Out of a desire to ease the burden on his beloved wife, who had to juggle a career as a business technology consultant with the demands of managing her home, an entrepreneur decided to start his own online retail business.
Olumide Olusanya, established Gloo.ng – initially buycommonthings.com – to enable his better half, Seyin, to shop from the comfort of home and not have to spend what ought to be quality time with her family in grocery stores.
Olusanya, a medical doctor turned technology solutions developer, was in the middle of his third act as a value investor after a successful career as an e-payment expert where he led the team that deployed West Africa’s first locally issued and processed international payment card – Ecobank MasterCard. The idea to establish an online supermarket that would offer same-day delivery of groceries and essential homecare products came to him on a routine work day.
“I was doing my investment management from my home office; I would jog in the mornings and spend the rest of my day working from my study. When the idea came to me, I wrote the plans and tested it. I took out all the settees in my house and had a carpenter build the shelves then set up a small team initially, but all of them ran away after one month because they couldn’t stand the heat. So I was left with my co-founder, my wife, and we continued developing the idea. We had built the product and were operational, so with the traction we saw, I decided we had to do this.”
Progress over the next few months meant the business had to be expanded. Tapping into his personal savings, Olusanya moved to a bigger facility and hired two more people to join the team.
“For the first three months, of course it was just me alone. I was doing deliveries and as the demand started growing, we had to increase capacity. So I asked my wife to leave her job and she also started doing deliveries as well. Then we got the facility in Lekki (a middle class suburb in Lagos). Once we moved to Lekki that was the moment we burned the bridge and the only way we were coming out of this was at the other side. We had two people join us later and for 10 months, four of us ran the business.”
Nigeria’s retail sector has seen explosive growth since the middle of the last decade. A recent report by Euromonitor estimated the annual value of the market for supermarket products in 2012 at $33 billion.
Groceries and household essentials are mostly sold in open air markets and convenience stores, but recently, there has been a revival in the development of large shopping malls and superstores. South African retailer Shoprite entered the market in 2005, while Dutch brand, Spar, also entered the market operating in partnership with the Artee Group, a local player. Both brands are leading the market in terms of the number of stores with a combined total of eight. But as they seek to expand – Shoprite and Spar aim to have 40 outlets nationwide over the next three years – online retailers such as group buying site DealDey, as well as Jumia and Konga, have experienced rapid growth in the last three years.
Gloo.ng aims to ride this wave to challenge the brick and mortar players and capture the largest share of the market.
“Our vision it to be the biggest supermarket in Nigeria and our mission is to change the way Nigeria shops for living essentials or supermarket goods. There’s something driving everything we do. Our values derive from the Spartan culture, which is a very well knit culture where our sense is there’s nothing we set out to achieve that we will not.”
Eschewing the marketing-led approach to creating awareness for the brand, Gloo.ng chose to grow organically, allowing its customers to spread the word about its service. This has seen the company build an army of loyal customers, something that often eludes e-commerce firms. Olusanya reveals that 75% of the company’s business comes from repeat buyers, where most e-commerce firms have return rates below 10%.
“I was the one doing deliveries, and then Seyin joined me so she started doing deliveries as well. The early customers knew Seyin and me, but they didn’t realize we were the co-founders. Someone found out and that was something they liked about the story. So the business started growing; we hardly spent money on marketing, we grew largely on word of mouth.”
Impressively, the firm is also surmounting challenges that have often held back online retail companies in Nigeria. Payment has been a significant problem in a market where a lack of trust means customers prefer to pay for products with cash rather than using bank cards.
Gloo.ng is bucking this trend.
“What we end up building with our customers is a relationship. Our customers know us and once they do one or two transactions with cash, for the next transaction, they start using the electronic means which is obviously more cost effective for us. The new trend we are seeing is that customers are actually leaving money with us because using your card in Nigeria is a pain, unlike abroad where it’s just a click once your details are stored. So I think the whole idea, because of the nature of the repeat business that our customers do with us, is the trust they have built with us.”
Expectedly, the company’s early success has not gone unnoticed. Olusanya previously received offers from savvy investors but thought it was premature to raise major funds to grow the business. Feeling that the time is now right, Gloo.ng just secured Series A funding from an investment firm in Nigeria.
“We just signed a $1million funding agreement with IRM Limited. We’ve had investors calling us from all over, locally and internationally, but we have a type of entity that we’ve chosen to work with because we have to have people who are aligned with our vision. IRM understand what we are trying to achieve.”
Selling groceries online is notoriously tough and several worldwide start-ups have failed, most notably that of United States-based Webvan in 2001. Scaling Gloo.ng in Nigeria, a country renowned for the hostile nature of its business environment, promises to be a sizeable task but Olusanya is confident that they will succeed.
“The experience of the team we have and the research we have done are some of the things that put us in good stead to deal with the risk. Anything involving groceries online has been the Bermuda Triangle of e-commerce worldwide, but some companies like FreshDirect, Tesco.com, Ocado and Peapod have shown that it can be done. But we are not chasing any of those models; there is no single model that has been proven to work in that regard, and that’s why Gloo.ng has a multi-faceted model. We have various models, each with its own strategic objective that we are executing at the same time and we’ve been growing well quarter on quarter, so we are confident that we will get it right.”
Their loyal customers seem to agree.
The Madhvanis: The Industrialists Who Have Tasted Sucrose And Success
The Madhvanis started with sugar and now lead diversified global businesses. In a rare interview from their home base of Kakira in Uganda, Mayur and Kamlesh Madhvani, the Joint Managing Directors of the Madhvani Group, share a century-old tale of extraordinary family enterprise and how they are continuing the legacy of their forefathers.
It’s a bumpy 100km drive from the Ugandan capital of Kampala to the town of Kakira in the east. Past the swaying sugarcane plantations and green hillocks and roundabouts intermittently featuring the words ‘Madhvani’ and ‘Sugar’ that announce you have arrived, a tranquil avenue, immaculately lined by pine trees and acacia, leads to Kakira.
From this little town, an international empire was built, with a reach in far and distant lands. To this little town, have many a cavalcade, bearing presidents and global business tycoons, made its way.
At the sugar factory that is the pulsating heart of Kakira, the quiet of the verdant landscape rapidly gives way to the deafening sound of production.
The sound of enterprise, the sound of African industry.
Close to the equator and Jinja, the source of the Nile, I am in the ‘cane yard’ of Kakira Sugar Limited, watching giant machines noisily swallow up truckloads of sugarcane and crush them into pulp.
READ MORE | Uganda Sees 11% Growth In Sugar Output This Year
Under the sweltering African sun, these monsters, also known as feeder tables, are four in number around me, relentlessly chopping tons of sugarcane fed by a long line of at least 400 trucks piled high with unruly cane stalks gathered from the fields in this eastern corner of Uganda.
This is the back-end and the beginning of a well-oiled factory process that will eventually turn sugarcane into foamy rivers of juice and finally sugar.
The entire process, from feeder table to sugar crystal, is completed in eight hours, resulting in bags of refined sugar at the other end.
Inside the factory, even the air is calorific, with the saccharine-sweet smell of sugar – and success. The factory is the soul of the 14,000-hectare Kakira Sugar Estate, which provides a livelihood to some 9,300 direct employees, and sugar to the rest of Uganda and East Africa.
It is the core business of The Madhvani Group, Uganda’s biggest sugar producer. And everything within a 10km radius from here, belongs to the group.
Generations of the Madhvani family have been based in Kakira, and much has happened here over the last century: success, strife, destruction and resurrection.
It all started in 1908, when at the age of 14, the family’s venerable patriarch, Mujlibhai Madhvani undertook the long and arduous journey from India to Uganda, to join his uncles Vithaldas and Kalidas Haridas in their shop in Iganga. By the time he was 20, Mujlibhai was tasked with opening and managing a shop in Jinja, a town at the source of the Nile River.
The waters ran deep in his veins as he was determined to make a success of his enterprise. He was appointed the Managing Director of Vithaldas Haridas & Company, which in 1918, bought around 800 acres of land in Kakira. The sugar factory subsequently started operating here in 1930, with a cane crushing capacity of 150 tons per day.
Mujlibhai built his empire on sugarcane, and laid the foundation for Kakira’s development, also empowering the communities within. Kakira grew around the factory and family home.
Soon, Mujlibhai Madhvani & Co. was also manufacturing sweets, soap, cooking oil, ghee, tea, margarine and pastry shortening. It also made cotton and became the agents for imported goods such as Goodyear tyres.
The late Manubhai, Mujlibhai’s second son, writes in his book, Tide of Fortune, an account of the family’s tale, with British author Giles Foden: “My father was the first person in Jinja to own a radio, which he bought in 1938. He purchased a record player in 1940 and soon afterwards, he became the proud owner of a 9.5mm film projector. His love of cars led him to purchase an extremely expensive powder-blue Buick, as well as an Oldsmobile.”
After Mujlibhai’s death in 1958, his eldest son, Jayantbhai, took over the business. Manubhai worked closely with him. By 1970, the Madhvani Group, according to Tide of Fortune, was at its peak with rapid annual growth of at least one new manufacturing unit a year. Manubhai says of his brother Jayantbhai: “I admired his humility and his commitment not only to serve the family, but also the community at large.”
And he further pens: “How did we select the industries we were expanding into? It was a combination of two or three policies, really. The first was to seek vertical integration. If you make beer, you will need bottles, so why not manufacture them and some plastic crates as well?”
Unfortunately, for the Madhvani family, tragedy struck when Jayantbhai died of a massive heart attack in 1971.
Politically too, Uganda’s destiny was changing.
When Idi Amin came to power in 1971, Manubhai was thrown into the Makindye military prison, an infamous hell hole, by the ruler for 21 days. The Madhvanis, along with the rest of the Asians living in Uganda, were notoriously expelled by Amin in 1972. The family relocated to London and then Kenya.
The sugar mill operation, which was producing 83,000 tons of sugar and contributing to 10% of the country’s Gross Domestic Product (GDP), was destroyed, looted and run down.
“Production had been at a standstill since the end of 1983 and the great hangar where sugar had once been produced was now a home to birds and animals,” says a line in Manubhai’s book.
When Amin was toppled, the Madhvanis returned, to the vestiges of their farm and factory, and a family squabble, with a segment of the family taking over the business in 1980.
The property was returned and the process of recovery started in 1985, with Manubhai and Mayur, Mujlibhai’s youngest son.
“When you repossess assets that are completely destroyed and run down, there is obviously a great emotional side to this,” says Mayur, the Madhvani Group’s Joint Managing Director, when we meet him in his offices at the Kakira sugar factory on a sun-filled afternoon in March.
The offices he shares with his nephew and Joint Managing Director, Kamlesh, Manubhai’s elder son, are adorned with tasteful MF Husain paintings, family memorabilia and redolent with the smell of incense. The British-educated Mayur, wearing a crisp white linen shirt, warmly invites us to his office space.
“For us, it was not so much a business decision, I think it was more of an emotional decision but it ran into the business arena because we knew that once the industry would come up, there would be growth,” continues Mayur about the challenging 1980s.
Kamlesh, 64, who joined the business a few years later, and is the younger of the two, chips in: “Kakira is where the roots of the family are. What we learned very quickly was that it is far easier to build something new than to rehabilitate something that is in total disrepair. It is not only the physical assets but also the mentality of the people.”
They had to work hard to return it to the glory days of the past.
“When we were here before 1972, we had connections with a lot of leaders. Mrs Indira Gandhi visited us, and also the Kennedys; they all used to visit Kakira. Martin Luther King was here, to meet my brother. My father of course is the pioneer. I mean if you look at the way the estate is laid out, it was this man in the early 1950s that laid it out,” recalls Mayur.
Today, the Madhvani Group is one of the biggest diversified private-sector businesses in Uganda, with assets of $750 million for the Kakira sugar business, producing 180,000 tons of sugar, 74,000 tons of molasses and 22 million liters of ethanol.
The sugar factory also makes green electricity. Very little of the sugarcane is wasted. The fiber from the process, or the bagasse residue, is burned in large boilers to generate steam that drives the turbines.
The facility also generates 51MW of electricity daily and of that, sells 32MW to the national grid, “enough to light up Kampala”, says Mayur. This is one of the biggest bagasse co-generation power plants in Africa.
A tour of the sprawling factory is rounded off with a visit to a storage warehouse with mountains of 50kg sugar bags, stacked from floor to ceiling at any given time, ready to be hauled onto waiting trucks.
At an altitude of about 4,000ft, Kakira is lush, fertile territory offering year-round harvest. The sugar factory stops only for a month every year for maintenance. It processes its own cane but also buys from the farmers, or the out-growers, living outside the nucleus of the estate. This is an association built from Mujlibhai’s time.
“There was a genuine affection when we came back [in 1985]. But it was very nice to say the Madhvanis are back but the Madhvanis are not magicians,” recounts Mayur. “It takes a lot of hard work and strategizing, and with government support (President Yoweri Museveni was newly elected at the time), we managed, through our small efforts, to instil in him, the aspect of business not necessarily being a bad thing. He was the one that allowed us to move forward and put this company right and pay taxes.” Fast forward to now, and the group’s focus continues to be to build its core businesses.
It is commencing a new $150 million sugar project in the northern district of Uganda named Amuru, working closely with the government. It has a sugar project in Rwanda, and projects in South Sudan and Tanzania are also on the cards.
“If you are manufacturing food commodities, it’s going to grow and this is the bread basket of the world. The Ugandans went through hell with Idi Amin but you never heard about famine because we can put anything in the ground here. We are so blessed,” says Mayur.
Cashing in on the salubrious climate and natural resources, another focus area for the group is tourism. There are nine lodges that it currently operates in Africa including in Rwanda, Uganda and Kenya.
One of the ways in which it opts to stay relevant is with partnerships.
“In the past, we used to think we can run [the business] ourselves and have those old-fashioned conglomerates. Those days are gone. You need to tap into the international market and get good world-class partners to work with and work with the right value for the African context,” offers Kamlesh.
And this applies to management as well, to further professionalize what is a family-run business.
“Most businesses that have started have been family businesses, if you look at Walmart, Ford, etc. But what you have to do is move away from the family business and let it become a little bit more professionalized,” adds Mayur.
“You want to avoid falling into the trap where the first generation creates, the second generation enjoys and the third generation destroys. We are the second generation moving to the third. The Madhvanis have broken the mould, but now [it’s not] for us to think we are infallible. We need to set up something that other family businesses can emulate, and follow other families that have succeeded in this. For that, you need to have a business that is professionally-run, yet have the family involved to give direction and not lose total touch or control.”
For this reason, the group mandatorily organizes three meetings a year in Bermuda, attended by family members and stakeholders.
But why this location in the Atlantic Ocean, far from Kakira? “We set up our companies in Bermuda in 1958, so we have been there some serious years now,” says Mayur. “In those days, perhaps it’s correct to say Bermuda was a tax haven, but now, the corporate tax structures have changed. Bermuda becomes a good venue because it is one of those tax havens that is also respected by various jurisdictions and for us, it is a historical fact that we were based in Bermuda. Our boards are all there.”
In Bermuda, the family also meets with members not actively involved in the business. Even the youngsters who are a part of the business have to report on their activities.
“We present our reports to the family and I think the secret that myself and Kamlesh are looking at is that the business has to be such that it survives this turmoil of create, enjoy and destroy and there is transparency. The secret is transparency. The more transparency you have in a business, the more likely it is going to survive the long-term because then individuals are not allowed to mess up the day-to-day control systems,” says Mayur.
“Leadership is something that you grow into by an accident of life. I am not the oldest of this family. I have two brothers but they are much older. Kamlesh’s dad, and my elder brother Jayant, sort of had the experience of my father. So did Pratap and Sur, my elder brothers and then things changed. We came back here and I worked closely with Kamlesh’s father and he had a lot of knowledge and I had the advantage I had. We got on as a team wonderfully, and in any business, you always need the ying and the yang. Kamlesh and I work very closely but you will find that each one of us is very good in certain aspects of the business. That is so important.”
As Joint Managing Directors, their offices are adjacent to each other.
“We have this little window and we shout at each other or talk to each other whenever we want,” laughs Mayur.
“We are more like brothers, but he is still my nephew. As children, when we were at boarding school in the United Kingdom, his mother was always worried and I had to look out for him.”
Looking ahead, the Madhvani Group plans to produce rum, vodka and gin, predominantly for the export market. All of these are by-products of the same crop – sugarcane. The distillery at the estate produces 22 million liters of Extra Neutral Alcohol or ethanol a year.
“Sugar is the main product, [but] it’s quite possible in the time to come that some of these other activities from the by-products will become the main product. Such as electricity and alcohol… We are even putting up a plant for carbonated waters coming up next year,” says Mayur.
But Uganda, a part of the East African Community (EAC), has a population of about 45 million and a poor rating score in the EAC when it comes to corruption. Surely, that’s discouraging for investors?
“The biggest problem we have in Africa is nearly 58% of the population is below the age of 30 and these individuals really do not want to hear about the wars because it is history. They are looking to see Africa catapult itself to another level. What the businessman needs is political stability and structured legal systems so that you feel comfortable doing your activity and I think [that is the only way] you will see Africa grow,” says Mayur.
“And yes, we do have corruption; it is endemic, you have corruption in every country. You have got to stop it. You have to have the right systems in place and you have to have total transparency on how businesses are conducted. Countries have gone through these stages and I think you have got to make an effort to try and eliminate corruption actively, without lip service. Now, action needs to be taken. If you look at Rwanda, it has progressed amazingly. As a businessman, what I have seen is the efficiency in which the government works, and the government takes decisions very pragmatically. That is the kind of model one needs to follow.”
At this point, Kamlesh interjects to say decisions taken must be implemented too.
“It leads to frustration. In Uganda, you have the President who has tremendous vision, and his vision towards the private sector driving the economy becoming the engine of the economy is absolutely spot-on, but there is no follow up,” agrees Mayur.
As in other countries of the EAC, in Uganda too, private-public partnerships may be the way forward and it takes effort from the private sector to lead that charge.
“The politics of Africa is very similar. Leadership is important but then [you have to] have growth cycles driven by the private sector. I remember there was a time when in Uganda, prior to the expulsion of the Asians in 1972, to do business was criminal. If you were a businessman, you were regarded as a crook. Today, it is instilled that everyone should do business; business is a good thing. There are positive changes.”
The Madhvani Group’s sugar project in Amuru, in northern Uganda, for example, will be owned 51% by the government and 49% by the group and it will be managing it.
“Eventually, the government will offload the shares to the general public, but I think it is important for all private sector businesses to try to involve the community, the population around you,” says Mayur.
“Kenya’s President Jomo Kenyatta gave a good analogy when we left Uganda. He said ‘in the case of you Madhvani, you are the tree and the tree has fruit and if you share the fruit with the local community, the tree will get water’… For instance, we make the products, but we don’t do the distribution, we allow the others, we have our out-growers.”
“The farmers benefit more, we have a very successful joint venture NGO with them,” adds Kamlesh. “Essentially, we convinced the farmers to contribute a certain amount of money which we will also contribute and this money goes to finance roads, clinics, health facilities and orphanages. This is one quite unique experiment. The farmers have voluntarily sort of parted with money.”
For farmers like 48-year-old Naitema Godfrey, who owns 48 acres of land and has been an out-grower for the Madhvani Group for the last 15 years, sugarcane is everything. Calling himself a “sugarcane millionaire”, he says: “The food crop has given us money, power, sugar and electricity.”
Another out-grower, Robert Waako, who has been supplying sugarcane to the Madhvanis for the last 26 years, says he has been able to put his six children through school and college; four of them are software engineers today.
On the cards for the Madhvani Group is a possible listing in the future. The group also operates properties in India, and is big on religious tourism with hotels in famous pilgrimage sites.
“Indians are very religious, they go to these sites, but don’t have a good place to stay. We built a beautiful four-star hotel in Tirupati. We are now opening one in Bodh Gaya, and we have in Rajkot. At Rishikesh, we have the land, and we are looking at Shirdi and Benares. They are all in the pipeline.”
Back home in Uganda, the group are also big in packaging and steel.
The discovery of oil in the country has made investors and the private sector sit up to the opportunities to fund development.
The Madhvanis are also keen to hop on to the bandwagon.
“We are looking for good partners to work with. We have our infrastructure companies, also working on the logistics side,” offers Mayur, but says Africa’s real strength is the green economy.
“I think oil is overplayed, and is not going to solve our problems. I think oil brings problems in itself, from an environmental point of view and the point of view of not becoming too reliant on this one product. Look at Nigeria and Saudi Arabia; they are all looking at alternatives now. The one thing you have got to remember in Africa is we have the weather, and we have vast tracks of land that are fertile. I think Africa can be a great grain basket for the world.”
The next generation of the Madhvanis are in line to take the company to the future. Mayur’s 34-year-old daughter Tanya, who is based in Rome, is responsible for managing the hotel business.
His nephew Ronnie was tasked with reviving the packaging business and he has built it into “a multi-million enterprise through his creativity and marketing efforts”.
The caveat is that family members who are involved in the business must contribute to its growth. Kamlesh and Mayur too came up learning the ropes the hard way.
“We have enough youngsters in business. But just employing family members for the sake of employing them and giving them a posh office is totally wrong and it hasn’t worked. What you have to do is contribute, and when you do, you also get a share of the success as an individual,” says Mayur.
“Basically, we are all fortunate we had good role models to follow. If you read my father’s book, you will know we had our own turmoil in the family. Kakira did not come to us and say ‘here is the key’; we had to fight for it. We had to fight for it from other family members as well. We are not the perfect family; we had to prove ourselves [in addition to] the passion we had [for the business]. That is the type of determination that made it work,” says Kamlesh.
“We started at zero…” adds Mayur.
Today, the family members all have their own businesses too, and in different countries. “I have my own companies. Kamlesh has his. I have vast real estate in Orlando, we all have assets in Europe, North America and India. But we have been taught to be low-profile,” says Mayur.
The family live in bungalows near the factory in Kakira, minutes from each other. There is nowhere else they would rather be. They have their own airstrip and private planes.
“This is utopia for us,” says Kamlesh.
Succession planning is key in ensuring the Madhvani legacy lives on. Mayur is cognizant of this truism.
“We have reached an age where we know the inevitable is coming. We have to witness the change so we can actually guide that change to some extent, rather than create a vacuum and arrive at a situation where there is no smooth handover,” he says.
“We will have to leave that to the next generation. The important thing is to make sure that whatever business that we have, we maintain a world-class lead in them. Today, our sugar factory is the most modern in the world, and more and more we are moving towards automation, and everybody is going to still need sugar,” says Kamlesh.
“In the end, you don’t work for the money, you work for the passion of it all.” The bags and packets of sugar that go out of this little town of Kakira are testament to the fertile bounties of the land, and the story of a family from India that, through enterprise, resilience and industry, found its fortune in the fields in a beautiful corner of Africa.
This Billionaire’s ‘Terrible Purchase’ Just Made $14 Billion In Profits, And Now He’s Ready For More
Back in 2012, it was a mystery to many why Chey Tae-won spent $3 billion to buy control of troubled Hynix Semiconductor. Ten years after being bailed out by South Korea’s government, the world’s second-largest chipmaker was losing money and its stock sliding amid a global slump in demand for PCs and memory chips.
South Korea’s SK Group, the sprawling conglomerate Chey chairs, had a wireless carrier, an oil and gas company, a hotel operator but no presence in chipmaking.
“Pretty much everyone in the financial services industry thought it was a terrible purchase,” says Morningstar Research Director Dan Baker in Hong Kong. SK Holdings’ stock fell 15% between the day in November 2011 the deal was announced and the day it closed the following February.
To Chey, though, the rationale was clear. “SK needed something else to grow,” he recalls during a rare interview held on the sidelines of the World Economic Forum’s annual meeting in Davos. “Someone needed to step up. It made sense to me.”
SK’s wireless subsidiary, SK Telecom, bought a 21% stake in Hynix from a group of creditor banks, and Chey, already chairman of SK Group and SK Holdings, gained a new title: co-CEO of Hynix, later renamed SK Hynix.
Chey’s foray into the volatile chip industry turned out to be one of his savviest investments, timed almost perfectly to take advantage of a nascent global boom in smartphones. SK Hynix earned an estimated $14 billion last year, up 40% from 2017, on revenue of $36 billion—an impressive 39% profit margin. The stock has climbed roughly 150% since SK took control.
In September SK Hynix ranked No. 20 on the Forbes Digital 100, an inaugural list of the industry’s top publicly traded companies across 17 countries. Chey ranks No. 7 on the list of Korea’s 50 richest, with a net worth of $4.7 billion.
“It has been a fantastic investment given the growth in the memory market,” says Baker.
The Hynix deal was also a turning point for Chey, now 58, emboldening him to make the kind of big bets that characterized SK under his father before his death in 1998. Chey demonstrated that confidence last June when SK Hynix joined a group of investors paying $18 billion to buy 49.9% of Japanese chip maker Toshiba Memory. Hynix also created an imperative for Chey to expand.
SK Hynix now produces 70% of SK group’s net profits, according to the company, eclipsing its earnings from telecom, oil and chemicals and thereby posing a risk as big as it is successful, given the cyclical nature of the chip business.
In a little over two years, therefore, SK group has spent $2.6 billion to venture into a range of new businesses, from ride-hailing apps and biopharma to food and beverages. “We need to explore other areas,” Chey says. “I cannot rely 100% on semiconductors.”
SK was born in 1953, when the Korean War had just ended and Chey’s uncle Chey Jong-kun started making polyester. Sunkyong Textiles took advantage of government loans and tax incentives to expand, starting with exports of rayon to Hong Kong (SK is an abbreviation of Sunkyong).
When Jong-kun died of lung cancer in 1973 at age 47, his three sons were too young to lead the fast-growing company. In keeping with Korean tradition, his younger brother and Chey’s father, Chey Jong-hyon, took over.
Jong-hyon steered SK’s expansion into new industries with the purchase of two companies that now rank among SK’s biggest interests: in 1980, he bought 50% of Korea Oil from former U.S. oil giant Gulf (now SK Innovation), placing SK among Korea’s top five conglomerates, or chaebol, by assets (today it is No. 3 after Samsung and Hyundai). Then, in 1994, he led the $530 million takeover of state-owned Korea Mobile Telecommunications Services, renaming it SK Telecom.
In 1998, at the height of the Asian financial crisis, lung cancer claimed the life of Jong-hyon, thrusting his 37-year-old son, Chey Tae-won, into the role of group chairman. “It was a war situation,” Chey recalls. “There was only one thing on my mind: I have to survive.” Chey had been groomed to lead the Korean multinational: while studying at the University of Chicago in the late 1980s, he met his wife, Roh So-young, daughter of former South Korean president Roh Tae-woo.
He joined SK in 1989 as a manager at a subsidiary in San Jose, California, moved two years later to the group’s U.S. headquarters in New York and returned to Seoul in 1994 as group managing director. By 1997, he had already been promoted from head of business development to CEO of SK Corp., then the group’s largest subsidiary.
Chey cut his teeth on smaller deals: in 2000, he engineered the takeover by SK Telecom of a smaller rival, Shinsegi Telecom, for 2.3 trillion won ($2 billion) in cash and stock. Buying Shinsegi boosted SK Telecom’s market share overnight to 57% from 43%. But Chey’s plans for an overseas push were put on hold when, in 2003, he was sentenced to three years in prison for accounting fraud. He was released after seven months and given a full presidential pardon in 2008.
Chey didn’t manage to resume SK’s expansion until 2007, when he turned SK Corp. into a listed holding company, SK Holdings, for SK’s major subsidiaries; it is now the de facto holding company in which Chey and his family hold nearly a 30% stake. Chey then led SK into China, investing in oil exploration in the South China Sea as well as energy and chemicals in Shanghai and Wuhan.
Today, the SK group employs 93,000 people in 101 companies and generates an estimated $140 billion in combined revenues. Of these, 16 major companies operate autonomously, yet the CEOs of these firms convene monthly as part of a “Supex Council” to coordinate strategy under the slogan “independent yet united.”
When Chey first started looking at Hynix, it was a troubled company with a dominant position in the market for dynamic random-access memory, or DRAM, chips. The nine Korean banks that ended up its largest shareholders after its 2002 bailout had hunted for years for a buyer. U.S.-based chip company Micron Technology bid $3 billion in 2002, only to be rejected by Hynix’s board.
$10 million for Africa’s next great entrepreneurs
Budding African entrepreneurs can now apply for the Africa Netpreneur Prize Initiative (ANPI), founded by the Jack Ma Foundation, for a $10 million prize.
The application process which is in partnership with Nailab was officially opened by Jason Pau, Senior Director and Chief of Staff International to Jack Ma, Alibaba Group Executive Chairman.
“Africa Netpreneur Prize is about looking for heroes. We are looking to shine the spotlight on existing African entrepreneurs’ whether they are in the traditional sector or tech sector or men or women who come from any of the 54 countries that are part of this continent” said Pau.
Pau says for the next ten years the foundation will host a pitch competition in Africa where ten finalists from across the continent will compete for $1 million in total prize money.
“Jack Ma will personally commit one million dollars in grant money. The trick to the part is for ten finalists to compete every year for the next ten years. He wants to turn it into something like a show. A million dollars for entrepreneurs’ is not a lot of money but what we think we could do is to have their stories remembered and watched across the continent,” says Pau.
The prospective entrepreneurs will get assistance from experts.
On the advisory board is Jack Ma, Ban Ki-moon, 8th Secretary-General of the United Nations and Graca Machel, Chair of the Graca Machel Trust Board.
Pau says he believes having the Graca Machel Trust will expose the potential of women across Africa. He says their aim is to uplift the confidence in women of ‘you can and you should’.
“Through their networks, I believe they can reach a million or more women across Africa. I believe it is two things, one is confidence building. I think a lot of times women don’t really believe they could compete with men for whatever reasons,” said Pau.
Pau added that because the majority of women in the continent are single parents and breadwinners, they need all the support they can receive.
“We need to find those breadwinners and a lot of them are women… we are not only looking for tech-entrepreneurs we want to include the traditional sector because a lot of women are active in sectors such as agriculture. So if we could include a prize in industries that women in Africa are strong at, then that is the prize,” said Pau.
Shungu Gwarinda, Director of Programmes for Graca Machel Trust, says their mission is to connect women and put them at the center of Africa’s development.
“We strongly believe that the social and economic transformation that we seek to see towards building the Africa that we want, that nascent potential lies with women. Seventy percent of production on your lower level is driven by women, but at a lower level,” she said.
Gwarinda says she believes that through the partnership with Jack Ma Foundation they will better amplify the voices of women across the continent and build on their networks.
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