Establishing A Construction Glass Manufacturing Plant in the Gambia

by S. A. Jallow
(The Gambia)



The principle mineral resource of The Gambia is quartz sand, the main component of manufactured glass. However, without the technology to process this sand into glass, The Gambia is limited to exporting the sand in its raw state in order to have any economic benefit at all from this resource.

Most of the value and profitability of construction glass is added during the manufacturing process – a value usually not shared with the country supplying the
raw material.

The obvious step toward maximizing the countries return on this natural resource is the manufacture of such glass in The Gambia itself. Such a step though is not seen as practical when the knowledge and infrastructure needed to operate such a plant does not exist.

One alternative is for The Gambia to open the resource to foreign investment from an established
glass making company – however history shows such ventures normally result in plants that form little more than "island economies".

One where the knowledge resource remains within the domain of foreign expatriate workers, ownership is in the hands of the knowledge company with little economic gain "trickling down" to the local economy.

The establishment of such a plant would also be unlikely to be seen as a viable option for any established glass making company for the following reasons.

1. Almost all construction glass is manufactured using the float-glass method, where the industry accepted minimum viable output is about 120 tonnes per day, and the norm is now between 400 and 600 tonnes. This gives a capital cost of between 150 and 200 million USD with a constant energy demand of 20 to 30 Megawatts - normally met by fuel oil or natural gas.

2. Neither the transport nor the support infrastructure in West Africa would be seen as adequate to handle this quantity of raw materials, finished product or energy demand. Most plants are also built within their market regions to reduce as much as possible the costs inherent in transporting flat glass.

Another alternative, upon which this proposal is based, is to build a "fitness for purpose" process and plant where the scale, the capital cost and the infrastructure requirements are tailored to meet the circumstances and market size to be found in and around The Gambia.

One also able to act as a "model" for other similar plants to be built around the African
continent where local demand for construction glass could also be met by Africa to Africa trading.

MARKET: The manufacture of float glass on the African continent is limited to South Africa and Egypt. Both factories presently producing about 400 tonnes per day with Egypt now adding 3 new float lines to keep up with demand.

The market in between is open to any new glass making venture that can provide a quality product at a good price.

The total market in and around The Gambia is estimated at more than 20,000 tonnes per year of the three flat glass types – reflective, tinted and plain.

For the purpose of establishing the viability and the base financials of this venture the likely early market share has been assessed at 20 tonnes per day, about 40% of the total of local sales.

All construction glass needs in The Gambia are presently met by imports; this however does not mean the Company will have an easy time entering the market. The Company will be operating in a high concentration ratio market environment where a few major players dominate (and often illegally share) the market.

It is also of a type and cost structure that will give a significant competitive advantage. This could well lead to dumping, or similar, claims
against it within its own West African market. The advantage of it being a genuine Africa-to-Africa trading entity will however make it difficult for any competition to use such methods effectively.

Although small by world scales, this Company should not be protected against imports unless dumping or other unfair practices can be shown on the part of the competition, and should not need to have any unusual degree of state support.

Market share must be won on quality and price alone if the venture is to grow and provide a good return to its owners - the quality of
both its product and its sales team.

FINANCIAL: The Company is not based on the normal model for such plants, where a "standard" facility is
built and capital investment is of an amount set by competitive bids for the construction and supply of western industry standard capital equipment.

Rather it worked from the market study to estimate the likely sales turnover, and then applied a turnover ratio figure likely to result in an economically sound operation to determine the capital figure available for plant and equipment.

The IFAF engineering team then selected a process and designed a plant that
could be built within that figure, and in such a way to as to contribute to a solution to the problems of knowledge and infrastructure.

Assuming an average sale price of GMD 600 per 3.66 sq m sheet for a mix of types, the production of 20 tonnes/day (375 sheets at 85% yield) gives annual gross sales revenues of about GMD 80 million. The price is set slightly higher than the equivalent manufactured elsewhere to take advantage of the reduced shipping costs for the plants initial market. (Prices India GMD25 mm/sq M – The Gambia GMD27.32 mm/sq M Clear glass price)
Flat glass production is very capital intensive - typical within the glass industry is a turnover/capital ratio of around 0.6. Intuitively - a smaller plant, constructed with more local input, should have a better ratio - so choosing a more conservative 0.9; we need then to develop the plant and process to require a total capital investment of no more than GMD 90Million (Approx. Euro 2.8 Million).

In order to realise a reasonable long-term return for shareholders – most of this capital need should be met by equity investment. The manufacturing process is being developed with a "target" gross margin of about 40% of sales, which will lead to a return on equity in the range of 10 to 15% - depending on debt equity ratio, profits reinvested, the level of R&D etc. - and
of course the quality of its management and training.

It must be clearly understood the establishment of the company has to be done in stages and the bulk of the investment will be raised over several years.

It cannot be seen as a project where all the capital is raised first to be then spent on paying for and installing all the capital equipment needed. These details and reasons are being explained fully in the detailed business and project plan and encapsulated later in this summary.

The first step is to incorporate the company as a small private company in The Gambia with sufficient paid up capital to support only a small office, one local salary and the required legal and license fees.

The purpose is only to provide a legal entity for licensing and all agreements and contracts, and a basis for future expansion into an operational company when the technical developments are complete.

It should be noted here that all estimates of pricing and costs are conservative and based on the assumption that some costs will be affected by "western" influence. The higher the degree of success at developing the knowledge and equipment base as a Gambian/African component – the lower the capital cost, the lower the final price of the glass product and the higher the potential margins.

==================================================

Therefore, I am looking for potential investors in Africa to raise the capital requirement for this long term goal so if you are interested please do not hesitate to contact me on salifuj25@hotmail.com

Comments for Establishing A Construction Glass Manufacturing Plant in the Gambia

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 09, 2015
Rating
starstarstarstarstar
bestaustralianessays NEW
by: Lisa

Hello! Visit and order an essay from the best australin essay writing services. We promise that you will get uncomparable quality of paper.

Oct 17, 2011
Rating
starstarstarstarstar
Labour
by: Anonymous

You did not put in labour figures and the costing of your labout and other inputs. But I would like to know how much labour will be required.

You can email me directly on:

cnhova@aol.com

C. Nhova

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Business Ideas.