Connect with us

Entrepreneurs

How To Turn Pocket Change Into Millions

How Mohamed Jaffer turned $240 into $140 million by swimming against the tide.

Published

on

On Beira Road it seems everyone knows about the Grain House and its owner.

In the coastal city of Mombasa life runs in the slow lane, so it’s little wonder the constant rev and turn of 34-wheel trucks at Grain Bulk turns heads.

The ‘ordinary’ businessman near the end of the road is no ordinary neighbor in this coast-hugging, business enclave of Mombasa.

This extraordinary, ordinary man at the helm of Grain House is Mohamed Jaffer.

In 1976, when he was just a 26-year-old civilian in search of a quiet business life, Jaffer borrowed $240 to start a timber business. A few years later, he upgraded to exporting pallets to Jeddah, Muscat, Kuwait and Aden.

Little did he know that trading in wood planks and color-mixing boards for artists would end up as a multi-billion dollar port business spanning three continents.

It was in 1983, while running his pallet manufacturing businesses, that Jaffer started taking a keen interest in how grain imports were being handled at the Mombasa Port. He soon noticed something was not right. The process was mainly done manually. It was unhygienic, there was a huge amount of wastage of grain and there was also no accounting for discharged quantities.

“I began researching how developed countries were doing it,” he tells FORBES AFRICA.

“I observed that their handling system was highly mechanized, hence capital intensive. I was convinced that Kenyans are capable of importing technology and harnessing technical skills to maintain a state-of-the art terminal, which I was determined to install at the port of Mombasa.”

Coming up with the idea of a bulk, but efficient graining facility located next to the port took an eye for spotting out-of-the-box thinking. The implementation of the dream project would emerge in the installation of a mechanized handling system that would be commodity and environmentally-friendly and efficient.

But securing the funds to pull off his dream was like an upriver swim. So was planning for storage silos connected to the massive conveyor belts and the technology to control the systems seamlessly and to establish a safe exit route from the port. Jaffer knew he was biting off more than he could chew.

With revenues from the pallets business being a drop in the ocean of what he needed, he had to use someone else’s money—and lots of it.

Even with the funds and the vision, the project took 17 years to materialize. Some of the factors that contributed to the delays included prohibitive interest rates that made securing local financing suicidal, as well as the fact that Kenya was then blacklisted by virtually all foreign donors because of governance concerns.

“The business climate was hostile to local investors. The problem in Kenya is that government authorities view local investors with suspicion and will always frustrate you. Back then there was also a lot of politics around the project,” says Jaffer, now 64.

The adverse climate for funding from international financial institutions notwithstanding, Jaffer approached the Commonwealth Development Corporation (CDC) and the International Finance Corporation (IFC) for loans to implement his dream project. The two corporations recognized the potential of the proposed project and expanded their scope to cater for regional rather than national interests. With Jaffer’s astute negotiations they readily offered a credit line of $35 million.

The funds borrowed from IFC, CDC and Proparco eventually facilitated implementation of the project, which was commissioned on March 15, 2000 by the Kenyan president at the time, Daniel arap Moi.

The facility, now 12 years old, handles 1.8-2 million tons of grains annually, though its capacity is in the region of 3-4 million tons a year. The low volumes are attributed to Kenya being a net importer, bringing in expensive capital goods and other commodities while exporting very little, mainly tea, coffee and horticulture products.

The commissioning of the grain terminal revolutionized the handling of grain at the port of Mombasa.

Grain Bulk Handlers Limited (GBHL) is now a specialist in the discharge and handling of bulk grain imports at the port, which is regarded a main gateway for East and Central Africa. Its silos are built for both transit and long-term storage. Valued at $140 million, GBHL is one of the biggest private investments in East Africa, beating most listed companies at the Nairobi Securities Exchange in market capitalization.

GBHL boasts a turnover of $12 million and is the flagship company of MJ Group. Jaffer’s other business interests include Mbaraki Bulk Terminal in Mombasa, which deals in petroleum products; Africa Gas and Oil Company operating an LPG (Liquefied Petroleum Gas) terminal at the port; Great Lakes Port Ltd as well as a container freight station at Changamwe in Mombasa that’s due for implementation. Other projects awaiting implementation include dry ports for Tororo, Uganda and Miritini in Mombasa.

And he is not done yet. He says: “I will keep on investing despite the unfriendly business environment in Kenya. I am actually a coolie. I go for port projects. You can call me a coolie promoting investment in specialized handling facilities at port. I will therefore always work in port-related businesses.”

He’s spreading his wings too and it’s no mean feat that Jaffer has reversed the trend of investment flow. Normally, foreign direct investments move from developed economies like Europe, China and the States into Africa, but Jaffer is clearly swimming against the tide and with the big sharks, far away from the Indian Ocean.

The MJ Group, of which he’s also chairman, owns a grain terminal at the port of Lake Charles in Louisiana, in the States. The company is currently working to establish similar projects in Vietnam and India. This international expansion was boosted by IFG Fund LP, which in 2006 acquired an equity stake in GBHL and committed to grow the brand worldwide. IFG, through its affiliate Infrastructure Funding Group, brought in its financing expertise and global reach that made GBHL a stronger enterprise and positioned it for international expansion.

Jaffer is ready for the global expansion being a multi-linguist who speaks and writes in six languages: English, Urdu, Hindi, Gujarati, Cutchi and Swahili.

But Kenya is where GBHL has transformed the port of Mombasa—and Kenya. The port is a hub for relief agency operations, which facilitate quick, regional relief needed due to civil strife or famine.

Jaffer says others, who are part of the supply chain, have also benefited.

“In the case of millers and commodity traders, GBHL facilitates growth in their trade through provision of efficient services. Millers can now plan importation and receive consignments on a just-in-time basis. They no longer need to stock large quantities of grain as before.”

He adds that commodity traders can improve their outreach by stocking grain at GBHL silos. This allows them to promote ex-silo sales and eliminates lead times associated with sale of grain that is still aboard vessels en-route to the port. Adoption of ex-silo sales by commodity traders ensures quick supply of grain from the GBHL silos to buyers across the region.

Jaffer holds a diploma from John Hopkins University and qualifications from the College of Business Administration in Baltimore.

He ran the show for close to 30 years, growing the scrappy timber business in the yard of his father’s inland depot into an empire that will last for generations to come. Three years ago, he relinquished the role of chief executive to his son, Mujtaba Jaffer, and took the less hectic chairmanship position.

Sitting in his fifth floor office at Grain House on a humid spring morning, he remains modest about his lucrative grain imports handling business.

“Three things are God-given in life: wealth, health and children.”

He says his road to success has been paved with hurdles, but he chose to do things the right way and legally. “There’s a wrong perception that if you do things right you won’t make money. You are going to make money; in fact, you make more money because you don’t have to watch your back. Business done legally and right is much better. I have never defrauded customs, income tax or any taxes knowingly.”

He says success comes from hard work, honesty and dedication.

“You must be focused on what you want to do and accomplish it against all odds,” he says.

For him, working hard means finishing work on time.

“You are useless after seven hours of working and if you work more than this you are wasting your time and the time of people around you,” says Jaffer.

Jaffer also runs a foundation that provides water, medical care, education and rehabilitation of drug users in the coastal region.

“God has given us time for a night’s sleep of eight hours, eight working hours and eight hours of recreation.”

That’s the principle he applies across his businesses. He says a business is as good as its employees and to perform optimally they have to be motivated through better remuneration and making them part of the organization.

“You pay peanuts, you get monkeys,” he says.

Through the business, Jaffer has learned one key lesson: never trust a friend in business. He recalls how he was bitten this way. Being a religious man, he traveled to Mecca for the annual Hajj in 1974, and took a tour of pilgrimage sites in Iran, Iraq, India and Pakistan. Before he left Kenya, he gave his friend and partner in business power of attorney.

“When I came back, my partner had taken over everything. I lost all my investments. It was devastating,” he recalls.

He had to sell off four of his five cars to start all over again—and that has made Jaffer an extremely cautious man when it comes to choosing business partners.

But he adds: “I don’t believe in crying; I believe in positivity—negativity does not pay.”

Continue Reading
Advertisement
Comments