Hope Springs Eternal For The EU Of East Africa

Published 11 years ago
Hope Springs Eternal For The EU Of East Africa

Manu Chandaria is no spring chicken, but he has a spring in his step. The 82-year-old chairman of the Comcraft Group has been on the regional economic radar screen for 10 years through his unflinching support for the East African Community—a common market with a combined population of more than 130 million and a GDP of $75 billion. He

Manu Chandaria, Chairman of Comcraft Group


reasons—like free trade proponents—that pooling populations, skills, expertize and production can create the economies of scale and the huge markets that business craves. There’s even talk of the fledgling state, South Sudan, joining the EAC.

“Politics doesn’t put food on the table,” says Chandaria, touching the raw nerve that threatens the pace of EAC integration. Politics killed the first attempt in 1977, when Kenya’s then president, Jomo Kenyatta, fell out with his Tanzanian counterpart, Julius Nyerere, over whether to adopt capitalist or socialist policies. Chandaria has no such doubts.

“We need to help our people to better their lives. That can only be done if businesses have enough space to grow and expand. That’s how jobs are created, incomes improved and GDPs grown,” he says.

The business community views a robust regional economy as a trigger for productivity, economies of scale and competitiveness. It is a wonder why some Kenyan bureaucrats, legend has it, toasted the collapse of the idea with champagne more than 40 years ago.

The 21st century version of the EAC is fashioned along the lines of the European Union, which has monetary union of 27 member countries and one central bank. The EU is currently battling debt troubles among its key economies, like Greece, Italy and Spain, pushing analysts to speculate that EAC monetary union may mean more of the same trouble in Africa.

Richard Sezibera, the Rwanda-based secretary general of the EAC, says uncertainties created by the financial crisis in the EU—the biggest financier of the protocol in terms of funds and technical assistance—won’t affect the EAC.

“Although the East African Monetary Union (EAMU) has been patterned on the Euro Monetary Union, lessons drawn from the ongoing crisis and also the 2008 world financial crisis will ultimately shape it,” he says.

Chandaria, like Sezibera, is stubbornly optimistic, even if the dream of union remains about as elusive as democracy in some of the East African states.

“We are finding it very difficult,” he says with zeal. “Will it really work? That’s the question we were discussing at our regional forums. People are still Kenyan, Tanzanian or Ugandan. It can’t work like that. We need to get to a level where we are East African first, East African second, East African third and the rest can follow… You have to know your business and how to tackle the differences… Otherwise, you will be killed.”

There are plenty of flies in the ointment. Chandaria says Tanzania wants to be in the Southern Africa Development Community (SADC) and EAC at the same time, while Uganda is fiercely protective of its markets against bigger and ferocious business rivals from Kenya. Kenya and Uganda are in COMESA, from which Tanzania pulled out a few years ago. Not so good for a budding economic bloc.

“It is not working the way we wanted. We are just creating unnecessary jobs for so many people instead of building institutions and teaching the people to get the best out of it, so we can get better GDP,” says Chandaria.

The EAC aims to improve earnings for member countries, but every country differs—politically, legally and culturally—making it hard for companies to operate cross-border businesses.

Even the EAC secretariat acknowledges this. “Following the completion of the ratification of the protocol on the common market, the complex and long march towards transforming the EAC region into a common or single market begins with resolve and fervor,” said EAC secretary general Juma Mwapachu during the launch on July 1, 2010. “It is important to underline the words ‘complex and long march’.”

The process is complex in terms of what is required to be undertaken at the levels of the partner states and in certain respects, at the level of the EAC itself. All five countries have a common external tariff; an identical tax applied to imports from outside the bloc, and they allow duty-free regional trade with the exception of Kenya, the largest and most advanced economy of the five. The common market aims to build on this and enable the free movement of people, capital and services, and abolish import duties.

The EAC’s ambitions go beyond pure economics. The plan is for the common currency in 2012 to set up the groundwork for a political federation by 2020. Yet the other member states worry that Kenya, which is the economic powerhouse of the five, could end up being the dominant player.

It’s easy to understand why Chandaria, the son of a former shop attendant who built the business empire, is so passionate about integration. A Kenyan-born entrepreneur who returned from studies abroad to take charge of the family business, Chandaria has worked in Uganda, Tanzania and Kenya. In the past 50 years, the Chandaria family has transformed a scrappy medium-ranked business into a major global player with some of the most coveted brands, including roofing iron sheets, electronics, software, kitchenware, pots and pans. He won’t give figures about the net worth—the businesses are jealously private—but simple calculation points to a conglomerate worth millions of dollars.

Comcraft has invested in steel rolling, aluminizing, galvanizing, color coating and profiling. The companies include Mabati Rolling Mills Ltd in Kenya, Aluminium Africa Ltd (Alaf Ltd) in Tanzania, Uganda Baati, Safintra Steel in Zambia, Safintra Steel in Mozambique and Safintra Steel in Malawi. The others are Safintra Johannesburg, Safintra Durban, Safintra Cape Town, Safal Steel in Cato Ridge near Durban and Midget Steel in Nigeria. The group also has a presence in the pipe and section manufacturing division in Insteel Ltd in Kenya, Alaf Ltd Tanzania, Uganda Baati and Hoech Pipe in Nigeria.

Chandaria, who steered Mabati Rolling Mills to one of the most successful companies in the Comcraft stable, says success has taken a concerted effort of family, understanding, higher education and vision in entrepreneurship. “It’s basically the principle of joint family,” he says, sipping herbal tea at his palatial home. “Zero multiplied by zero is zero, one multiplied by one is one; until you reach two, where two times two is four, which gives you a base for linear multiplicity of four times four to get sixteen and so on. We decided we want multiplicity.”

That’s his mathematical way of explaining how his family teamed, with his in-laws, to build a business empire—from the pots and pans to iron sheets to manufacturing, electronics and software. Not very many people manage such a feat. This Indian family from Savrashtra, Gurjarat, has proved that blood relations can also build a strong bond for business.

This is a big lesson for African entrepreneurs who often go it alone in business and fizzle out, or at best, start small and remain so. In Kenya, the Indian community dominates businesses: in retail, think Nakumatt Holdings owned by the Atul Shah family; in manufacturing, think edible oil maker Bidco, owned by Vimal Shah, who controls virtually the whole of Kenya’s industrial area portfolio in Nairobi and major towns.

When Manu Chandaria’s illiterate father came to Kenya 96 years ago, he had a simple mission: to earn 4,000 rupees and return to Gurjarat.

Chandaria with Aruna, his wife of 56 years

But after a period of super-high growth, almost all the low-hanging fruit is gone. Now the group is left with expanding its existing business lines and scouting for opportunities in emerging sectors like ICT.

Chandaria joined Kaluworks in 1951, alongside his brother, a food technologist, and two other siblings—a civil engineer and campus graduate. Then Kaluworks had 40 workers and a grocery supply business. “We decided that everybody was going to work hard, from Monday to Saturday, and if there was maintenance on Sunday, we worked on Sunday. From 40 people, in five years’ time, we had 500 people. That cooperation planted the seeds of partnership that expanded the workforce to 800 people by 1960.”

Chandaria was sent to Uganda, the only country that was known to be rich in those days. There was a joke in town that Uganda would earn, and Kenya would spend, by selling them products. So he opened an office there and undercut the competition.

The dawn of independence in the early sixties opened new investment opportunities in newly autonomous states, and Comcraft went on a spree. It ventured its iron sheet business in Tanzania (Mabati Ltd), Zambia (Galco), Uganda (Bati Ltd) and Ethiopia (Ethiopian Steel), making it a pan-African business in just five years. “What we knew we duplicated, triplicated, four times, five times…” he says.

The group’s strength is in teamwork and building multiple plants in various markets. This is then boosted by Chandaria’s shrewdness in creating strong and loyal management teams. But he admits the group’s leadership is not always able to attend to difficult situations in time, leading to losses or lost opportunities. The company has also been slow in training enough numbers of management teams for existing and future expansion.

In 1953, Chandaria proposed a charity foundation, but his father initially rejected the idea. “You lived too much in America; we are not Ford Foundation or Chrysler,” said his father.

Today, Chandaria’s foundation is easily the biggest and one of the oldest charity organizations in the country. Some of its notable contributions in Kenya include Chandaria School of Business at United States International University (USIU); Chandaria Business Innovation and Incubation Centre, recently launched at Kenyatta University; and the Chandaria Emergency Centre at Nairobi Hospital, to mention but three. The foundation has done lots in helping the poor, in rebuilding houses and schools of those displaced in the post-election violence, and in educating bright children from poor families.

Philanthropy is the in-thing for the super-rich these days, with US investment guru Warren Buffet urging fellow billionaires to give at least half of their wealth to charity. In most of Africa, it is manifested mainly in corporate social responsibility—planting a tree here or donating a cheque there.

“If you can’t give what you have—experience, knowledge, philosophy,” Chandaria says, “I don’t know what else you can give. I can make a swimming pool of whisky, but I don’t drink. I have compassion for others. I have no hobbies because my game is to serve. I walk in slums and children come to play in my compound.”

As politicians struggle to fit their interests in the East African frame, it is clear that to achieve integration, and urgently so, the region could need more Chandarias.