JAMES MWORIA Green­fields just don't work for us

The CEO of in­vest­ment rm Cen­tum has had a strato­spheric rise at the com­pany. He is now build­ing up a $500m fund to tar­get mid-cap com­pa­nies in East Africa

The Africa Report - - TOP 500 AFRICAN COMPANIES - In­ter­view by NI­CHOLAS NORBROOK

‘ I CAN DEL­E­GATE OPER­A­TIONS, BUT YOU MUST OWN STRAT­EGY, YOU MUST OWN TAL­ENT’

TAR: Is there a cap­i­tal drought in Africa? Or is it a project drought?

I think there is more of a short­age of mar­ket-val­i­dated and fea­si­ble projects. The project devel­op­ment life­cy­cle if you are doing, say, in­fra­struc­ture projects is a very long one. So al­though there are many projects that have been mooted, the process from con­cep­tion to fi­nan­cial close – getting all the ducks in a row – is a very long one. We are not mov­ing fast enough in getting to bank­a­bil­ity. There are is­sues with chang­ing reg­u­la­tions. Gov­ern­ments – that’s one is­sue. Then on the com­pany side, com­pa­nies that can ab­sorb large pools of cap­i­tal are also not that many. So the only opportunit­y you have is re­place­ment cap­i­tal, and a lot of busi­nesses are held by families (see page 107) and they are not sell­ing.

In Nairobi, it can feel like there are more malls than there are shop­pers. Is there a risk of a bub­ble in the prop­erty sec­tor?

These de­vel­op­ments are cycli­cal. What tends to hap­pen is pent-up mar­ket de­mand. The devel­op­ment side re­sponds with an as­sump­tion of that growth. And from the point where the de­ci­sion is made to the point where the de­vel­op­ments come on stream, it’s any­where from three to six years. In that pe­riod, you can have a lot of sup­ply ar­riv­ing at the same time, which is not a co­or­di­nated sup­ply – it’s mar­ket sup­ply. We have the same prob­lem with ho­tels.

What are the most dy­namic ar­eas out­side the cap­i­tal?

We in­vest across the board. We are in­vest­ing on the coast in Mom­basa. That’s a res­i­den­tial devel­op­ment called Vipingo. It started a year ago. We have so far sold over 400 res­i­den­tial units. We are also build­ing an in­dus­trial park, and we have our an­chor cus­tomer for that. We have our own de­sali­na­tion plant, [and we are] in­vest­ing in a pri­vate port plus an ur­ban road. We have also sold a site for re­tail and life­style. We have sold a site to a de­vel­oper for a ho­tel. So that is com­ing along well.

We also have bot­tling plants scat­tered across the coun­try – a plant in Ny­eri, a plant in El­doret, one in Kisii. Our banks are also across the whole coun­try, so while we have the head­quar­ters in Nairobi, we op­er­ate na­tion­ally and re­gion­ally.

How did you go be­yond the bor­ders of Kenya? What has worked?

What we have tended to do is to help our port­fo­lio com­pa­nies to ex­pand. Our strat­egy is that once you have scale in your own mar­ket, then you ex­pand in the re­gion. That has worked for us [with in­sur­ance com­pany UAP, pub­lisher Long­man and as­set man­ager Plat­inum]. What

has not worked is where we have de­vel­oped com­pa­nies from scratch. Green­fields just don’t work. They have taken a lot of time and scal­ing up is dif­fi­cult. Maybe at that early stage you need an owner-man­ager, an entreprene­ur who is there, be­cause you don’t have pro­cesses set up and all the rest. When you do put those pro­cesses in, it in­creases the costs, which in­creases the break-even level. So per­haps the con­clu­sion is that it is best run by an entreprene­ur-type leader and our cap­i­tal is best de­ployed at a different level. Do you share the op­ti­mism in the East African Com­mu­nity?

We used to have East African Air­lines and sev­eral other re­gional com­pa­nies. In the 1970s, we were ac­tu­ally a lot more in­te­grated than [we are] to­day. My own feel­ing is that in re­al­ity we are fall­ing back. We used to have it, but not any more, for var­i­ous rea­sons. The po­lit­i­cal unity that

was there is not what it was.

How do you nav­i­gate this? Ob­vi­ously you want to have re­gional in­vest­ment.

Yes, and that’s part of the challenge. Ob­vi­ously you re­main apo­lit­i­cal. But if you look at how com­pa­nies have es­tab­lished them­selves, they are not re­gional com­pa­nies. They are com­pa­nies with a re­gional pres­ence. You’ve es­tab­lished a stand-alone unit in each coun­try, but they’re not – to an ex­tent – in­te­grated. We are not there yet. Each of these com­pa­nies has a national ap­proach.

Do you find dif­fi­cul­ties in, say, getting se­nior ap­point­ments con­firmed in a coun­try like Tan­za­nia? How do you man­age it?

Re­gional work per­mits is an is­sue across the board, even for us in Kenya when we try to bring ex­pa­tri­ates into our some of our port­fo­lio com­pa­nies. For ex­am­ple, a school we de­vel­oped with an in­ter­na­tional part­ner, try­ing to bring in some of their teach­ers from other schools, and we had a big challenge with work per­mits. So the work per­mit is­sue is not just be­tween East Africans, it’s also out­siders com­ing in, and that’s likely be­cause of unem­ploy­ment.

What we’ve done to mit­i­gate it is that we de­vel­oped tal­ent cen­trally that we in­tend to lo­cate in other coun­tries. So if you want to do busi­ness in Tan­za­nia, I have sev­eral people, And we’ve em­ployed Tan­za­ni­ans, work­ing for us in Kenya and other places.

How far down the track are you look­ing with that strat­egy?

So we started at grad­u­ate level, en­try level. [...] I have even taken people I have hired from other coun­tries who have de­vel­oped to a cer­tain level and then I have placed them or got them se­nior jobs in their home coun­tries at other com­pa­nies, with the in­ten­tion that when we are ready and I go to that mar­ket I will be able to say “Come back”. I know I will need this per­son in the fu­ture. If you don’t have tal­ent, you can’t ex­e­cute strat­egy. It is a big por­tion of a CEO’S job. I can del­e­gate oper­a­tions, but you must own strat­egy, you must own tal­ent.

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