You wouldn’t think George Sambonos is a multi-millionaire. He may drive a Porsche, but he spends his Fridays helping clear the tables in the rush of Friday lunchtime at his flagship store. Hence, two words describe him: ‘humble’ and ‘shrewd’.
The son of a Greek entrepreneur, Sambonos was born in Hillbrow, South Africa. His life has been filled with doses of luck and bucket-loads of hard work. It all began with his father’s business, started by his mother to pass the time. The Dairy Den was a franchise, from the US Dairy Queen, selling ice cream and fried chicken to customers in their cars. He worked at the Dairy Den from the age of 18 and would stay until the wee hours every day.
He uses words like “awful” and “horrible” to describe working for his Jekyll-and-Hyde father. Sambonos recalls days when he’d have to go outside and cry for five minutes in his determination not to quit. Another time, his father threw a bread knife at him for dropping a glass—the knife stuck into the skirting board. He remembers his father as a good businessman but an awful boss. Sambonos is the opposite with his daughter, Chantal. He considers himself strict but fair, believing that you catch more flies with honey than vinegar.
It was the benign side of Sambonos senior that threw tickets to America across the dining room table and gave the young man a chance to make a discovery that was to change his life. The condition of these trips was that he visit his aunt in Greece on the way back.
The overseas trips allowed him to soak up everything he could about the US restaurant business. Sambonos would spend his days walking from one outlet to another, trying out the food and taking photographs of the menus. He claims that he still does this, but is now more selective and secretive. When he takes a picture these days, he gets his wife to hold the menu, while he pretends to take a picture of her.
It was on one of these trips, in 1972, that Sambonos tasted the fried chicken which would change his life. He asked the business owner in Waco, Texas, to give him the recipe. He wore the owner down to making a deal but did not have the $5,000 asking price. The chicken shop owner took pity on Sambonos because he was young. Further negotiations brought the price down to $1,000—all the money he had for the rest of his trip.
Sambonos came back too afraid to tell his father what he’d done. He began mixing the spices under his bed and adding them to the chicken at his father’s roadhouse, from a recipe he hoped was right. Chicken sales grew. The Dairy Den went from taking in R25,000 a month to a staggering R200,000 a month in the course of a year: a fortune in those days.
It was a good three months before Sambonos came clean, if you can call it that. It was a visiting relative who asked Sambonos’s father what he’d done to the chicken and the old man said: “That little ‘bastard’ must have done something—I’ll kill him.” The secret recipe for the addictive chicken is safely in the hands of Robertsons Spices, and its chemist was made a director in the company to safeguard the company secret.
With business doing so well, thanks to Sambonos’s bold move, he thought it the right time to ask for a 5% profit share. This did not go down well with his father, who told him to either be happy with what he’s got or his cousin would be called in to replace him. So when the opportunity came up to sign the store’s lease in his name while his father was in Greece, Sambonos jumped at it. It was a move motivated purely to save the lease, but his father didn’t speak to him for three months and died three months after their reconciliation.
Rebranding was next. In 1981, Sambonos wanted to name the store ‘Golden Fried Chicken’, like the name of the company he’d just formed, but was turned down because the name was too descriptive. A despairing Sambonos had his head buried in his hands when one of his waiters suggested the name, Chicken Licken, from the children’s book, Chicken Little/Chicken Licken. The waiter received R300 for his idea.
The Chicken Licken signs went up and by 1982, Sambonos had taken over the business and was franchising into the townships. The first franchise was in Zola, Soweto. Sambonos admits to giving away the first franchises. By 1985, he began selling them for R3,000 and giving the franchisee R15,000 worth of equipment to get them started. A television commercial featuring a well-known black actor drove up sales in 1989 with the jingle “It’s good, good, good, it’s good, it’s nice.” Sambonos found out what his customers liked and used it to make money.
Setting up in the townships of South Africa during apartheid was another risky move by Sambonos and in 1984, things took a turn for the worse. The growing turmoil in Soweto meant that delivering chicken to the township was nearly impossible. Business suffered.
Sambonos has come a long way since then, with 245 outlets and franchisee payments of 12% of their turnover, up from the pre-2012 payments of 10%. These consist of 6% for royalty fees and 6% for the advertising share. The group is said to turn down five people a day. This is all testament to how much the brand has grown. There is an outlet set-up cost of at least R2.8 million ($354,670) and an initial franchise fee of R120,000 ($15,200). The flagship store in northern Johannesburg cost R5 million ($633,240) to set up, excluding the R500,000 ($63,330) for the generator. Unlike the 1980s, a lack of electricity is a concern these days.
Sambonos is still at the helm, ensuring stringent quality control. All the outlets receive their ingredients from the same licensed suppliers; use the same specs; are furnished with identical equipment; and have access to the trademarks.
This rigorous approach has led to problems when expanding in the continent. The company opened two stores in Mauritius, with a three-year royalty break. The country only had two chicken producers, one of which supplied Kentucky Fried Chicken (KFC); they had no choice but to use the other. The outlets did well, but when the royalty break ended, so did Chicken Licken in Mauritius.
Zimbabwe’s capital, Harare, had four outlets which were doing extremely well; one of them was a top performer in the entire group. That is, until the country ran out of foreign exchange to pay for ingredients.
Nigeria’s five outlets in Lagos closed down due to issues with the franchisee. According to Sambonos, the franchisee wanted to refranchise to others at a lower rate and loosen quality control.
Chicken Licken plans to invest in the rest of Africa, beyond their 12 stores in Botswana. Sambonos says this is provided they get the same quality chicken in those countries. The company is awaiting expansion into the continent by Rainbow Chicken, South Africa’s main chicken supplier. Sambonos feels that the key to success is to control the chicken and the advertising. In Nigeria, the cost of fuel to run generators has to be thought about as no business can rely on the electricity supply.
Sambonos says: “Nigeria’s only got 30 million chickens, that’s all. The big producer is the former president and he won’t let you import chicken, so you’re finished.”
As if going into the rest of Africa is not hard enough, Chicken Licken has had to battle the image of being a township brand in its attempt to enter wealthier malls. There is an apparent fear that the outlets will bring in the wrong element of people.
Sambonos was annoyed when O.R. Tambo International offered to slot them in the back. He believes his brand will win over the sceptics.
The company’s annual turnover is close to R1.4 billion ($177.4 million) and is powering its way towards its R2 billion ($253.5 million) target for 2014. Sambonos says that the company reaching R3 billion ($380.2 million) by 2017 will be his cue to step down from handling the suppliers and the advertising. “They can’t mess it up after that,” he chuckles.
The 2012 budget is R64 million ($8.1 million) for advertising and Sambonos oversees the ideas right down to attending the photo shoot.
The group is also a firm believer in taking care of its employees. Every three months, the best performing manager receives a R6,000 ($760) to R12,000 ($1,520) bonus and the rest of the outlet, about R600 ($75) each.
Sambonos says: “If the manager is right, then the rest of the outlet is right.”
Kind to his employees, but merciless to his competitors, Sambonos has seen his fair share of battles, or caused them, as some might say.
The first legal battle, in 1982 with KFC, was over the name. Sambonos opened up an outlet in Lenasia, south of Johannesburg, not far from a KFC. The new store took half of KFC’s business in just two weeks. The battle lines were drawn.
KFC claimed Chicken Licken’s name was too close to their ‘Finger Lickin’ Good’ slogan. Sambonos says the trademark lawyers told him he could change the name or fight in court. He chose the fight, dropping off the R10,000 legal fees in a Chicken Licken plastic bag that ended up in the office fridge. Chicken Licken won both the case and the appeal. The proud Sambonos says KFC offered him R250,000 to change the name, a sum he clearly refused, adding a sly: “Harry Swartz (of KFC) said, ‘Hell or high water, I’ll see you in Bloemfontein [High Court]’.” They never made it there.
The second battle was born of Sambonos’s usual trips to the US in the early 1980s. Walking down 6th Avenue in New York, he saw a KFC banner advertising KFC’s popcorn chicken. Loving the idea, he called his lawyer to put in an application with the South African registrar. A while later, back home, he saw a KFC advert for KFC Pops in the paper and did some digging into how this was even possible.
Apparently, his paperwork was not pushed through due to clerical forgetfulness. Sambonos demanded due diligence as he had placed his application first. The matter was settled at the registrar; KFC lost again.
By the time the hotwings saga began in 1992, Sambonos was already a thorn in KFC’s side. KFC held a convention in Swaziland for its franchisees, who were served fried hotwings. A friend’s phone call prompted Sambonos to call up his lawyer and say: “Hotwings! See if we can grab the name quickly.” The lawyer found out that a company called County Fair owned the name in South Africa, but had failed to use it. Sambonos’s lawyer offered them R750 ($300 at the then exchange rate) for the name, pointing out that  their ownership could easily be expunged and they’d get nothing from it. The lawyer signed a check on the spot.
Sambonos describes how he quietly went to Rainbow Chicken and asked them to supply him with his wings, even drawing a diagram as to where they should be cut. In the meantime, the creative entrepreneur would buy normal chicken wings and cut them himself. He sold them at one outlet—six ‘hotwings’ and chips for R2.95 ($1 at the then exchange rate)—and had the manager keep all the receipts just so they could use the name for the minimum required period. This paid off because KFC decided to start selling the hotwings its sister company in the US had introduced, only to be informed by Rainbow Chicken that Chicken Licken had beaten them to the order and would use the same name.
Since the name legally belonged to Chicken Licken, KFC offered Sambonos about R85,000 ($29,460 at the time) for it. “No deal,” said the man who had already paid R750.
According to Sambonos, his company sells an average of 12,000 cases of hotwings a week and is now importing XL wings to keep up with the growing demand. The original ‘six hotwings and chips’ meal now costs R21.95 ($3).
Sambonos attributes his business savvy to his constant need for something new. He still reads trade journals every week and travels as much as he can. He says that the US isn’t as secretive as the South African market. There, when a company creates something new, they test it and it becomes common knowledge.
Sambonos says: “If somebody has got something good and you’re not going to go to jail for it, use it.”
Wise words from the humble millionaire who owns the trademark “Soul” in the food category, and probably has his eye on a few more words.

From Ducking Knives  To Making Millions

Tanzania’s political landscape is dominated by the ruling Chama Cha Mapinduzi (CCM) party, which was re-elected into power in 2010. CCM may remain in power despite whispers of infighting and corruption and a rising challenge from the opposition.
President Jakaya Kikwete fired the ministers of finance, energy and minerals over allegations of corruption and mismanagement. Since November, President Kikwete has faced increasing political and public pressure over corruption allegations on members of his cabinet. Over the last two years Tanzania has plunged 32 places in Transparency International’s Corruption Perception Index. In the 2010 survey, Tanzania ranks 116 out of 178 countries.
Nevertheless, Tanzania’s economic prospects look bright, especially in contrast to subdued growth in the Eurozone. Over the past decade, economic growth has averaged above 6%. Both the International Monetary Fund (IMF) and the World Bank expect growth to reach 7% in 2012, higher than the 6% for the continent overall. The Economist magazine has identified Tanzania as one of seven economies that it predicts could grow 7.2% on average annually.
Prudent macroeconomic policies, anchored by the country’s engagement with the IMF, will support growth. Macroeconomic policy will be focused primarily on poverty reduction to uplift the lives of millions of marginalized people. Growth will likely be driven by reforms in the agricultural sector to encourage commercial investment which will likely buoy the country’s biggest employer.
Infrastructure development aimed to address bottlenecks, particularly in the energy sector, will boost the construction sector. The services sector—transport, telecommunications and finance—is also expected to be a key growth contributor, as investors continue to show a keen interest in these sectors.
Mining, one of the economy’s mainstays, will also favorably contribute to growth. Tanzania is the continent’s fourth largest gold producer and foreign investment in the sector is high. Oil and gas discoveries will further buoy the extractive sector as investors flock in. Tanzania’s gas reserves are estimated at over 10 trillion cubic feet. The World Bank expects gas revenues to boost domestic growth over the next decade.
There are several risks to the country’s positive outlook. The main risk to growth lies within the country’s energy sector. Tanzania faces a chronic energy crisis following a drought in 2011 which led to the authorities instituting the emergency power plan (EPP) to help alleviate the crisis. Tanzania has one of the cheapest power tariffs in the region yet only 13.5% of the population have access to electricity. In January the authorities increased tariffs by 40% to cater for the higher cost of energy production. Energy tariff increases will in turn drive inflation higher to the detriment of the economy at large.
Inflation has been another bugbear for the economy. Inflation increased in 2011 on the back of higher food and energy prices as well as weaker shilling. In 2012 prices have remained stubbornly high—year-on-year inflation was recorded at 19.0% in March, down from 19.4% in February. In the face of elevated inflation coupled with uncertainty surrounding the stability of the shilling, the Bank of Tanzania (BOT) is likely to be reluctant to loosen monetary policy. The IMF expects inflation to decline to single digits by year-end. However this view is heavily dependent on this year’s harvest.
Lastly, uncertainty surrounding global growth also poses a risk to Tanzania’s growth outlook. The European sovereign debt crisis is probably the country’s biggest risk factor. With the European Union a key export destination, a deeper and prolonged contraction in growth, is likely to dent demand for Tanzanian exports.
At a regional level, the authorities are likely to be focused on the further integration of the East African Community (EAC). The BOT governor, Benno Ndulu, in February this year pledged that the government will improve the investment climate in order to attract regional and global investment. With the Europeans’ woes the world will be closely watching when the monetary union of the EAC will come into effect. Given the lessons from the European Union this may well be put on the back burner for some time to come.

Choked By An  Energy Crunch

It doesn’t matter how many capital cities you have flown into; the descent into Maputo never fails to impress. It is a breath-taking expanse of wide, deep water flowing into the Indian Ocean, 92km long and 32km wide, that sparkles in the sun. When Portuguese navigator, Lourenço Marques, surveyed the bay in 1544, on behalf of his seafaring country, tears of joy must have welled up in his eyes. Maputo is a perfect natural harbor made for ships. Marques laid the foundations for the port and lent his name to the colonial city that grew up.
The mouth of the harbor is hemmed in by banks thick with bush, and the blue waters lead right up to the city of Maputo, perched on a ledge of rock above the cranes, palm trees and funnels of the mighty ships in dock. Offshore tankers from Namibia to New York line up for their turn at the quayside.
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They say in Maputo you are never far from the port, and in many ways it dominates the city, home to two million people. It helped pay for the high-rise concrete buildings of this rich city center—or “cemento”, as it is called in Maputo—but for many years it was failing.
In the early years of this century, the port was crumbling to dust after decades of neglect. By 2003, the roads to the port, once among the busiest in Africa, were strewn with rubble. There was barely enough working equipment to load the dwindling amount of cargo. Hundreds of idle casual dock workers lounged by the waterfront waiting for jobs that would never come.
It is a sign of changing economic times in Maputo that private business has been allowed to ride to the rescue with the dash of Zorro. The government of Mozambique invited Grindrod—Africa’s largest shipping company—from South Africa, and DP World, from Dubai, to operate the harbor in return for a stake each.
The turnaround was dramatic.  The number of ships docking in Maputo has doubled, compared to 2003, to more than a thousand-a-year. Coal exports have more than doubled to four million tons and chrome exports are set to reach two million tons this year—five times what they were in 2003. The port is reopening rapidly to trade and now handles everything from citrus fruit to steel from neighboring Zimbabwe.
The change in fortunes, for this key piece of infrastructure, couldn’t have come at a better time to support the rising economic fortunes of Mozambique. The Moatize coalfields, in the north-west corner of the country, are set for a boom; gas has been discovered on the northern coast of Mozambique and BHP Billiton’s Mozal smelter in Matola, south of the capital, is churning out aluminum for export. Rio Tinto has been buying up coal mining assets to add to its international portfolio.
Maputo millionaire Venancio Matusse, an engineer by trade, is one of 42 shareholders in the consultancy, Mozambique Gestores, which manages the port and owns 3% of the free carry business. He said the port is investing $800 million in security and dredging the channel leading to the docks to make way for the big ships. The Maputo River empties into the bay, bringing with it tons of silt that choke the channel.
“A lot of money needs to be spent on the dredging; it is a job that almost never ends,” says Matusse.
“Now the port has all the equipment it needs, but still needs to grow. We need to earn more of the container cargo market because that is where the money is. One challenge is the time goods take to go through the port inspection side. You can take three or four days to clear your goods and that costs money.”
Fernando Lima, a veteran journalist in Maputo, agrees that the port has a long way to go.
“If you look at the container terminal, it is completely congested. Grindrod has attracted a lot of business and now the terminal is facing serious problems of congestion,” he says.
“There is also a problem with bureaucracy, especially when it comes to customs. Delays mean you are losing money as an importer or exporter, which is bad when you have to compete with Richards Bay and Durban in South Africa.”
Even so, millions of dollars are
flowing into infrastructure at the port and another school of thought is that exporters from South Africa—struggling against high cost and a lack of rails at home—could be looking towards Maputo. Either way, to borrow from the words of American writer Mark Twain: reports of the demise of the Port of Maputo have been greatly exaggerated.

The Port That Came  Back From The Dead

The world descended on Africa’s political capital, Addis Ababa, Ethiopia on May 9.  The queues were long and winding at Bole International Airport as global airlines landed one after the other, offloading hundreds of delegates bound for Africa’s most exclusive economic event.
Throughout the World Economic Forum on Africa, the streets were abuzz with vehicles and people going about their daily routine, oblivious to the occupation of their capital. This humming capital is the epitome of Ethiopia’s remarkable economic achievements in recent years.
Ethiopia is the second most-populous nation in sub-Saharan Africa with a population of more than 80 million people. It is also one of the fastest growing economies on the continent. The International Monetary Fund (IMF) expects growth at 5.0% and 5.5% in 2012 and 2013 respectively. This is a far cry from growth prospects in Europe and the rest of the developed world. Most Eurozone economies are either in recession or teetering on the brink.
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The skyline over Addis Ababa is full of swinging construction cranes. A delegate, who had worked in Addis Ababa since the late nineties, told of his surprise at the building and economic progress since he was last in the country.
Rain and dark clouds hung over the capital for most of the conference, but this didn’t dampen the enthusiasm as delegates exchanged business cards in the hope of new business opportunities. Almost every conversation talked of how the fast growing continent of Africa was the place to be.
“‘It is a tremendous time for Africa where Africa is coming to the world, and the world to Africa,” says Josette Sheeran, vice-chairman and member of the Managing Board, World Economic Forum, speaking to CNBC Africa on the eve of the forum.
Sheeran, in her remarks at the opening plenary session, said Africa was in an era of the hand shake with people banding together to galvanize the continent’s transformation.
The discussions were wide and varied, ranging from innovation and technology, to social and gender issues. Several themes were pervasive throughout the three days—among them infrastructural development, regional trade, leadership and governance.
Infrastructure development was identified as the biggest impediment, bar none, to growth in Africa.  Donald Kaberuka, president of the African Development Bank, talked of a recent trip to an African capital. To his dismay, this particular city of a million people had water infrastructure to cater for a mere 17,000 people.
This story brings to light Africa’s gaping infrastructure hole. Delegates at the forum were unanimous. Africa needs to invest heavily in roads, ports, railway lines and power stations to remove bottlenecks and promote efficiency in the economy. Sufficient infrastructure will reduce the cost of doing business on the continent dramatically, which will in turn spur investment.
Many African governments have taken heed. Governments across the continent are spending billions of dollars on infrastructure. In February, South Africa, Africa’s biggest economy and by far the most advanced in terms of infrastructure, announced a $100 billion capital expenditure program over the next three years.
The forum also heard Africa’s global and regional trade was at risk through uncertainty created by the Eurozone sovereign debt crisis. Delegates were concerned about low intra-Africa trade.  Intra-Africa trade is only about 10% compared to 70% in the Eurozone; 52% in Asia; 50% in North America and 26% in South America.
Low intra-regional trade is a missed opportunity for growth and development for the continent.  Pascal Lamy, director general of the World Trade Organisation, blamed this low intra-regional trade on poor infrastructure, inefficient border procedures, regulatory discrepancies and insufficient trade finance.
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“The issue of boosting intra-African trade is not so much the diagnosis on what needs to be done, but on how to do it.” He added that “we know that the necessary initiatives have to happen at the regional level. Regional organizations have to address these problems one by one. The key to removing these bottlenecks lies in the political energy of regional leaders to do it,” says Lamy.
Over the last decade, six of the 10 fastest growing economies in the world were African.  Part of Africa’s stellar growth during this period has been partly attributed to good leadership and governance. Kofi Annan, chairman of the Africa Progress Panel, praised the continent’s leadership and governance standards.  He was confident that over the next decade Africa’s progress will continue.
Annan stressed the need for public policy debate which, he rued, was practically non-existent across the continent.  He lamented that as much as there is democracy there is no engagement between governments and their citizenry. As such there is no policy consensus in nations which means that at each change of government, every five or 10 years, there is a change in policy. He said that lack of policy debate not only promotes myopic policies but also policy discontinuity. This limits consensus and nation building on the continent, ultimately putting a cap on economic growth and development.
Gao Xiqing, president and vice chairman of China Investment Corporation, hit the nail on the head when he referred to a quote by Chairman Mao referring to China’s poverty.
“This may seem a bad thing, but in reality it is a good thing. Poverty gives rise to the desire for changes the desire for action and the desire for revolution. On a blank sheet of paper free from any mark, the freshest and most beautiful characters can be written; the freshest and most beautiful pictures can be painted,” he says.
Africa, like China then, is also fortunate enough to have ‘a blank sheet free from any mark’. It is Africa’s opportunity given its many desires to rise and produce a unique, beautiful and heavenly masterpiece in the form of inclusive, strong and sustainable economic growth to lift Africans from poverty.

Build And We Will Grow

Ken Ayere’s moment of lucidity came to him as he was about to write his last story. His head was full of wonderful memories of life reporting on the road, his pocket was empty.
Ayere was at the end of a 14-year-long career working for the News Agency of Nigeria and was the bureau chief in South Africa. He was about to end his contract, when the thought hit him.
“Remuneration from media was just not enough for me. My mind was working on a way forward. I was thinking about how I could change the status quo,” he says.
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The answer was drawn from his experiences of welcoming visitors to South Africa from Nigeria. They all wanted Nigerian food, but there weren’t that many salubrious places in Johannesburg to go to.
Ayere, who also craved Nigerian food, decided to open his own restaurant. The idea was to create a restaurant which served West, East and Central African food where ex-patriates could meet and feel at home. The gimmick was that a Kenyan waiter would serve a Kenyan in his or her mother tongue; a Nigerian would serve a Nigerian, and so on. Ayere already had a name in his head, Homebaze, a place where Africans from across the continent could feel at home.
The trick was to raise money—not always easy when you are in a country far from home. Ayere managed to eke a little money out of the banks; the rest came from his life savings and borrowings from his family.
“I got the capital I needed to bring this dream to fruition,” he says.
In 2003, Homebaze opened its doors in Randburg, Johannesburg, with Mrs Ayere running the kitchen. The dining public of South Africa could sit down to plantain, egusi soup, chapati, pounded yam and moinmoin—a kind of Nigerian bean cake, amongst other delicacies on the Homebaze menu.
Supplies are not easy. You can’t nip down to the supermarket; every recipe and ingredient has to be imported from across Africa—you can’t afford to leave one spice out of a Nigerian dish if you want to satisfy a Nigerian palate. This alone costs at least R100,000 ($ 12.140) a month and Ayere tries to cut down on his costs by getting friends to stash spices in their suitcases.
“While it was a salable concept, it still took a while for things to get off the ground. I had to do a lot of marketing,” says Ayere.
The idea grew and there are now a total of three Homebaze restaurants in Johannesburg and Pretoria, with a fourth being built.
“I am very happy with my brand and I have exciting plans for the future,” he says.
Ayere toyed with the idea of opening a branch back home in Nigeria, but the cost of business and generators outweighed the romance of a triumphant return.
Nine years into his life as a restaurant owner, Ayere had a second epiphany. The power of the pen had never left him and now nagged him to write again. One day, he was sitting in restaurant when he decided to take up, once again, that which is mightier than the sword.
“Once in media, always in media; the bug bit again,” he says.
The result was a newspaper for Nigerians in South Africa, called The Envoy, which aims to tell their story.
“This is to spread information about the good professional Nigerians here and dispel the myth of the negative impact of Nigerians in business,” he says.
In both his business ventures, Ken Ayere has a full plate.

The Tale Of A Pen, A Spoon And An Empty Pocket

Professor Njuguna Ndung’u, the governor of the Central Bank of Kenya, and one of the country’s most influential men in economic matters, is not known for being talkative. Partly because of his reticence, the few public remarks he makes are studied carefully.
These days, however, Ndung’u is displaying a wholly different side, allowing himself to be caught up in spectacular public squabbles with politicians over deteriorating economic indicators reflected in high inflation, a weak Kenyan shilling and rising interest rates.
“Policy making is very challenging,” he says. “You have to understand what  the right policy is and understand which tools to use.”
Booking an appointment was a lot easier than actually sitting down with the governor on the day. He postponed twice—from 10am to noon, and then to 3:30pm—so he could attend a grilling from the parliamentary committee on the controversial award of a currency printing tender to De La Rue of France. You would think that facing unforgiving legislators in an unforgiving part of the world would be about the worst thing for a banking regulator who is used to dealing with polished economists and bankers.
“There are no worse days for me,” he says calmly, as he sinks into his black leather seat which squelches in protest.
“I work day and night. There’s no worst day or best day. Today it could be inflation; tomorrow a parliamentary committee wants certain statistics; and so on,” he says.
But looking back, it is obvious that as far as bad days go, some are worse than others. In 2009, the global financial crisis started trickling down to Africa, especially in countries connected to the west like Kenya and South Africa.
Even worse, the financial melt-down—which began in the US with the collapse of the mortgage market—came to Kenya when the country had barely recovered from the violent two-month political crisis of January and February 2008 which had not only scared away foreign investors, but also slowed economic growth and production.
“That recovery was painful. It was painful because 2008 was a difficult year, and 2009 was devastating because by the time we were dealing with the post-election aftermath, the economic crisis hit us,” he says.
When there’s a crisis in Europe or the US, skittish investors fear it will spread to developing countries. In 2009, Ndung’u, who is an associate professor of economics at the University of Nairobi and holds a PhD in economics from the University of Gothenburg, Sweden, was a worried man.
“We tried to understand our
internal crisis, but with the global financial crisis, you were waiting every day, waiting for something to happen.”
For a man who implements quick yet well-thought out actions, the waiting game was unbearable.
It was just past 5pm on a cold Friday in August in 2009. In a dimly lit office at the Central Bank headquarters in Nairobi, Ndung’u, an economics author and a fan of Shakespeare, stared blankly at the markets trading board, his lower lip trembling at the gravity of what he was witnessing. This was tragedy worthy of Macbeth.
What was happening was crazier than anything he could have imagined. Global stock markets were swooning, currencies were being crushed and financial systems across the world were punch-drunk.
From his third floor office, looking out at the skyline of East Africa’s strongest economy, Ndung’u’s well-tuned economic antennae began picking up danger signals. Too late for him; Kenya’s financial system and stock market were already in panic, and the numbers were not looking pretty.
“There was not much we could do. It was the public panic that we were waiting to contain,” he says.
That day, when the global financial crisis hit and he could do nothing about it, was his worst day.
Helpless, he could merely watch as it triggered events that would challenge his reputation as Central Bank governor and plunge Kenya’s economy towards recession. The economy grew by 2.6% that year, compared to 7.1% in 2007. It was all work and no play for the professor.
“We were looking at all avenues to manage it. The other crises we knew [about] were speculative attacks from Europe. But now we were, day and night, looking at what we could do without contradicting domestic policy. Because we had signed Article 4 with the International Monetary Fund (IMF) and so we could not restrict forex controls like South Africa and Tanzania.”
This meant that the humble Kenyan shilling was left to the mercy of the crisis. It was pummelled daily as investors dumped it and scampered for safety to international currencies like the dollar.
This was not good for Kenya, as it further squeezed an economy emerging from intensive care.
This is the man named after a leprosy outbreak, that hit Kenya in the fifties, who takes struggle in his stride. With a smile, he remembers the famine of the 1960s, when the country was forced to eat maize, and the multiple political economic crises of the 1980s.
“Crises will always come and go. Any crisis is a lesson and any challenge must be surmounted,” he says.
Ndung’u is a tall, tireless 60-something with an angular face, a modest voice and a smile that rearranges everything on his face, ending with deep dimples on either cheek. Armed with years of experience in theoretical economics, teaching at the university and working for a number of organisations, he intended to beat the global financial crisis.
No longer would the Central Bank of Kenya sit and wait for an onslaught by the big boys, he resolved. But like many central bankers across the world, Ndung’u was merely chasing shadows.
“Even America didn’t understand until Lehman Brothers collapsed and that’s when we started mapping out who was trading with Lehman and who was holding the toxic assets.”
Lehman Brothers Holdings Inc. was a global financial services firm and the fourth largest investment bank in the USA after Goldman Sachs, Morgan Stanley and Merrill Lynch. It conducted business in investment banking, equity and fixed-income sales and trading, investment management, private equity and private banking.
On September 15, 2008, the firm filed for Chapter 11 bankruptcy protection following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies. This is believed to have played a major role in sparking the global financial crisis.
The domino effect spread through the global financial system, and fuelled capital flight from markets thought to have been overly exposed to the so-called toxic assets.
“The beauty of it is that we have a strong financial industry in Kenya. And it has developed. Only we don’t have faith in it; but in CBK we have faith.”
Ndung’u says his academic background combined with his years of experience gave him the upper hand in managing the crisis. He used all the monetary tools at his disposal, such as interest rates to reduce the cash supply in the economy and increased vigilance on banks and other financial institutions, to ensure they were operating within the required liquidity levels.
In spite of the best that his arsenal could muster, the impact of the financial crisis – which is still being felt in certain quarters, especially through inflationary pressures and currency swings—saw the governor being voted as worst performer in Africa by Reuters in 2011. He takes the dubious honor in his stride.
“I don’t fear being rated; it makes you think fast. If you ask them to give you the previous ratings of governors, they won’t show them to you. Rating is a family of indicators and having to control inflation is a weak way of rating. If there’s a shortage of maize and there’s a rise in prices, you cannot say you are going to rate the governor on that. People will laugh at you. But I don’t fight with the media. That’s their business.”
With a demanding job that requires a stiff upper lip, the governor says he unwinds by playing golf on Sundays. But even his madness has a method, and the reason he enjoys golf, he admits, is because ultimately it is about strategy.
“Golf is about the brain: you have to be relaxed in mind and you have to have a strategy. I used to play lawn tennis until I realized I was growing old and my legs were wobbling,” he says.
But it is his football stint during his school days that he talks passionately about.
“My advantage was that I could dodge with the left or right leg and I would use both legs for scoring as well. That’s why you can see my hands are injured and not my legs,” he says, exposing three scars on his left arm from his footballing days. His ambidexterity and the game’s ability to stimulate intelligence, vision and strategy stood him in good stead both on the football field and in the wood-panelled offices of the Central Bank.
A nation passionate about football could not wish for a better captain guiding their economic future.
“Soccer requires intelligence, good vision and strategy. And all these qualities are applied in managing the economy,” he says.
Except when a striker, in the shape of a world financial crisis, is tearing your defense apart.

Crisis 1 Governor  0

Tony Elumelu is in his office on the corner of a serene Ikoyi street, not far from the bustling Obalende taxi and bus park, in the heart of Lagos. Documents are strewn across a large desk and he looks busy.
“I was in a meeting in this office when I got the call. The first thing I did was to call one of my brothers, to mandate him to take charge. In crisis management, the first thing you do is get somebody to take charge,” he says.
It was a call that everyone dreads. Kidnappers had snatched his 84-year-old mother, Suzanne, from her farm in the Delta State. Elumelu, realizing the futility of panic, strove to deal with the situation calmly. By all accounts, there was nothing frenzied about his actions in the days following the kidnapping.
I ask if he expected something like that to happen. His answer is instant and forceful: “Not at all!”
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Elumelu sums up the incident as “a symptom” of the prevailing despair in the country. Nigeria’s security agencies “were very supportive,” he says.
It all ended well, she was rescued four days later, and arrests were made. The message from the Elumelu family on Facebook says it all.
“The family wishes to thank Nigerians and friends from around the world for the unprecedented outpouring of concern, solidarity, love and prayers during the harrowing ordeal. We are most grateful to the Federal Government, the Delta State Government and the respective law enforcement agencies for their professionalism, diligence and bravery which led to her rescue. At this time the family requests for privacy to spend time with Mama, and recover from the emotional wounds and anguish of the last few days.”
Persuading Suzanne Elumelu to move to the relative safety of Lagos doesn’t appear likely. Elumelu says his mother insists on staying in her village. At that age, he adds, it is essential for her to be where she feels at home.
As Elumelu and his family recover from this trauma, the coming months promise to be hectic for him. There are three new hotels to be built: two in Lagos, and one in Port Harcourt. This will increase the number of hotels owned by his Transcorp Group to five, in which he acquired a controlling stake in 2011 through Heirs Holdings, his investment firm.
Then, there is the goal of taking over the entire import market for fruit juice concentrate by 2013. Elumelu says that until the opening of Transcorp’s manufacturing plant—the agri-business subsidiary run as Teragro Limited—in Benue last March, Nigeria imported all of its concentrate, costing the economy close to $1 billion every year. Teragro also plans to build fertilizer plants in Delta State.
There are also the two oil blocks, one owned by Transcorp, the other by Heirs Holdings. He expects that by 2013 both oil blocks would have gone into production. And then there is the power plant Transcorp is bidding for, under the Nigerian government’s privatization program. For this, the company has gone into partnership with US energy firm, Symbion Power. When the deal is done, Elumelu says the goal will be to increase the plant’s capacity from the current 300MW to 1,200MW.
Elumelu is a champion of the private sector and its role in redeeming Nigeria and Africa. Regarding the insecurity in Nigeria, he chooses to focus on how the private sector, by providing employment, can help create a less combustible environment.
“Where there’s hope people do not take to violence. Where there’s no hope people become vulnerable,” he says.
His story is by now a well-known one. In 1997, a group of investors acquired the distressed Crystal Bank Limited, and rebranded it Standard Trust Bank (STB). Thirty-three-year-old Tony Elumelu, who until then was executive director at Continental Trust Bank Limited, was appointed CEO of the new institution. Over the next few years he grew it into Nigeria’s fifth largest bank. In July 2004, the Nigerian Central Bank governor, Charles Soludo, announced a series of banking reforms, with the goal of creating larger, more robust banking institutions in Nigeria.
Elumelu led Standard Trust Bank into a merger (in Soludo’s words, “the first successful merger during the banking consolidation”) with the older and larger United Bank of Africa (UBA), and took over as CEO of the new entity, which adopted the UBA name.
Nuhu Ribadu, former chairman of Nigeria’s Economic and Financial Crimes Commission, recalls it as being the “gutsiest news of the year”. The merger was completed in 2005, and a year later the Elumelu-led UBA became the first Nigerian bank to hit a N1 trillion ($6.3 billion) balance sheet mark. The ‘whizkid’ had come a long way from the modest beginnings at STB—which had a N5 billion ($31.7 million) balance sheet in 1998.
The UBA phase was destined to wind up as it had started—on the strength of a policy pronouncement by the Central Bank (CBN). In January 2010 the new Central Bank governor, Lamido Sanusi, introduced a new rule stipulating that bank CEOs would have to retire once they had clocked ten years in office. Elumelu was in his 13th year as CEO—eight years at STB, five at UBA—so, at the relatively young age of 47, Elumelu was going to have to step away from the business in which he had made his name and fortune; from a bank he’d grown into a pan-African brand, with more than 800 branches in 18 African countries, and $19 billion in assets.
Two days after the CBN policy announcement, UBA named Tony Elumelu’s successor, becoming the first of the banks to realign. He recalls people telling him he was too young to quit, wondering what he would do with his life. He was the youngest of that set of CEOs to retire.
“But looking back,” he tells me, “there couldn’t have been a better time to start a second journey.” And thus began the second life of Tony Elumelu.
It has been almost two years since Elumelu left banking. I ask him to assess the bank he left behind. I’m especially interested in what he thinks about its 2011 results—the bank posted dismal results: a pre-tax loss of N28.5 billion ($180.8 million); the result of debt write-offs.
“Last year UBA decided to clean up its balance sheet … This has been demonstrated on the first quarter results,” he says
UBA posted, for the first quarter of 2012, N16 billion ($101.5 million) pre-tax profits, a 233% increase from the corresponding period last year. And its share price has more than doubled over the last month.
“Africa is beginning to contribute to the [UBA] bottom line. Africa contributed over 20% of the [first quarter 2012] profit. The harvest period is here.” UBA Ghana, he adds, currently generates profits of “close to $3 million monthly”.
He sees a bright future; referring to a new Standard &amp; Poor’s’ report that predicts a rise in GDP across several African countries.
“UBA operates in almost all the countries they mentioned,” he says.
There is an air of ruthless efficiency around Tony Elumelu—deducible, not merely from his rise in less than a decade from relative obscurity to a prominent place in the engine room of the Nigerian banking industry; but the sculpted jawline, and the flawless, understated cut of his suit. The credit for his fitness should go to the gym, not the golf course. He’s that rare type of CEO—the non-golfing one. And no doubt this is a man obsessed with getting things done—no fuss, no excuses. Just like Michael Jackson.
“If you saw Jackson’s last movie, This Is It, you saw a man who was so detailed and meticulous,” he says.
“He believed in hard work”—at this point his voice takes on greater forcefulness—“Look at the amount of practice, energy; everything he put into that show!”
In a country where all sorts of stories circulate about the personalities of corporate CEOs, the no-excuses-acceptable Elumelu would be lucky to escape unscathed. A hint of this may be gleaned from a tribute to him written when he was leaving UBA, and published in a hefty coffee-table book, The Power of Vision. “Sadly, he is misrepresented publicly as being an arrogant and hard person,” writes Owen Omogiafo, who worked as his executive assistant at UBA, and now works as director of resources at Elumelu’s Heirs Holdings.
One underlying theme in the tributes in The Power of Vision is the idea of Elumelu as a people-person.
“Talents I don’t have, I don’t regret; I surround myself with people who have them,” he says.
During the interviews he comes across as sober and soft-spoken, with tendencies  for much chuckling and laughter. A member of staff tells me one of the things she’s realized about him is how close he is to his family—his wife, Awele, and their five daughters. In the time I spend with him, sitting in on a meeting of senior management, and then interviewing him (twice), his mischievous, self-deprecating sense of humor shines through. When I ask him what talent he wishes he had, he says: “I think I’m very shy, but people don’t think so.”
On July 31, 2010, at the farewell party organized in Lagos to mark his retirement, Elumelu said: “As I retire from UBA following the regulatory pronouncement, a question has come up in the minds of so many of you here; what’s next for Tony Elumelu? I would like to share that with you today. I have two passions—entrepreneurship and philanthropy.”
Thus, were born Heirs Holdings, his investment company, and The Tony Elumelu Foundation, a non-profit organization keen to redefine philanthropy in Nigeria and abroad. In Elumelu’s words they were intended to “develop business excellence and leadership in Africa.” He shares the vision behind the transition.
“Upon my retirement from UBA it was a question of ‘beyond business’. I tell people I was born in Africa, bred in Africa, schooled in Africa, worked in Africa, still work in Africa, and achieved some level of financial and economic comfort in Africa, from Africa to—so you ask yourself, what’s next? What’s next for me is: I’d like to create more Tony Elumelus. If, due to our entrepreneurial drive we’ve been able to create 25,000 jobs, if we had 10 or 100 people like me, multiply 25,000 jobs by 100, it’s more impact. To me those are more sustainable and impactful ways of helping society than just donating money.”
Embarking on such a journey, he looked to the example of Warren Buffett.
“I decided, okay, it’s time to build a holding company that will monitor our investments in companies we’ve invested in. What we do here at Heirs is slightly patterned after Berkshire Hathaway. Buffett is a very astute and serial investor. I like his business sense. When it’s time to give back to society he’ll give, but time for business is business; they are two different things.”
From the “lean” nature of Heirs Holdings to its “highly strategic” approach to investing, imprints of the Buffett DNA are evident.
Joining Michael Jackson and Buffett, in Elumelu’s personal pantheon, is the man who’s arguably the most famous contemporary second actor—stepping down from running one of the world’s most successful companies to devote his life to philanthropy: Bill Gates.
“He changed the world to a large extent, and upon retirement—he also knew when to leave—he decided to give back to society. The learning point, for me, from Bill Gates is that this is a world of infinite possibilities.”
Leaving UBA freed him up to expand his perspective.
“UBA’s life was extremely busy but industry-focused: just on UBA and banking. And I was at UBA, more like, at operational level.”  But now, it’s a different type of life—more of a strategic life, looking at bigger pictures and interests,” he says.
Now he has a lot more speaking engagements within and outside Nigeria. Most recently, in April, there were appearances and speeches in Washington, D.C.: at the International Finance Corporation headquarters; the Global Philanthropy Forum Annual Conference and a meeting of the World Bank Group Advisory Council of Global Foundation Leaders.
I’m curious to know how things would have worked out had he not left UBA when he did. From the readiness of his answer, it’s clear that it’s something he has thought about.
“If I didn’t leave UBA when I did, two things would have happened: one; I’d still have continued to see life from that micro-perspective, and think this is just everything about life—competition&#8230; But today one has transcended to a different level where you look at your business interests, you look at mankind, you look at society, you look at the interplay of societal forces that shape the system, the economy of the country, the continent. You’re looking at advocacy, trying to make sure there’s good governance because good governance brings economic prosperity and social wealth. You’re also trying to do good; to give back to society in a more impactful way, to mentor others&#8230;”
Again and again Elumelu sounds like a business professor addressing a class. Words and phrases like “sustainable”, “impacting”, “good/better society”, “good governance”, “full potential” crop up regularly.
When I ask him what he would title his autobiography, the motivational speaker within him takes over.
“I like to make people understand that there is no glass ceiling, that you are who you want to be; that if I can, you too can&#8230; I was not the most brilliant in school, and I also did not have all the resources growing up, to have everything I wanted. But I had a determination, I had a purpose, nothing in my life happened by chance&#8230; and I think people can become what they aspire to be.”
In the end we conclude that the phrase “glass ceiling” is likely to feature in the title of the book.
At our second meeting he deflects my attempts to get him to declare his net worth. “It’s not how much we’re worth but the amount of impact we make. Why boast that one is worth a certain amount when there’s so much poverty around. I will assess my wealth based on the [number of jobs] I create through my economic investments,” he says.
As the curtains rise onstage for act two, Elumelu joins a set of Nigerian CEOs and billionaires who are redefining the rules of the retirement game. Gone, it seems, are those days when, after quitting the roles that brought them to national prominence, CEOs settled for a life of sitting passively on company boards; playing golf; attending social functions; chairing book launches—and handing out scholarships to indigent students. More retiring Nigerian CEOs, it seems, are carrying C-suite thinking along with them into the retirement zone.
“We’ve had a trend in the past where it was more of donating monies to society, but I personally believe that this is not the age and time for that. Donations are good, but to a large extent we should do it in a way and manner that is sustainable, we should make it have more meaning and impact,” he says.
Given a choice between giving out a million dollars in scholarships, and using the money to fund advocacy that could positively influence the government’s education policy and help expand citizens’ access to education, he insists he’d settle for the former.
“It might not sound too populist, and people might not even appreciate what you’re doing, but indeed it has the most significant impact for society,” he says.
After laughing at my questions about the possibilities of a third phase, Elumelu is ready with an answer. I realize that he’s assumed, rightly, that I’m hinting at full-time politics.
“I believe that everyone cannot be a king, and at times, you know, kingmakers are more powerful. I think that I’m very content with this second phase, more so that I’m able to combine business with advocacy, in a manner that is sustainable,” he says.
He proceeds to lecture me on “natural human progression”.
“There’s the age of acquisition, after that [there’s the] age of social order, social wealth, happiness for all—you need to think of how you want to be remembered and [helped] change the system. There could also be a third phase of, ‘you know what, let’s go and do it, let’s get things done’, but I think one has to know one’s limitations, strengths and capabilities. So instead of all of us being involved in government, we can be outside and support the government to achieve growth and prosperity.”
Around the world bankers are prime candidates for the backlash against the excesses of capitalism. I ask about what it means to be a member of the “1%” (and I’m interpreting this loosely; hinting at the fact that he belongs to the moneyed class). He laughs, and then sets out his thoughts on the state of the world. He draws from foundational economics philosophy—the work of Lenin and Marx—to make his point.
Elumelu thinks governments should take the bulk of the blame for the global economic crisis.
“To a large extent we are failing to hold those we should hold accountable for what’s happening—the governments that have failed to either create the right environment, or to block the loopholes&#8230; I do not think that the world should be negative towards successful businesspeople. What is important is the kind of governance framework we put in place to make sure that successful people do not exploit those who are not so privileged.”
He is standing up for his capitalist constituency, but in this new phase of his life, the larger society counts just as much.
“Why is it important to companies that a country has a huge population and huge purchasing power, that income per capita is high?” he asks. “Because those are predisposing factors to good business—it means it is in our collective interest that people who are at the bottom of the pyramid are also able to afford certain things.”
That task—of reconciling the hard-nosed demands of the bottom-line with the interests and well-being of the pyramid-bottom—it seems to me, is what the second act of Tony Elumelu is all about. And he is going about it with the same passion, and intelligence, with which he built one of the largest banking institutions in Africa.

Tag: June 2012

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