Mukwano: There's Pride in Doing Business in Uganda

Monday December 3 2001


To survive in the new world order – where emerging economies have been forced to open their doors to imports while export markets in developed economies remain under tight control – Uganda, and Africa in general, must rise to the challenge of producing globally-competitive products.

"We either do that or Uganda becomes a huge supermarket for more competitive global producers," says Alykhan Karmali, managing director of the Mukwano Group of Companies.

Coming from a man who seems to be blessed with the Midas touch, this message is not to be taken lightly. Working alongside his father, Amirali Karmali, Alykhan has seen the transformation in 15 years of the Mukwano family business from a simple trading house with a modest transport operation , into one of the leading industrial houses of East Africa.

The transport business started with one truck in the 1960s.

From a turnover of $2 million in 1986 when the group's flagship soap factory was launched, gross income reached $250 million last year and is poised to hit the $300 million mark this year.

Built on the philosophy of providing products that, judged on quality and cost, can pass muster in the global market, the Mukwano Group has demolished the myth that Uganda's landlocked status makes it a natural loser.

"Uganda has many fortunes and misfortunes, but the pros outweigh the cons," observes Mr Karmali.

The country offers a conducive environment for business, he says, adding that the government is aggressive in its efforts to develop the economy.

"There is pride in doing business in Uganda and the business community is upbeat about nation-building," he adds.

Security and a level playing field have given firms an opportunity to grow.

Although Uganda has a small domestic market, Alykhan sees a functioning East African Community and Comesa changing that. "These will give us access to a larger market."

The Mukwano Group plans to become a one-stop centre for fast moving consumer goods.

Over the past decade, Mukwano's brands have become well established nationally and Alykhan is convinced that they can now compete regionally, even globally.

Brushing aside the popular belief that you can't compete with multinationals, Mr Karmali says small to medium operations can be more competitive than the big boys.

"Small or medium size companies that are professionally run and well managed tend to be more aggressive than multinationals," says Mr Karmali.

He adds that multinationals' insensitivity to the local environment is a weakness that small companies can capitalise on in emerging markets.

The Mukwano Group took on the multinationals when Uganda did not produce any detergent of its own and went ahead to acquire a sizeable market share.

"In some countries, it is difficult to compete against established brands, but modern machinery and good business practice results in cost effective goods. This is the lesson we have learnt in Uganda which has encouraged us to increase our exports.

"I think that on a level playing field and soft tariffs, duties and taxes, our brands will challenge any established brand anywhere in East Africa as well as the Comesa region," said Mr Karmali.

He, however, feels that a global recession is the biggest threat to trade.

The question that Ugandan or African business people should be asking is whether they will be able to compete in trade blocs outside Comesa and the East African Community.

"Shall we compete with Malaysia, China or South Africa? We should be ready for the challenges or we return to the era of exporting unprocessed raw materials and importing finished products."

Mr Karmali gives the example of the group's tea subsidiary, which exports tea in bulk instead of branded tea to compete on supermarket shelves abroad.

"These are the challenges we face, which, I believe, are not purely commercial but also have to do with the wellbeing of East African populations."

He sees improving quality and efficiency through automation, e-commerce and an overall improvement of businesses practices as the only way to strengthen business in Africa.

The history of the Mukwano Group goes back four generations to 1904, when Alimohamed Karmari landed on the East African coast.

He made his way to Uganda, eventually settling at Fort Portal in the west of the country. It was his rapport with the local populations that earned Alimohamed the nickname Mukwano, which means friendship in Kiganda.

He started a small business which, in the 1960s, gave birth to the transport business run by his son, Amirali Karmali.

Amirali later shifted his base to Kampala. He was one of the few Asians who stayed on in Uganda during Idi Amin Dada's military regime.

Towards the close of the 1970s, Amirali launched Egesa Commercial Agencies, the forerunner of Mukwano Enterprises.

With security improving in the mid-1980s, Mukwano started a soap factory in Kampala, the family's first industrial venture.

In an economy where even basic household needs such as soap were scarce, Mukwano's soap factory was a blessing for Ugandans. Within a short period, the company was supplying soap countrywide.

This gave the family the confidence to diversify into edible oil, cooking fats, plastics, packaging, detergents, confectionery and, more recently, personal care products.

The group also moved into rail transport in partnership with the Uganda Railways Corporation.

The company has now ventured into agriculture after buying tea estates that were once owned by European and Asian developers. The group has 7,000 acres under tea and another 3,500 under an outgrowers scheme.

"This probably makes us the largest privately-owned tea estate in the region; we shall double acreage and production in the next three years," says Mr Karmali.

Other projects in the works include commercial farming of soya beans, sunflower, sesame seed and cotton. A ginnery, spinning mill and a plant to process maize starch, glucose, sucrose and dextrose as well as essential oils for export are also planned.

In all, 46 projects, including expansion of the confectionery business to produce chewing gum, lollipop and chocolate, are on the drawing board.

Soon the cosmetics division will have 60 new products on the market, while the margarine line will begin production for housegolds. Currently, the section produces margarine for sale in bulk. The container plastics line is also being expanded to include a recycling facility.

Asked why he had such confidence in Uganda, Mr Karmali said that most Asians in the country had no direct connection with India. "They may speak Indian dialects and eat Indian food, but they are Ugandans at heart."

During the mass expulsions of Indians in 1972, Amirali refused to leave Uganda because he did not see a future anywhere else. "If I had gone to India, I would have been an outsider," he said.

Amirali finds it interesting that Idi Amin had to chase away Asians, only for them to be accepted by other countries such as Canada and the UK. "On the one hand was a government that felt that these people were a hindrance to national aspirations, while another looked at them as an asset.

In an unusual reversal of fortunes, one country's burden turned out to be another's blessing. The third richest Canadian today is one of the Ugandans expelled by Idi Amin," he said.

He thinks that as a family, the Karmalis have built enduring bridges that reach out to the other communities in Uganda.

The group is a leading employer, has sponsored many projects and is a leading taxpayer.

These social linkages have resulted in tremendous goodwill and acceptance, he said.