Abubakar Ali — transcript

Equator Kenya and Gulf Power

This transcript is generated automatically by YouTube and has not been checked by a person. It misspells names and mishears words, particularly around Kenyan English and company names, so read it as a guide to the conversation rather than a quotable record. Each timestamp opens the video at that moment.

0:03 [Music] Greetings ladies and gentlemen and welcome to episode 36 of the African do podcast. Today uh we are very privileged to have with me an old friend uh from high school days uh Abu Bakr Ali. Abu Bakr welcome to the African do center.
Um Abu Bakr wears many entrepreneurial hats. So we'll try and go through them um in as much detail as possible. Uh but it's great to have you
understand. Thank you very much. It's an honor to be here.
Excellent. So Abu, let's start maybe post high school. Yeah. Um I know your family is uh is um from the Kitoui area and you find yourself there. Maybe walk us through and and I always like that story around that trade because it's a very hands-on story. and maybe as you tell us about your thinking and as you are figuring out where you ended up finally in finance how that journey started.

1:05
Okay.
So um after Nairobi school I went back to Kui
and then just after high school uh I looked for a job I landed in a family business in in Wingi.
Yeah.
And uh it gave me a lot of lessons. Yeah. Because it was a distribution.
Yeah. you know what traditionally we used to call wholesale.
Yes.
But it included everything.
So there I started off as a simple store guy and then we moved up the operations and then now we had uh you know what we call routes going round we call them rounds. Mhm.
And then you know you would arrange a truck going let's say to Shikuru area and you have your orders like 100 orders and then you have to arrange all those orders and arrange them in a way that you know the truck can go and deliver um uh town to town to town.

2:00
Uh and then you know very young then at 19.
Yes.
Very energetic. So I learned the ropes going and then slowly being given more responsibilities more responsibilities and you know a lot of my lessons I took from those initial four years.
So when you're talking about orders this is actually what we the shops that neighborhood shops that we go through this is actually you servicing those shops as the wholesaler. So the guys would come and it's it's not one product. You're carrying a diversity of products and then you load based on what what they require and you go shop by shop.
Yes.
Yeah. Now that sounds simple enough but uh it's not as simple as it sounds right because uh someone is taking a bit of soup here maybe a bit of cooking fat a bit of flour. So it's it's a bit more scientific than it sounds. Is is that a fair comment?

2:56
It is. It is. And uh you have to remember how trade in the rural area is rural area is done.
Yes.
So you have the like a major town servicing all these other smaller towns.
Mhm.
So we had Mingi servicing you know areas like Shakuru Casuni. So we have roots for those this areas.
Yes.
So what used to happen is um maybe on the market day is the day that we take the truck there. So Leonard and everyone else would come and say you know on that particular day I want four bells of a simma
two crates of soda
you know a dozen we used to sell dozens and half dozen
of detergent sachet
I want the 200 g I want you know soap dozen toothpaste and this and much so we'd have all those orders

3:47
and then you know there was no system digital there's no digital there's no AI It's also you write the receipt for each one.
Yes.
In advance.
In advance.
Yeah.
So everyone has then now you put all that
in a book.
So now if you have ordered such it's half a dozen another one. So we add them up all those ones and then now come up with the aggregate of those.
And the next challenge now is how to now arrange those ones. Mhm.
So the bal corders like the sodas and the all those were you know counted and put in the truck and then in the truck also
you had to arrange in a way that
when the truck reaches the shop it's not taking too much time because it has to deliver

4:34
to everyone and come back at the end of the day. So you have to think of all this how to arrange the truck and also you know you can't just arrange the heavy items in front and the light ones uh at the back. You have to think about the weight and distribution of the of the truck. That was easy. But now the smaller orders was the more complicated ones.
Yes.
So now you had to pack all these small orders in small small boxes.
Uh so that when the guys reach maybe they can just pull out Leonard's box and put it there.
Yeah. or now go by his order and say okay give me half a dozen of this give me half a dozen of that and then you know arrange all of them and have people so we load this the day before

5:18
so we'd aggregate everything load them the day before you know early in the morning the truck has left and the evening you're expecting the truck to come back with your empty crates and now do
you know a count of
reconciling
reconciling what was delivered how much cash did you collect there was no are
and of course that's what now pushes you down the numbers route because you have to now start.
Yes.
Yeah. But you say there are some key lessons you learned that you carry with you to this day. Yes.
What were those? So things like you know decision making on the day
um you you would be given that this is the route that this track needs to go tomorrow
and then you find that at the end of the day one track has come another one hasn't come. So you need to make a decision how to do it.

6:09
So then you have and I had a very good boss who was patient enough and then if I made the decision to change this to that The next day they asked you know why did you do this right?
Mhm.
And I found that very interesting because it shaped how I think. So he asked me why I told you to do KB this route and KC this route. Why did you do this route?
So then I explained myself you know
I think the Shakuru route is further. So we loaded the truck earlier so they can leave early because we didn't know what time the other one would come. If it's late then at least it's a shorter route we could load in the morning. Yeah.
Uh so he says, "Okay, fine. That's enough." But
that track has another order the next day.

6:55
Somewhere else
somewhere else. So you know I didn't think to that level.
So then now he's taught me that okay
but if that leaves tomorrow what's the plan for the next day?
Like we used to carry
cattle to to Nairobi. Yes.
And then now
take things like unila stuff and bring them back.
Yeah. Yeah. So now cows you had to load sand in the evening at night
so that you know they load cows at 2:00 a.m. and then leave and start stand so the track had to be available at night.
Yeah.
So uh so now he's taught you you have to think one step further.
Yes.
You know so
not Yeah. Your your shorter step Yeah. in your thinking.
Yes. Yes. So now I was taken through that kind of you know decision making and stuff. So those are things that um lessons that I learned in my first job

7:53
as as a teenager.
So you now go get your training in finance. Yeah. And where does that take you after after that for into distribution?
So I come back into college at 25. Yeah.
Uh which was very difficult for me because then you know you guys were as a finished graduating
starting and here I am back in Nairobi.
Yeah.
And uh you know starting back at college. So I ended up doing finance
actually because it was the easiest thing to do.
It's not
because you know I wanted anyway we believe in you know a path is the destiny is done for you. God has planned for you everything. So
I think I ended up doing that. So then I started off um as a uh at that time we used to be called administrative assistant.

8:44
Yes.
Which is just a secretary.
In the area.
Yes.
But then because I started doing my accounts
my employer was good enough to start giving giving you accounting.
Accounting work.
Yeah.
So then I started doing that. We started doing you know manual book entries and it was very interesting. They gave me an opportunity to apply some of what I was learning class there.
Then you know I overgrown that went to another business
uh not mine but starting off another business in automotive.
Yes.
In doing radiators.
Yes.
And then
still in finance at this time.
No at this time I was running the the branch. So I was applying uh almost everything.
Okay. Then I advanced so much in in in accounting then I now went into an accounting job.

9:36
Okay.
Um as fate would have it 2 months into the job we're doing quite well uh we moved to Mombasa.
Mhm.
When we moved to Mombasa my boss who had taken me in at that time said you know he doesn't want to live in Mombasa.
Yes.
So the opportunity appeared for me to take
to take the boss's job.
Yeah. Yeah. Uh like I said, you know, everything is distinct. So
true.
I was hesitant. I've just been two, three months into this job. Do I do it? Why not do it?
And this was a business that I knew well is transport. So we've done transport for a long time. So I said, "Oh, why not?"
And your distribution experience of course is transport in essence. Yeah.
So this time now I was doing actual finance or accounting work as the chief accountant

10:23
in Mombasa for 2 years. Uh very interesting, very new challenges. Uh now seeing the need to plan finance, you know, and planning and cash flow management and uh a different phase. The my first job uh trade was much easier. Um cash flow was managed because it was an old business. People were done well.
This other business was a little bit different. was leveraged, balance sheet was leveraged. So, brought new challenges in in in my career.
I learned quite a different things.
Um, Mombasa was also very different for me.
Yeah.
You've never lived in Mombasa?
I've never lived in Mombasa. I mean, I was in Koui and Nairobi.
Yes.
That's the only life I knew.
So, Mombasa is a bit different. Um, I had a few papers to complete from a professional uh

11:19
perspective. Yeah. I hadn't hadn't finished. Then um one day someone woke up and said, you know, there's a couple of guys who want to start a business in in Nairobi.
Startup.
Uh startup. Yes.
Uh are you interested? I did not hesitate.
Oh, really? No. No.
And what drew you to a startup? Because you're in a stable place.
Yeah.
Things are working. You've now gotten a feel for the numbers. Yeah. But you then exit to to join a startup. Um let me say I just wanted to move back to Nairobi.
Okay. Okay.
So uh the opportunity that you know you have a job and you can go back to finish your
professional career I mean professional uh training was was the first was that draw. Yeah.

12:04
Yeah. But um these guys who were starting somehow had one of the investors coming in and someone working with those investors is the one who invited me.
Yes. told me there's this opportunity can you join this
and what's the field?
Uh that was in energy.
Okay.
Yeah. Okay.
So that was uh in energy came met the guy very young guy very ambitious.
Um and then you know this is some of things I look back and the first sitting I sit with him you know the way you could learn from someone say you know Leonard has a certain
attribute
attribute that I know that I lack. M
so
this is the guy I should be working with in the next few years to take some of
to learn from

12:49
to learn some
and since then that has been sort of my philosophy yes
okay
uh so from that moment when I I sort of meet someone and I see uh something that impresses me
I I I weigh whether that is something an attribute that would help
is there something I can get from him
from yes
and I think that's a very good lesson for the younger maybe the younger viewers in our audience because sometimes we look at things solely from the perspective of what I'll earn
and you you you we don't give this opportunity to learn particularly earlier on enough weight.
Yes.
Okay. So that maybe that was foresight beyond your beyond your age at the time.
So you now enter what is an OMC right? Yes. And you um it's it was originally just an OMC oil marketing company but graduates to an allout energy company.

13:44
Correct.
And you do a significant time in there. Yeah. And you get to do uh I know you're you're still quite heavily involved in the power sector,
you go into power uh as part of the oil marketing. So not only is it an oil marketing startup, but you later on transition into power to power. Correct.
Yeah. which is not many locals. Yeah. At that time and I dare say even today it's not power generation. Um I know we discussed this a lot with you because of the similarities with hospitality because of the capital requirements. The barriers are high.
Yes. Correct.
You know but you guys still managed to do it.
Yes. So maybe briefly we can discuss that and and and just walk us through the thinking of the investors because I think sometimes when you hear so and so has started a power plant the assumption is that he was there's a big bag of money sitting somewhere but that's not really the case is it?

14:47
So um I'm very blessed in my life we did very many of fasts. Yes,
very many of us
and I'm lucky to have landed with this you know group of people who are
ambitious and have foresight and you know
we were all very young at that time. I mean I was the oldest at 32 thank you and you were the oldest.
Yes, in the team of three.
Yes,
they are the the two founders.
Yes. So it helped that you know we were young and you know each one had came with a different skill set
and um you know some of the things you later learn in class you realize I used to apply this
just not
in this way
in this way you know like risk mitigation
you know like when we started people you know assume that those first we were doing just risky but most of those things we put thought into you would sit around and say, "Okay, most of the time the ideas would come from the other guys because the business guys and say this is what we're thinking of doing

15:52
and then now of course I'd be the
the numbers
guy to question you know."
Yeah. Yeah.
And sort of this role uh playing roles helps
because then you get call into a room to you know help think what could what is it that we haven't thought through
and then we get into the room and say okay this is what I'm thinking and say okay what about this what about that uh this is the answer this is the answer and then we'd leave and say okay you go find out from your supplier or from the bank whether this can happen then we meet again and then say okay we can do it but this is how we do it. So that kind of thing helped us develop many things you know including uh exports that of product that had never been exported. Um and then now came the opportunity of uh supplying power plants.

16:42
Mhm.
And we also did one of the first you know supplying heavy fuel into Uganda a Kenyan entity supplying heavy fuel into into Uganda Uganda Uganda
power plants. So that sort of opened our eyes into this new sector now
power sector.
Yeah.
So we did that for some time. Um like I told you we we learned our lessons.
We didn't have certain things. So we did a consortium with one of the big MC's.
Yes.
Who had the infrastructure.
Yes.
And a logistics company.
So we had each one had his own input of what they do best.
So we brought the you know procurement supply side and the banking how to structure.
Yes. cuz we were we had done several structured deals. So that's how we grew. So we brought that into the so that opened our eyes into this new business. So uh then we started doing supply into the power plants. Then opportunity came that the Kenya was buying into into power plants. It was a medium

17:42
medium-term strategy.
Yes.
So we said okay fine why don't we
we've been seeing these things supplying them.
Yes. Let's do it.
Yeah.
And uh the idea was that you know we would develop it and then we'd bring a bigger partner to sort of do the the rest.
Yes.
Like you said it's a big ticket size.
Yeah.
Uh as we were doing this uh we learned many lessons. Uh
just to give you context between us and another uh old man who has since passed away. We were the only sort of locals who have ever done uh power plant I think in the whole subsahara Africa
really.
Yes.
Uhhuh.
Uh so all other this sector had all been done from people from outside because you know

18:36
of one the expertise and two the capital behind.
Yes.
So we said why don't we just
you know try so but we brought in help. We didn't pretend that we know everything. So we brought in guys from different jurisdiction who have done these kind of things
to help us you know do the model do everything else. We had an engineering company to help us think through the engineering even picking the contractor.
Okay.
You know what technology works best.
Yes.
And stuff like that.
And when you're negotiating now the the agreements or the sale also you need some technical help. So now in in this sector when you're developing you all things moving at the same time
and it's very difficult.

19:20
So you are negotiating the underlying contract
then you also need to negotiate with your contractor.
Mhm.
So that you're building your plant to be able for you to meet what your your commercial agreement is.
Yes.
Right.
In terms of power generation.
Power generation. So you have to build a plant.
Yeah. you know that's going to meet what you are being asked of your
yes
contract
right so you have to do it in tandem at the same time um uh we'd like in the project such projects as a sector the more debt the better okay
because then it's
why cheaper
just yeah
so we say debt is cheaper than equity
yes
right
cuz debt then you know if it's foreign maybe single digits.

20:12
Yeah.
But an equity partner would be looking for double digits.
Yes.
So even in the contract when Kenya was contracting said you need at least 75% of debt.
M
right.
Okay.
So now 75% of debt is huge exposure on the lender.
Yes.
So on project finance the lenders look at the project just like equity partners because they take most of the risk
with the same detail.
Yes.
If not more.
More actually. Right.
of the risk.
Then um because it's such a long tener, they also would like to know what how the contracts work.
So at the same time that you are doing this, you can't do a contract all the way and sign and then go find it's not bankable.
Yes. So you

21:03
so you have to identify your your your partner or your lender early on
and now you are working with everybody.
So on one side you're negotiating of course with Kenya Power to sell them power.
Yes.
But before you sign you share with a lender and say do you have issues with this contract and then you back forth back
and your and your
and your contractor contractor because from time delivery
when you start producing power and the quantum of power.
Yes. So that's rather complex and you're doing this for the first time.
Yes.
Yeah.
And also you have to raise equity.
Mhm.
For the 25%.
For the 25%.
Yes.
Now what was interesting was that we're thinking that this is a big transaction that we have.

21:49
Yeah.
So we walk around trying to raise money.
Yeah.
And some of the guys you knock to and they ask you, okay, what's your project size? And you're like, it's 100 million. So what's your equity requirements? 25. You know, our minimum transaction size is 100 million.
Too small.
Too small.
Yeah. Yeah.
And as you're doing one of the biggest.
That's a very painful thing when you're when you're an inpreneurial startup cuz you you know like why don't you just
entertain me and give me some hope. So it was you know it's when we realized uh you know where you are in
in the in the pecking order
the pecking order. Yes.
Yes. Yes.
So as we were doing all this we said you know what let's park this equity discussion.

22:39
For some time
because it was it was consuming.
Yes.
So we focused on on doing the project.
Yeah.
So we did the project. We had we had one of the uh DFIs u come along.
Yes.
And surprisingly they were one of the most helpful because they had the expertise.
Yes.
In-house expertise
to do in energy
in in project finance in power generation.
Okay.
You know
and at that time I remember walking around asking local institutions to take part. M
and we had a few guys who wanted to do but people at the top were not because it's a 15 year exposure
you know things they have never done before
so it wasn't it wasn't easy raising any any money locally
so we had to work with the DFI so the DFIs and you know we were thinking that these guys will take their time but it was really an eye openener for us they really taught us a lot you know it reached a point where when you're arguing with them that when someone tells you you know this or insinuate that this is my project

23:51
sort of yours and you you're like
this is my project or you know I'm the one who's telling you what I want to do
and then guy reminds you someone reminds you that you know I'm the one
funding
funding it's it's mine
it's more mine than yours than yours
yes
you stay back you don't want to admit but
you get some humble pie
it's Yeah. Yeah.
So we take all those lessons from them. So we you know we go along and uh where we differ we come around and uh so negotiations also we learned along the way how negotiate some of these things.
Uh we did one of the first what we call now partial risk guarantees PRG that's widely adopted now.
Now if you think about it looks easy but at that time it hadn't done it hadn't been done before. What it means is that um you're putting uh an investment he have investment 100 million and then you only have one customer.

24:50
M
it's not a commodity that you can take anywhere.
Yes.
Right.
So I really have to be sure that you are able to meet your contractual obligations with me cuz once I build the the plant
there's no way I'm taking it. And when you're saying meat, that means your offetaker.
Yes. My offer who in this case is Kenya power has to be able to for those 15 years because you have no other customers.
I have no other customer.
You can't say I'm sending this power to Uganda or something.
Now we have wheeling what we call wheeling where it's allowed. It's still uh you know regulation is going on. We hope it will be done. Yes.
But you can supply someone else. Okay.
But at that time

25:31
you didn't have it.
Even now we can't. Our contract is only to Kenya Power. Yes.
Right. So at this time uh when you do that you have to make sure this entity is able to meet its obligation. Now the question is it bankable?
Right. And then there are things like what if something goes wrong right then what do I do? So there's termination. You could we could end up not
I agree. Right.
Yeah.
Then there's termination. So what happens then? M
so at that time we were moving as in Kenya moving from sovereign guarantees
we didn't want anymore to issue more guarantees because
guarantees were being um assumed as debt.
Yes.
So it was going into a debt ratio.
Yes.
So we were trying to to you know maintain our debt ratio.

26:22
So Wildman came with this uh idea that you know they would oftake some of this risk. Mhm.
So the risk now is taken off from the entity like Kenya Power
to World Bank.
Yes.
Right. So uh World Bank comes and says I'm good for
the risk of Kenya Power. Right.
And then now someone else a bank comes and issues a letter of credit
uh to
on the strength of that
on the strength of that. So this had not been done before. So uh you know uh Nigeria had just started but I think they hadn't moved it all the way to execution. I think theirs was only 7 years. So in Kenya we managed to do this you know with all parties Treasury, Kenya Power, you know World Bank uh everyone around the room we made we we made this work and we made it work for 15 years.

27:18
Wow.
So the PRG structure is now very common.
How long is the power plant now in question? uh 10 years
10 years
10 years of operation but since we started is 15 15 years
you know maybe I should ask you this I've never asked you Abu this question but is it because you guys were young you know and and there's a certain naivity of youth yeah in entrepreneurship is it because you tried big things you know launching an oil marketing company as a startup in a market that had established m multinationals and then you go and do you decide to do a power plant and I know part of some of that journey was very painful because the learnings are heavy you know but is that is there a certain fearlessness that comes with youth or is it because you you you've now developed as a muscle I see it as your friend you've developed as a muscle what can I your tolerance for risk has increased in the sense that you're willing to try. You're not afraid of being fast. You know, um you guys are doing a power plant at a time when no one in

28:35 subsaharan Africa is even thinking about doing a power plant. And now, like you rightly say, we're seeing a lot more um willingness to take on bigger projects, you know, hund00 million projects plus plus. Yeah. But at that time it was not very common. So I don't know what your thoughts are on that. Do you feel like you've developed that muscle and it's now a muscle that you continue to exercise or
So I think u first the earlier part of your question of whether it's youth or
Yeah.
and the ability to take risks.
Yes.
Um yeah maybe youth but also energy. Okay. you know um cuz some of the things we discussed today
yes
uh you can see the opportunity but you don't have the energy to do

29:24
of course
so if you lose that time would have jumped at them
right
um so I think both uh yes youthfulness helps in terms of your views of risk but like I said we have developed certain
you know uh risk assessment our unique way of doing risk assessment And not to say some of them, you know, didn't go
bad, but you know,
this this kind of thinking of role play helps in risk mitigation.
And also working with like I said people who know
more than you and listening helps.
Yes. Um because of our lack of strength in balance sheet, we did a lot of trade and structured finance
in our trading business.
Yes.
And working with a bank that does this as their DNA
um helps especially me

30:23
to to start seeing things the way they look at it.
Okay.
So you start developing some of this skill in the house.
Yes.
So it's not like we didn't know what we were doing. We knew what we were doing. But I think also the the energy that was available and seizing the opportunity helps.
Yeah.
But the the most important one is the one we've just mentioned that you're coming into an area where there's someone who's been here 100 years.
You know, doing this for a long time.
Yes.
And if it's retail, you know, they're
two three times more, you know, than you. their brand is better than so you have to think of what else can I do
cuz I can't compete
like for like

31:11
like for like
I have to do something different so like I told you we do quite different structures and trade transactions very different
yes
but you also had to do the what we call the vanilla ones
so that's where that's where your innovation came in
yes yes okay
so this also taking this uh power plant was sort of in a way which are area can we grow?
Yeah.
And one of the opportunity was it's like another big station.
Yeah. Yeah.
You know, it's another offtaker of my product.
Yes.
Little did we know but there's some also regulation around procurement. It's not as easy as we thought
as you thought. Yeah.
But it helped that we had done several of this. So it it helped. Okay. So there was a mix of all these factors together. So you you're in this oil marketing company power. Yeah. And you guys it was very public. You you exited the oil marketing company to a global multinational. And uh now let's come to present day. Yeah. And um Equita Kenya Limited. Yeah. Which is uh first of all maybe you describe it. What is Equit Kenya

32:27 Limited?
Okay. Equator Kenya Limited is um um what we call the name says fruits and vegetable. Yes. Uh company but we're a food agro. We're an agri processor.
Yes.
So we we don't farm ourselves.
We we work with farmers.
We develop the farmers. We develop certain value chain
and our main product has been African bad eye
chilies.
Chilies. Yeah.
Yeah. African bad eye chili. So we buy from farmers, we process it and we export.
And process means what? What you do to it?
So far uh at the moment we've just been doing drying.
You dry it.
Dry.
Mhm.
And now we're exploring uh powder and flex.
Okay.
Okay. So that's our next uh
Okay.
Um so Equator Kenya is an uh agree processor based in Mind.

33:24
Yeah.
In Kifi County.
Excellent. So now this uh I I I like this topic because I think it's something that Kenyans and Africans should look at more. Yeah. Unlike your oil marketing experience and your and your power plant. Yeah. Which were startups. You know, you found nothing. You came and started from scratch and you built something from that. This was not that case. Someone had started Equit Kenya and you basically negotiated an exit for them. you purchased the business from them and you have continued to run it for a few years now. So that's a that's an interesting opportunity that I think doesn't get enough attention. The opportunity to acquire existing Yes.
Yeah. Because there there are many businesses where maybe you can see something I've not seen. There are many uh founders who are looking for a dignified exit and just want to for whatever reason tired fatigue they want to exit. So you did that. Yeah. Maybe let's talk a bit about that the journey of acquiring something that is already establishing and how that journey was for you.

34:35
So you know uh in our many conversations one of the things that we were considering is even
a fund.
Yes. for such businesses right where the founders have reached a certain stage
and we were saying okay let's let's you know let them do their business and then we help them in maybe finance marketing administration a little bit of capital
and take it from
A to to B
you know so that had opened my eyes into such business I started looking at some of those opportunities
okay
and then um we were looking into actually agriculture Mhm.
And then um what happened was that years back a friend of mine had started a boutique business and now it's big in in in South Coast.
Mhm.

35:26
Doing coconut.
Yes. You know.
Yes.
Yeah.
So at that time we were looking at opportunities and long time ago we went and looked at cashew nuts.
Mhm. And we even identified a place and then we said okay let's just do a bit of you know checks
drive drive drive around. Yeah.
So we discovered that in Khifi there was an old cashew processing facility that we sort of dead and then we started asking why.
So we had between us capital to put up the plant.
M
then as we were there said okay where's the cash coming from? Then we start hearing all these stories that you know people come from one country and compete for cashew and then Tanzania some cross to Tanzania
to get cashew some Tanzanians come to Kenya so like oh so there isn't enough cash

36:19
so we abandoned that so why put up a plan there's no
supply chain is weak yeah
so then during co
then I was in Malindi And then I saw this, you know, beautiful town and this guy's living and this what's happening here. Then I remembered that we didn't have enough cash. So I said, why don't we look at cashew as an opportunity now thinking about what can we do down in Malindi and sort of have a presence in in Malindi.
Yeah. And then as we were going through that discussing all that uh someone mentioned this opportunity this this company doing
chilies
chilies and uh the owners are thinking of uh exiting.
Yeah.
So with all my background on on trade and and and all that I looked at the numbers and I saw it's you know I could see where the some of the challenges are. Um and I got questioned the same way I asked someone is if Leonard is not able to do it, what makes you think you'll be able to do it?

37:29
Yeah.
You know, this time I was being asked a question and I didn't have an answer.
Yes.
Uh but I I I I just said no, I think we can make it
put something. Yeah.
Um you know, put what's the capital at risk? I said okay let's just uh start.
And how has that journey been because you've now acquired you acquired
when I was today when I was coming I was thinking about it and actually this is the fourth year time went
since the acquisition. Yes.
Yeah.
I just looks like it's yesterday because we are just
every day we are learning and adding something new.
So um it's been very interesting uh for me. Um so what we when we went we found that um there's two or three years with no business.

38:21
M
and the reason is this because of you know depending on we're depending heavily our business on weather.
Mhm.
So we're heavily depending on small holder farmers in the Khifi area.
M
and 2020
22 23 drought.
Yeah. 202 Yeah. 2021 actually 2122. No, no much rain.
Yes.
Um 23 we got a little bit of of of rain but now so when I'm we acquiring this at this time there's no business at all
nothing. So we said okay now how what do we do? So we started working on this program of now drisking and stopping to rely heavily on on on rainfed.
Yeah. And um it's something about a lesson maybe on on on corporates is that the changing the culture or the DNA of a of a company from this to this is is not as easy as it looks.

39:25
Mhm.
It's it's very difficult. I I I'll give you an example. We have extension officers.
Yes.
The model that we usually work with is we go we do what we call a mobilization. We go to a village, we call everybody, the chief, the ministry, and we tell them what we do. And maybe we do this every year so people have an idea of what we do.
Then we have the groups registered as a self-help group or CBO
and we contract this groups and then we issue seeds as subs and then you have an extension officer who goes around
teaching them how to
Yes. And then now if he goes an area, it's a group. So he goes sees three four farmers. If it's a training, he calls all of them together. So this person first you have to see the the type of people he's engaging uh are this uh ladies. So most of these guys are actually or these ladies what we call farmers are not traditionally farmers. It's not like they have a farm they're doing some somewhere else.

40:31
We're the ones who are giving them the opportunity for extra income.
Yes. Yeah.
So you know how it works. The mama is uh managing her her home.
Yes.
Uh so just before the rains she does a nursery small one. That's what she needs to take care of for 2 months. Just when it rains she goes and transplants to a farm and then that farm is a few meters 100 m away.
Yes.
Right. So then she does her work in the morning takes 2 three hours goes to her tend to her farm come back cook lunch for the kids. and then in the afternoon maybe she will go maybe she won't
go
so it worked well for everybody right but now when we start to do
move to different caliber of farmers
yes
I'm just giving you one example

41:21
so when you go to Leonard
who is now having two three acres and has some investment
yes
even how I speak to him
is different
is different
your extension officer is different is not ready yeah
because there the You almost have to be like an administrator.
You also have to, you know, put on like a chief.
Yes.
Why aren't you taking this seriously? Yeah.
Right. You meet
someone else. You have to teach our guys communication. Yes. Different communication skills. Yeah. And then now another complication is Leonard is not in the farm. He has a manager.
Yeah.
So now even the how who do I speak to?
Why speak to the manager? So even that we took some learnings.

42:15
Yeah.
Because first we speaking to the manager then you realize
the owner is not hearing what we are saying.
Right. M
so then we start developing how do we rather than just the language now how what does communication because then you find the manager calling you after months is frustrated no they say
but my guy see we told you guys to do weeding and I spray this and this and this and this
and that hasn't been done even as we're wondering what's what's happening
yes
then you realize uh now you have another
a new lesson
so you have to now uh how do I manage communication you know training
and what what am I telling the owner and what am I telling the manager

42:58
yeah yeah
right so now we've developed and say okay now we're even developing in our system where now the owner has information
but
in his in in his phone
but there were some advantages yes there's there's that of course the gaps yeah but there's also some advantages of acquiring as opposed to starting
of course
you know there's some value you bought there systems you Definitely like you know the product is known you know we have network of of farmers
you have staff who know you know the the product and stuff like that. So there's there's definite definitely so the challenges of a a new
uh business
and ongoing are different.
Yes.
So with a new with a what we call a startup you know you have administrative challenges you have all these things. I mean here uh the challenges are more on business

43:50
and probably a great thing for you in at this age.
Yes.
Because you know you you're you have a wealth of experience. You have run several businesses of different sizes. So there are some of the things that maybe in your youth you could not see you know so maybe acquisition from a timeline perspective this timing is good. Yeah. because of your experience
and also um value for time, right? Um
at my age today, do I apply my time doing the administrative work to set up the entity or do I think
strategically?
Strategically and how to to improve and get better and what opportunities are there
you see.
So let's speak a bit about the demand side.
Yes.
Because I know uh it's an export product largely. I know you do supply some locally but largely it's an export product. And uh one of the things that you've had to do since acquiring is do a lot of business development work where you go so let's speak to the magnitude of this opportunity. What have you found as you've gone to the markets where we're selling this dried African bzai chilies and what other products do you

44:58 see Kenya evolving to supply?
Um the demand for this kind of chili is you know it's it's a niche. It's Afghan eye today if you went and asked from the shop they give you but probably bigger than what we have. So we have
you know a small size
and uh it's got a very high what we call scooville heat unit the shu.
Yes.
Right.
It's 100,000 plus.
Yes.
As opposed to the local ones normal cayenne is 40,000 60,000. So ours is almost double.
Yes.
So the customers are looking for exactly that. We have some even specifying the size.
Yes.
Of what they want. Of the chili.
Yeah.
Uh so we have um spectrum of different customers.
So we have guys who do spices. So they take it and mix with something else.

45:54
Spice mix. Yeah.
So those guys don't care about the size. They don't care about the looks. They just want the heat.
Mhm.
Right. Then you have this guy who breaks bulk and now sells to their pops and moms shops.
So those ones they want small ones that they can put in their the small jars and
so those ones the ones who want specific size uh small ones.
So the demand is huge Leonard. Um we have orders because we took some orders from last year that we are sort of trying now
and we were forced to change our model and add different kind of farmers
and this is where the opportunities for most of the guys who are doing you know farming and I've listened to your podcast and you know just like any other yes

46:40
the challenge is the same
so we offer at least u an offic
right um so I get calls every people wanting
contracts to do farming.
Okay.
Because we offer the the offtake. We do contract farming.
Yes.
We off take 100% of everything that you produce.
We produce. Yeah.
Um so now we've been forced to move out of our you know zone and go into sort of bigger farmers with irrigation stuff like that
and we've been forced to think you know now pricing a return for the farmer because I think most of the time in this value chain of food
we ignore the farmer. M
and we forget this is the most important person.
M
uh and that's why you find people touching this and going and going

47:28
the capitalistic nature of making short-term money sort of is not doing enough
uh allowing enough investment into
into the into the farmer.
Yeah.
Uh and that's why people touch you know and start and leave. So our thinking is that we need to develop the chain where the farmer is actually making money.
Yes.
And our challenge has been because of competition and our competition
is not Kenya
is global.
Okay.
So when we are selling globally someone is telling you no but I'm getting from this region and that region at a lower price.
So but because of our lessons of what what we didn't have like last year even today there's huge demand. Everyone is calling asking for I have to tell them no I'm not taking any more orders.

48:16
Allow me to service my customers who I have at the moment.
Yeah.
When we're going back to the customer says look you can't be just dictating the price based on demand and supply that when that region my neighbor
has enough the price has dropped
then you're forcing me to lower the price because what happens is that we will go into what we happened last year and the year before where we have no chilies. M
so we need develop you know farmers who were there for us throughout.
Yes.
You know and these farmers are not have put in money into the farms.
M
so we have to adjust the price to reflect enough investment for me and for the farmer.
Yes.
So that's where we are as a business and saying look we can't just be you know what's the price today you know give me match that price.

49:02
Okay.
So that's where we are with our you know customers saying
okay
take lessons. Okay. Oh. Uh.
So you have two your demand side you said is high but you're also now in in you're now onboarding more farmers.
Correct.
Yeah. And I think if there's a footprint, what's the footprint you're looking at? A farmer
do require them to be a minimum size of acreage.
So yeah. So um we are doing at least an acre, two acres is ideal.
Yes. And then you get this other side of farmers who saying I can do 100 acres and you tell the guy you know the guy start too much do like three or four and ah you
you know you we don't have enough
we've seen we've seen guys who struggle
so like you know the dynamics in this thing is is very interesting because then if you want a big farm you move farther away from urban counts.

49:59
Yes.
Now, the further away you move, the less labor you have.
Yes.
Right. So now when during harvesting of this chili because it's small,
you need mechanized.
Yes. You need a lot of people to do it.
Now the further away you are, the less people you have.
Yes.
And most likely those people are pastoralists.
Yes.
So they don't even have time. They don't even know how to bend and pick chilies.
Yes. And most of the guys that's where sort of that's the new challenge we are facing
right. So when we tell someone start with three four acres and let's do something else.
That's why
that's why.
Yeah.
Um and what we're trying to improve now is add a value chain. So we're saying okay maybe 10 acres or 20 acres of Chile is too much.

50:49
It might not be too much if you know do labor. Think of labor and have a solution around labor. but let's do chili and something else.
So that's where we are with our farmers.
Another thing is now we're partnering with a with a um for input package.
Yes.
So we have yesterday we have agreed and we're going to sign with
uh equipment supplier for inputs you know um irrigation equipment, tanks, trips and stuff like that
and financia.
Yes. who now buys and sells on on on long-term credit and makes their margin.
Nice.
So, we we we're trying to see how to break this, you know,
build the sector,
the sector and then the farmer so that we can get the farmer making money

51:36
but you know, not outpricing the product, okay, that we're not able to to sell.
Okay.
Yes.
Yeah. So Abu as we wrap up maybe you can tell us a bit more about uh where the farmers are you looking for farmers which areas are you looking for farmers what size of land and what opportunities are there for anyone who may have an interest in unlocking value in their land by growing chilies.
Yeah. So we're on boarding farmers across Kenya. The only thing we are doing is we are trying to cluster the farmers.
Yes. So we are available I mean we are on our website equity.com you can find our contact there Richard I get calls at take call there all the calls
um what we do is we explain what we do and then we keep you in the database

52:23
so when we're coming to that area then we inform you and then we try because we undertake to give you support aonomy support so we don't want to abandon any farmer
and also of course logistics
we don't want you to
farm
and then we're not able to pick or the cost of
picking is too high or transport to us.
So that's what we're trying we're just trying to develop in a way where we don't abandon anyone.
Yeah.
Um we keep to our commitment.
So um any farmer who has any farm ideally and you're looking for an offtake, we are more than happy to to to speak.
Yeah.
Like I said, we come with a package of uh input.
Yeah.
And and and financing. So
excellent.
We're happy to take on any farm. So Abu Bakr one, I think you you're probably the most diverse guest to have had in terms you know from your early days in distribution into oil marketing onwards into power and now into agriculture. So ours is to one congratulate you on your journey thus far and uh the impact it's now having and I think you're you're you're you've worked in very impactful sectors and encourage you to continue on

53:30 this journey and also I hope that other Africans who watch your story will maybe um drop or have reduced caution in in venturing into new knowing that you can learn anything or anything that you don't have you can actually buy knowledge and and and get it professionally done. If you could build a power plant from scratch and have it celebrating its 10th anniversary, then there's nothing that can stop us. So, thank you very much for being a guest on the African Do podcast and we wish you all the very best in this journey of the moment with Equita Kenya.
It's been an honor being here.
So, ladies and gentlemen, that was episode 36 of the African Do podcast. Thank you very much for tuning in. You can find us on uh YouTube and Spotify in our respective channels under the African Do podcast. Uh do follow us and subscribe to those channels uh to hear more stories of excellent Africans executing excellently. Thank you very much. [Music]