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Making companies successful

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‘54 Capital’ is an Africa-focused asset manager founded in 2013, investing in and managing proprietary deals across the continent. The firm focuses on high growth countries in Africa, which have favorable political, governance and economic trends.
In Ethiopia, ‘54 Capital’ has invested in several well known companies such as AquaSafe, Etete and Gulele Detergent factory. Now, besides increasing the capacities of its businesses, it also has plans to focus on exports and generating hard currency.
Capital spoke to Saad Aouad, Founder and Chief Investment Officer about the future plans and what it takes to make companies successful.

 

Capital: Tell us about ‘54 Capital’ and what it does here in Ethiopia

Saad Aouad: ‘54 Capital’ is an asset management firm based in the UK. We manage a number of assets in Morocco and in Ethiopia. In Ethiopia we have been investing since 2014 with around USD 100 million in a number of companies. The biggest investment was in Addis Pharmaceutical Factory. It produces generic medicines. We are going under a huge expansion to triple the capacity of the factory in the North, we also have a small plant here in Addis providing IV solutions in bags. That was a 42 million USD investment.

On top of that we have invested in a number of fast moving consumer goods, with that we really focused on selecting small factories and growing them. We really started very small and today we have reached a good size; the numbers I saw in December, and January show that we are maybe one of the top three fast moving goods company, as a group, in this country, except the breweries, which are very big.saad-aouad

We produce edible oil, we produce soap and detergents, we produce pasta, macaroni, flour and biscuits and more recently we acquired Aqua Safe and even more recently in 2016 we acquired Etete.

Our strategy is to put capital on expansion and working capital, but in our last board meeting the past two, three months, we have also put a very ambitious strategy of investing in capacities to export. We want to be able to generate our own foreign currency because it is one of the big issues here. Ethiopia has a lot of seeds, grains; has a lot of potential in raw materials that instead of being exported raw, it can be transformed into a product with a high value addition for the local market and for export. That is our next wave of investment.

In terms of Etete specifically, that is the last acquisition so it will require time to stabilize; putting the right management team and grow to the next level. That is what we did for example, with Tena Oil; the business was an NGO business focused, now we have transformed it into one of the leading oil brands, reducing the bill for the government; instead of importing refined oil, we bring crude oil, we refine it and that 30 to 40 percent margin is saving money for the government. We are also supplying our farmers with cattle feed free of charge, partnering to with an NGO called IFDC and 90 % of our milk comes from Debre Birehan, which is sourced from highland grazed cows.

On top of that, we have been bringing in our own dollars instead of cueing at the banks and so on. The next step is to generate our own dollars, there is a huge number of grains; soy and a bit of Sunflower, sesame and so on, that can be processed into oil and into cake for the animal feed industry here but also for export. So that is the two-year plan.

When you look at Gulele, it was a closed factory three year ago and today we are doing well. This month, we have done half of the sales of the other big factories that have been around for the past 10 years. We plan on to continue to innovate.

When we come to Etete, it needs a lot of support because it is the little sister of all the companies. The main issue of the milk sector is to select the good milk. You can go for the big numbers; taking 60,000 liters per day, but we decided to really focus on selecting quality milk because when we did our study, Etete brand name was not associated with good quality despite having a good brand marketing strategy relating to motherhood and so on.

So we really focus on selecting the good milk, transforming it into a number of products, including a new line of yogurt we just launched, I think it is a market where Holland and us are the main players. Our aim is to continue to push in that direction, we will find ways to increase our milk collection, we have invested into additional capacity to be able to handle well that milk; keep it free from any aflatoxin and bacteria. So you will not see us increasing our supply until we are absolutely sure that we can handle the extra milk and provide the market with quality product. We already have a good reaction with our yogurt and our new packaging.

Capital: How do you choose to which companies or sectors to focus on?

Aouad: We select the segment of fast moving consumer goods that are of a certain size. For example the oil sector in Ethiopia is big; Ethiopians consume a lot of oil, so that is the first criteria; the segment has to be big. Historically because we acquired existing businesses, we focused on the commodity business.

For example 555 soap was an unwrapped soap, then as we progressed, we got to improve that and we cater for the whole segment of the market; we go to the souks, supermarkets, go up country;’ providing our different products ranging from unpacked to those with different new packaging’s.

We also look at the export potential when we look at investment; we want to be able to generate our own hard currency.

Capital: What would you say were the main problems observed in some of the companies before you invested in them? Were they financial or management issues? ?

Aouad: It is a combination of a number of factors. These companies were in need of capital, all of them. But other companies in the same sector were very successful and the entrepreneurs started from the same level but they were better managed.

I think some of the companies were not successful because, well, there are several reasons like the owners had other companies and weren’t too focused on this one, or the owner not being able to convince capital providers to give them the fund and so on. We really did struggle for at least a couple of years to bring these companies to standard and make the first operating profit.

It took us time because there was a problem of management and capital and there was also a problem of manufacturing facilities. For example when we acquired Ada Food Complex, there was a spaghetti line from 1970s with no wrapper; so it was just putting one meter long spaghetti in paper. So there we invested in a machine and plan on investing more on into that segment.

Capital: Which  of your investments have been the most successful? 

Aouad: I don’t want to give up on anything, I would say all the businesses are doing well. One issue is that when someone is successful in one sector, everyone will go invest in that same sector and crowd the market and the price becomes the differentiate factor. That is not what we want. So I would say there are some successes that were quick but I want all the businesses to be equally successful and that is what we are working towards.

Capital: You said you will focus on exports. Would that be the oil sector?

Aouad: Not only; in the next two months we have a target to put a team of experts, and their objective is to export a number of products that we produce. Potentially Maze flour to Kenya and Uganda, potentially a number of other products that are related to our business; we plan on, although the quantity will be small, detergents at high margin and hopefully in the next few months we will start a personal care line as well and export those, but again in small quantities.  We will also look into exporting AquaSafe to some Middle Eastern countries.

Our objective is to generate around 50 million USD through exports by 2020 that is how ambitious we are. Our plan is to invest 50 million USD this year on all fast moving consumer goods.

Ethiopian-Israeli teen wins Israel’s ‘X-Factor’

Staff Reporter
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An Ethiopian-Israeli teenager who went viral after showing a performance of pop star Demi Lovato’s song “Stone Cold” won Israel’s “X-Factor 2018.”
Eden Alene, 17, of Jerusalem, an Israel native who was raised by her single, Orthodox Jewish mother, began sobbing and hugging her professional mentor Ivry Lider when she was announced the winner of the competition. As the winner of “X-Factor,” she gets a recording contract.
Alene, who received the most votes from the viewing audience, sang “Human” by Christina Perri for her final performance. She also sang “Hall of Fame” in a duet with the Israel rapper Subliminal.
During her audition broadcast in October, Alene’s version of “Stone Cold” left the show’s judges in shock. At the time, the teen said her dream was to sing a duet with her idol, Beyonce.
Alene wears several rubber bracelets that she says represent different happy memories. Her favorite comes from a workshop at Yale University, where she performed with a mixed Jewish and Arab choir she’s a part of that promotes coexistence.
The rising star left behind religious observance in middle school and switched to a prestigious secular school for high school. She said she respects Shabbat when she is at home with her mother, and that her mother respects her decisions.
Alene told Israel Hayom in an interview early in the competition that she hopes her participation in the competition will help make people think more favorably about the Ethiopian community.
“Every Ethiopian represents the Ethiopian community,” she said.

(Jewish Telegraphic Agency)

The current liquid and digital Capitalism

Alazar Kebede
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More than 130 years after Karl Marx’s death and 150 years after the publication of his “opus magnum” – Capital: Critique of Political Economy, capitalism keeps being haunted by periodic crisis. The most recent capitalist crisis has brought back attention to Marx’s works.
Christian Fuchs of University of Westminister and Vincent Mosco of Queen’s University edited the works of 16 contributors in a book entitled “Marx in the Age of Digital Capitalism” in 2016. The book shows how Marx’s analysis of capitalism, the commodity, class, labour, work, exploitation, surplus-value, dialectics, crisis, ideology, class struggles, and communism, help the people to understand the Internet and the social media in the 21st century digital capitalism.
Zygmunt Bauman was a Polish-born sociologist and one of the world’s eminent social theorists. Born in Poland, he escaped to the Soviet Union when the Nazis invaded, then returned to Poland after WWII as a committed Communist and lecturer at the University of Warsaw. In 1968, he was kicked out of Poland for being too critical of the country’s Communist regime and moved to the UK. He spent the rest of his career and life in Leeds until he died just a year ago. His big ideas which focus on questions of modernity, consumerism and globalization reflect decades lived on both sides of the 20th century’s ideological divide.
As a sociologist, Zygmunt passionately believed that, by asking questions about our own society, we become more free. “An autonomous society, a truly democratic society,” he wrote, “is a society which questions everything that is pre-given and by the same token liberates the creation of new meanings. In such a society, all individuals are free to create for their lives the meanings they will and can.”
On the flip side, he states that society is ill if it stops questioning itself. According to him, we become enslaved to the narratives being manufactured all around us, and we lose touch with our own subjective experiences. Questioning our own society is hard work. Bauman stated that “we need to pierce the walls of the obvious and self-evident, of the prevailing ideas of the day whose commonality is mistaken for proof that they make sense.”
Given that last week was the annual World Economic Forum in Davos, Switzerland, probably, now is a good moment for all of us to ask some tough questions of the world’s economic modernity. Zygmunt wrote that “in the fluid stage of modernity the settled majority is ruled by the nomadic and extraterritorial elite.” His reasoning is this: In a solid world, the power of capital over labor was demonstrated by the ability to fix in place, to control. In the solid factories of Henry Ford, power was wielded by bolting human labor to machines on an assembly line.
But that power came with some responsibility, too. In the world of factories, human labor came with a human body. “One could employ human labor only together with the rest of the labourers’ bodies. That requirement brought capital and labor face-to-face in the factory and kept them, for better or worse, in each other’s company.” Factory owners had to supply some light, some food, some safety at least.
That’s no longer the case. In the current global liquid and digital economy, labor no longer ties down capital. While labor still depends on capital to supply the tools to be productive, capital itself is now weightless, free of spatial confinement. Now, the power of capital is to escape, to avoid and evade, to reject territorial confinement, to reject the inconvenience and responsibility of building and maintaining a labor force.
Bauman’s view of today’s liquid economy is this: “Brief contracts replace lasting engagements. One does not plant a citrus-tree grove to squeeze a lemon.” In liquid modernity, capital travels hopefully with carry-on luggage only. It counts on brief profitable adventures and is confident that there will be no shortage of them. Labor itself is now dividing into those who can do the same, and those who cannot.
According to Bauman, this has become the principal factor of present-day inequality. The game of domination in the era of liquid modernity is not played between the bigger and the smaller, but between the quicker and the slower. People who move and act faster are now the people who rule. It is the people who cannot move as quickly, and especially, those who cannot leave their place at all, who are ruled. Some of the world’s residents are on the move; for the rest it is the world itself that refuses to stand still. Where once we valued durability, now we value flexibility.Because that which cannot easily bend will instead snap.
As Zygmunt Bauman put it, “living under liquid modern conditions can be compared to walking in a minefield. Everyone knows an explosion might happen at any moment and in any place, but no one knows when the moment will come and where the place will be.” Under conditions of “liquidity,” everything can happen, yet nothing can be done with confidence and certainty.
That’s because “we presently find ourselves in a time of ‘interregnum’, when the old ways of doing things no longer work, the old learned or inherited modes of life are no longer suitable for the current human condition, but when the new ways of tackling the challenges and new modes of life better suited to the new conditions have not as yet been invented.” But people are working on it.

CORRUPTERS FIGHTING CORRUPTION?

Staff Reporter
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‘Wining the fight against corruption: a sustainable path to Africa’s transformation’, was the theme of this year’s AU jamboree, which was held in Addis this past week. This regurgitated phrase has become as vacuous as the numbing commercial adverts of our times. In the usual pompous lingua of officialdom the Summit was labeled; ‘The 30th Ordinary Session of the Assembly of Heads of States and Governments of the African Union.’ The gathering was supposed to galvanize efforts against corruption, which in Africa has become the dominant operating principles of the state, the private sector and even civil societies. One thing is for sure, just because the political honchos halfheartedly pontificate about corruption doesn’t mean that it will go away. In fact, without the direct/indirect involvement of the ruling elites, grand corruption in Africa is hardly possible!
To be sure, the whole machinery of the modern world system is now oiled with corruption of all sorts. No country is immune to this disease. What differentiates countries is only the degree of the sickness. For example, the affluent, socially conscious and relatively homogenous countries of northern Europe are by far better off when it comes to this sickness, compared to other countries of the world system. Transparency in everything they do along with respect for rights, (individual & collective) is an important feature of Nordic societies. For instance, in Sweden, the income of each individual is regularly published on the public ledger for everyone to see. This takes the myriad ways of making ‘mysterious money’ without being noticed, (by the public) out of the equation. Paradoxically, in places like our poor continent, it is those who do not actually work who become very rich, compliment of ‘mysterious money’ accrued from even more mysterious activities, business or otherwise! Grand corruption is almost always the result of collusion between ‘high officials’ and members of the private sector. In Africa, tenderpreneurs tend to dominate the corruption kingdom, as it is relatively easy to make plenty of money at the expense of the sheeple’s (human mass) welfare! In countries like Ethiopia where resources (almost all) are under the state/government, there are plenty of ways to make a ‘killing’ for corruptors, so to speak. Land, credit, projects (government/private), influence in the bureaucracy, judiciary, etc., are all there for the asking and for the taking, if one is well connected to the ‘Mafiosi State’ that operates behind the veil of the formally elected state. Just see who ‘made’ it big in Ethiopia in the last twenty years. It certainly is not the working stiff that includes the dynamic and creative entrepreneurs, rhetoric aside! See the articles next column, on page 41, 44 & 46.
The sheeple is sick and tired of corruption and is trying to take matters on its own hands. The traditional governance structure of the state, namely; the legislative, the executive and the judiciary have proven inadequate to fighting corruption, particularly grand corruption. Existing anti-corruption agencies ultimately report either to the legislative or the executive. In countries where the same party dominates both entities, to say nothing about the judiciary, the whole anti-corruption exercise becomes a farce. Unfortunately, our country finds itself in this ensemble. A novel approach to overcome this major obstacle was pioneered in Ethiopia (by civil society) about two decades ago, long before the anti-corruption agency was set up! The initiative was systemically frustrated by the clandestinely operating ‘Mafiosi State.’ The main objective was to create an anticorruption institution, appropriately named ‘Tirat’ in Amharic, from the ground up, supported/facilitated by the sheeple and answerable only to it. Primarily, the task of the institution was to observe, monitor and report ‘fishy’ activities and the individuals/institutions behind them direct to the people. The people themselves, it was assumed, will then take appropriate actions when engaging with the state/governments; like impacting elections, appointments, projects, etc. Each locality (outside of the ‘kebele’ setup) was to institute its own anti-corruption committee, elected by community members. Would be reputable candidates were to sign/vow pledges and declare their worldly wealth before serving in the committee. Individuals working for the state and the private sector were not allowed to become members of the committee or hold offices in the organization. Elections were to be transparently conducted without the interference of the state. This grass root setup was to be organized across the nation. Tirat’s motto; ‘Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity. Publicity is justly commended as a remedy for social and industrial diseases.’ Or in the words of Justice Brandeis of the US Supreme Court: ‘Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.’
Novel initiatives such as ‘Tirat’ that were determined to operate outside of the traditional state structure (legislative, executive an judiciary) are becoming visible elsewhere. In this regard, some of the South American countries have made encouraging headways, particularly in the systemic deconstruction of the old trinity (legislative, etc.) Our neighbor Kenya, just like us, is in a political and social flux. Mr. Odinga, who was a serious contender for power in the first phase of the last election and who boycotted the second phase of the election, was proclaimed ‘president of the people’ few days ago! It would be recalled Mr. Uhuru Kenyatta, who won the boycotted election, was already inaugurated and currently officiates as president of Kenya. Admittedly, the whole thing looks rather ridiculous, but that might be the intended message. This very action might sensitize the wanainchi/sheeple to reconsider even delegitimize the non-empowering political structure of Kenya. Shutting out the voice of half the population by mechanically employing legalistic arguments will only exasperate the impasse. Situations on the ground remain very worrying in Kenya; ditto Ethiopia. Wise leadership is urgently needed in these neighborly countries. Simplistic and jingoistic politicking might not do at this late hour!
In Ethiopia, where systemic cohesive administrative experience was never lacking, the effort to undermine value-based relations in our collective existence, spearheaded by the ‘Mafiosi State’, might well fragment the nation. The old saying ‘Abatu dagna liju kemagna’, which translates to, ‘the father is the judge, the son a mugger’ is a stuff fragile/failing states are made of and on which the prevailing mal-governance has zeroed the country’s future. We have started to pay the price for this stupid indulgence, perpetrated by degenerate party officials in collaboration with notorious oligarchs (foreign/local) and their minion accomplices, mostly within the state and the private sector. Unfortunately, the resultant depraved culture that has overwhelmed the country is bound to linger even after the demise of the ‘Mafiosi State’. The complete obliteration of the ‘Mafiosi State’ remains a precondition to our envisioned peace. Let us hope Mersa, et al., will not be taken as the only template in redressing the massively accumulated injustices of the last two decades. Time to recall the old saying; ‘when thieves are heroes the end is nigh!
“In too many countries, people are deprived of their most basic needs and go to bed hungry every night because of corruption, while the powerful and corrupt enjoy lavish lifestyles with impunity.” José Ugaz, Chair of Transparency International. Good Day!

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