From rags to riches: Re-afric make colourful shoes from recycled African fabric that sell worldwide


This week’s episode comes from Kibera, Kenya’s biggest, and one of Africa’s largest, informal settlements.

Life is tough here, and many talk about the “slum mentality” where a lack of opportunities leads to drug abuse, crime and a general sense of despair.

Julius Otieno is an inspiration for those in his neighbourhood.

After dropping out of high school as his family could no longer pay his school fees he combined the talents of his mother (a tailor) and his father (a cobbler) to make colourful, hand-made shoes from discarded pieces of African fabric.

The shoes are a hit, with both Kibera residents and expatriates (such as myself).

Julius and I talk about his story, how the shoes are made, and the impact of the business in reducing environmental waste and providing meaningful employment to the Kibera youth.

We also discuss Julius’ trip to Paris, after he was selected by an ambassador to present at a trade show there.

This involved Julius needing to get funding to get a passport in order to leave the country, let alone have his experience on a plane.

For more information on the business, head to the show notes where you can find the Re-afric website, as well as a blog post I wrote several months ago about meeting Julius for the first time.

You can also head to where you can learn about opportunities to help companies like Julius’, whether that be expertise or funding, should you so wish.


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Social Media Links



Twitter: @reafric

Pictures of me and my shoes

My feet getting measured in Julius’ shoe shop
Finished pair of my Re-afric colourful shoes


Sam:                                      00:08                     Intro.

Sam:                                      03:11                     Cool, so we’re here today with Julius from Reafric, Julius, welcome to the show.

Julius:                                    03:17                     Yeah, thank you so much.

Sam:                                      03:18                     And so to get us started, can you tell us a bit about, a bit about Reafric?

Julius:                                    03:23                     Okay, thank you so much. Once moreI’m Julius Okoth Otieno, I’m a young proactive Kibera resident and the founder of Reafric social enterprise. So Reafric simply means redoing it in Africa, the mission behind the innovation was, I mean, motivated by us being after restoring the original natural state of Africa as a continent and generally, Reafric drives three concepts in our social innovation as a social venture. One is waste management as you know, generally in Kenya both County and national level of our government they are overwhelmed with taking care of waste and this one is very dangerous to environmental pollution majorly in the informal settlements as a pure example kibera slum where I’ve been growing since childhood and the motivating factor was how best can we engage onto activity to clean, bring forth sanitation and reduce the risk of disease outbreak in the slum environment. And in due process of waste, I mean collection with the engagements with the youths and the local County government over here, Reafric thought it wise, part of this waste could be reused to do something tangible. That is what inspired innovation of shoe production whereby we engage into the shoe production of unique, different type of shoe style designs that embrace the nature of Africa and the culture of the population of Africa. And we collect waste like fabric, we call them Kitenge attire, the cut off pieces from the various existing tailors within the slum we also collect like suede, leather, jeans from the carpenters as we know there are a lot of carpenters…

Sam:                                      05:17                     They often use a lot of those things, don’t they?

Julius:                                    05:21                     Yeah, which we collect.

Sam:                                      05:21                     Fantastic. Well, we’ll go through sort of some about how it’s made, but sort of fundamentally you’re making shoes from waste material that otherwise would have been discarded burnt.

Julius:                                    05:31                     Indeed. So we make the shoes out of waste and, apart from waste, we inspire the job creation, to the jobless youths that are, I mean, in the slum. So we mobilize them, those that have expressed their passion through their artwork, we train them and give them work. Whereby now the skilled artisans that are confirmed work and at the end of the day they get paid, and this through sustainable development goal agendas in the whole world, we ensure we improve the livelihood of our employees and 20% of the profit we generate out of the shoe we sell, we plough it back to offer scholarship to the bright needy children. Also, you know, like the informal settlement of Kibera and general slum communities. There are so many existing, bright needy children who cannot afford to pursue their career dreams due to lack of school fee support since even getting three meals a day at the table in their family’s a big deal, which is just but a dream to each and everyone. So we try to mobilize them and after we’ve interviewed them and confirm from their performance and their seriousness with pursuing their career dreams, we offer them scholarship of which the business sponsors their school fee.

Sam:                                      06:40                     Very good.

Julius:                                    06:41                     Yes.

Sam:                                      06:41                     Alright, so there’s a lot, a lot happening in Reafric. So we’ll sort of go through a few different parts. So perhaps just to sort of give, give some context, when did you begin to do this enterprise?

Julius:                                    06:56                     This enterprise, before I officially gave it the full thought and a full attention, so to speak. I began it when I was in form two.

Sam:                                      07:05                     In form two. How old were you then?

Julius:                                    07:06                     I was in form two 2013, 2013 I was 17 years old.

Sam:                                      07:12                     17 years. Okay. So when you were 17. Okay.

Julius:                                    07:15                     Yeah.

Sam:                                      07:15                     And for context you so you grew up in Kibera?

Julius:                                    07:19                     Yeah.

Sam:                                      07:19                     This is the informal settlements, sort of in the center of Nairobi.

Julius:                                    07:23                     Yes.

Sam:                                      07:24                     So you’re in school?

Julius:                                    07:28                     Yeah.

Sam:                                      07:28                     And then form two, age 17, you decided to look at it and do that. Why did, why was it at that time you decided to look at it?

Julius:                                    07:36                     Generally I’m a victim of those that have gone through the struggle of life in the informal settlement of Kibera. So like I didn’t have school fees to support my, my education at high school level. That is from two. And by then my parents quit whatever they were doing in the city and they retired back in the rural at home. So I had to remain alone to ensure I achieve my career dreams. And, to them, they didn’t have anything to support my, my school fees. Like I thought of how best can I look on to something that can sustain me. And I began like hawking the shoes as a hawker.

Sam:                                      08:16                     Hawker. What does hawking mean?

Julius:                                    08:18                     A hawker is like these people that are walking in the street selling stuff.

Sam:                                      08:22                     So you’re sort of standing, you don’t have a shop, but you’re just going selling things?

Julius:                                    08:27                     I convinced the various existing people that are making shoes. Then I go and hawk. So from there I realized like the products were not working for me because it was like a holiday of (3 months a year), like April, August and December and I have to gather or collect what can pay for my school fees for the next term. And this one was not working.

Sam:                                      08:49                     Okay. So why was it not working?

Julius:                                    08:53                     A lot of these common products all over, of which there are so many hawkers, so many shops, so like I could not get my market well.

Sam:                                      09:03                     You couldn’t differentiate because you were just selling the same things as the others.

Julius:                                    09:06                     Yeah, the same things that I was not even getting the flow of cash.

Sam:                                      09:09                     Yeah.

Julius:                                    09:10                     I mean, in terms of revenue and profit to sustain me. So like the idea was how best can I venture onto something outstanding that can beat the market, not more competitive and it will sell with ease and get enough cash to take me to school when the school opens. And that is what drove my, inspiration to innovate this unique shoe products that are being made out of different materials, extracted from waste.

Sam:                                      09:37                     So why did you choose shoes? Like why did you not choose to sell food or to do anything else?

Julius:                                    09:44                     Generally my mother is a tailor.

Sam:                                      09:46                     Okay.

Julius:                                    09:47                     And my dad was a Shoemaker.

Sam:                                      09:48                     Oh really? Your father was a Shoemaker?

Julius:                                    09:50                     Yeah.

Sam:                                      09:50                     So I see, so did you, did you know how to make shoes?

Julius:                                    09:54                     Yeah. I know how to make shoes. We grew up, we grew up making shoes, even repairing shoes like yeah, my mum is doing tailoring and she is contributing to the waste emission and my dad is making shoes but does not know and I have not come to realize that this waste that is being emitted by my mother can be reused as raw materials for the shoes.

Sam:                                      10:14                     So their whole life they’ve been doing their current businesses and you’ve come along and said actually… We can combine them and bring forth mutual partnership among the various existing businesses.

Sam:                                      10:26                     Where did you get, because the shoes there are quite cool. Like where did you sort of get the inspiration?

Julius:                                    10:33                     Actually? I didn’t see anything to inspire me but I thought giving it, I had a new unique idea that why don’t we make shoes out of different material that have never been seen. Yeah. And I say no, let me make the shoes out of fabric because most of the Africans are after the fabric attires.

Sam:                                      10:57                     Yeah.

Julius:                                    10:57                     Why don’t I also serve their feet with a similar attire they put on.

Sam:                                      11:01                     Yeah.

Julius:                                    11:02                     And that is how like the fabric kind of shoe products came about..

Sam:                                      11:07                     And I should also note for listeners at the moment, there might be some motorbikes going on in the background, so if there’s a bit of extra sound in the background, that’s just what it is. Actually perhaps let’s talk about it. So we’re, we’re here in actually we’ll get to that in a bit. So you’re age 17, you have the idea, you think actually I can, you know, start to use these tailored product, you know, the off cuts of fabric for making shoes and you already have experience on how to make shoes. What happens then?

Julius:                                    11:37                     I didn’t have the full concept on how best I this bring this dream or innovation into reality. So what I had, it is like and moved from various existing skill artisans that are working on general shoe industry and I went to pick the professionals or the owners of those small shops and I brought them on board. And I told them I have this new unique product that can supplement onto whatever existing shoe product you have, can you try it out. And we test it if it can sell in the market. And I confronted like 10 and only 6 responded, 4 didn’t respond immediately. So when they responded, six because I didn’t have the capital or whatever it takes. So like I could like say, can you use whatever you have to do for me, this number of pairs of shoes. Then I try to Hawk I’ll pay back and through that concept, the first week I did the hawking, I made like four times revenue of the normal ones, I used this normal, I mean shoes that are common in the market, are you getting it. So I told them this things can sell and that one was within just Kibera.

Sam:                                      12:51                     And you were, you were hawking still?

Julius:                                    12:53                     Indeed.

Sam:                                      12:53                     So you went. So this is quite smart. So, rather than trying to get your own, make the shoes yourself, you just went to somebody else who could make them.

Julius:                                    13:04                     Yeah.

Sam:                                      13:04                     And you basically said, here are the materials. If it sells, I’ll give you some money.

Julius:                                    13:08                     I’ll give you some money, if it doesn’t sell. And it is my time to go back to school, I’ll return to you the shoe.

Sam:                                      13:13                     Yeah.

Julius:                                    13:14                     Because you’re the one who incurred the cost of bringing it here. So, and they agreed of which in due seasons during holidays, I come back in the slum and I go to them, they do the production, I hawk and I began to save after clearing my school fees, saved. And I think after form four, that is 2014, 2015, I mean, I went to Tunapanda Institute.

Sam:                                      13:39                     So by this time you’re how old?

Julius:                                    13:41                     I was 20 years. That is like 2015. So like I gained the passion and interest to learn whatever, what business means or what the business world fully entails. So from there I went to Tunapanda, I did basic ICT.

Sam:                                      13:57                     What is Tunapanda?

Julius:                                    14:00                     One of the various existing vocational institutions within the slum of Kibera that offers free basic ICT training in combination with entrepreneurship.

Sam:                                      14:14                     Okay. Who runs Tunapanda?

Julius:                                    14:16                     Tunapanda is owned by Meek and Jay, these are two brothers from the US, yes. It is just just near by within the Olympic estate.

Sam:                                      14:25                     Okay. What were some of the key lessons that you learnt in that program?

Julius:                                    14:31                     Tunapanda? Basic ICT skills generally in programming both website and graphic design and what I enjoyed the most was entrepreneurship, that is business, whatever it entails and basic accountings.

Sam:                                      14:48                     Very good. Okay. And how long did this program last?

Julius:                                    14:52                     The program is only three months. Very intensive so to speak because you’re committed full time.

Sam:                                      14:57                     Yeah. Okay and what did you do afterwards?

Julius:                                    15:01                     What I did is I didn’t even give the business a thought still because I was fearful it would be a struggle since there was no capital or whatever it takes to implement the venture fully. So I, from Tunapanda, I went to work in a company called Samasauce.

Sam:                                      15:20                     Samasauce?

Julius:                                    15:21                     Limited company.

Sam:                                      15:22                     Okay. What do they do?

Julius:                                    15:23                     So Samasauce is a technology company based in Kenya that is building on software developments in partnership with the various existing big companies like Google, LinkedIn, Facebook.

Sam:                                      15:37                     So it’s kind of like outsource, outsourcing?

Julius:                                    15:43                     Yeah.

Sam:                                      15:44                     Cool. So there’s this, so Samasource is the company and then you joined them. So because you have some ICT skills.

Julius:                                    15:51                     Yeah.

Sam:                                      15:52                     You could then go and join them and that’s a way for you to earn.

Julius:                                    15:55                     That is how I begun sustaining myself after that. And they were paying only $200 in a month and then…

Sam:                                      16:05                     You had ambitions for more?

Julius:                                    16:07                     Yeah, I had ambitions for more so like, I worked there for two years. Then after working there for two years, I also used to give a change kind of lecture or speech to motivate the youths because over 80% of employees in Samasource were youths and their lifestyle sometimes is wanting, in our society so like, I used to volunteer and like mentor or nurture the colleague employees, youths that are existing there. And I think from there is where I began realizing my potential and what life means for me because most of them were saying, no, you should not be here. You should be somewhere doing something to our society. Most of them, all my friends, even the managers, my bosses, so to speak. And from there, like one day I thought of making the shoes and display to them.

Sam:                                      16:57                     To the managers?

Julius:                                    16:58                     To the managers. And they bought the shoes and they presented the shoes to the executive team and they showed the shoes to the CEO of Samasource. She’s called Layla Jana. And when she got the shoe, they told me, she told me because she’s running a social venture, with a social impact with it. So when I described for my mission, she like said no, quit this job, go and do whatever.

Sam:                                      17:26                     So the CEO told you to quit your job.

Julius:                                    17:28                     She told me, make sure you are supposed to be employing more people, nurturing more people in this society and impacting lives. So the best thing don’t fix your mind here. Please quit the job. I didn’t even like hesitate, I give it three days, then I quit that job within three days, they allowed me and I came and launched this social venture fully 2017 September. Yes.

Sam:                                      17:56                     Okay.

Julius:                                    17:57                     Yeah.

Sam:                                      17:57                     So what did the what did it, what was your life like at the beginning, was is just you do, did you have other people who could help out with the venture?

Julius:                                    18:08                     It has been full of struggle so to speak because I’ve not yet gotten the hands, both locally, internationally, so to speak enough hands that can help it. And from the beginning I can say like it was a very big struggle because making a team from the informal settlement to build a company with them is the most hectic thing to do. So we began three of us, Peter over there and Selly, the one making beads here. We began three of us. So…

Sam:                                      18:43                     Back in 2017?

Julius:                                    18:45                     2017 September.

Sam:                                      18:46                     Are they your friends? Did you know them before?

Julius:                                    18:48                     I just knew Peter as a shoe maker who could make the, part of the team would make the shoe when I was hawking then I go and sell, but later I came and said can we now form a mutual partnership together and form a team as a company, or a social venture. And he agreed, but Selly was a friend, even though he’s more into sandals, bead work and he also joined the team. Yeah. So because there were only two and the business was growing and there was lots of demand, and I began like dominating the market by testing the product and confirming the interest of the clients in the market. So like we begun now what can we do to ensure we have enough capacity? Are you getting it to deliver the demand?

Sam:                                      19:36                     Who were the first people who were buying these shoes?

Julius:                                    19:40                     The first people were the local Kibera residents.

Sam:                                      19:44                     So other people who are living in Kibera, I’m trying to picture it. So you’d have a bag of shoes and you’d go around to different shops and say would you like to buy these shoes?

Julius:                                    19:58                     Yes, that is how we began. And I used to do sales by myself so like I could do, go and talk to various people and showcase the product. Go to various functions when I’m dressed like a “crazy” African, plus my feet, when you question about i, I direct you to the shop. Then you place an order, we produce and deliver to you. So people around are very well conversant and aware of the products because they were there fast.

Sam:                                      20:27                     And what were you calling them?

Julius:                                    20:31                     I used to call them sick shoes.

Sam:                                      20:33                     As in like I’m sick?

Julius:                                    20:38                     To attract the attention of a client or customer, who might, I mean diminish you or like deny you a chance to communicate or sell your idea or product to him/her. I say no. Have you ever heard about sick shoes? Sick? You want my feet to be sick? No, they’re made out of waste. So like, you know, we extract that which can negatively affect the society, we use it as a raw material, and now we do what, we make the shoe out of it. And that is how people began to entertain and enjoy.

Sam:                                      21:12                     Oh, very good. Okay. So that was those are the first few months. What was the next big break for the company?

Julius:                                    21:20                     The big break was now end of 2017, 2018 February, I joined the Somo project. Somo gave me the full knowledge of whatever entrepreneurship fully entails, in line with the concept of social innovation. And after joining somo, they gave me funding. That is after three months or so. Intensive kind of training.

Sam:                                      21:50                     So I’m trying to explain, the Somo project is an organization in Kibera.

Julius:                                    21:50                     Yeah.

Sam:                                      21:52                     Where people come, people like yourself come with ideas.

Julius:                                    21:54                     Yes.

Sam:                                      21:55                     It sounds a bit like this Tunapanda program,

Julius:                                    21:58                     Indeed, yes.

Sam:                                      22:02                     They kind of take you through how to have an eye to progress.

Julius:                                    22:07                     So with Somo, if I can differentiate it from Tunapanda, Tunapanda just gives you the skills and then they can either help you look for a job. Yeah. But Somo ensure that whatever they nurture you in, is a venture they believe in and at the end 80% of people that are going through their program are invested in.

Sam:                                      22:29                     I see.

Julius:                                    22:30                     Yeah.

Sam:                                      22:30                     So it’s much more about almost an incubator. It’s like that sort of thing. I should note that we’re actually doing this interview in the Somo projects container.

Julius:                                    22:42                     Yeah. This a Somo project container.

Sam:                                      22:45                     The office is like a shipping container. So we just said hello to Amelia and the people who run it. And they’ve kind of let us use their.

Julius:                                    22:54                     Indeed.

Sam:                                      22:54                     Shipping container a bit.

Julius:                                    22:57                     They even offer you the working space, to offer meetings, generally even to do your stuff. Yeah. This is why this container spaces are existing here.

Sam:                                      23:10                     Fantastic. Okay. So you’ve got onto the Somo project program. At the end of it you get investments?

Julius:                                    23:19                     I got a small grant.

Sam:                                      23:19                     Small grant, so that sort of allows you to start.

Julius:                                    23:23                     Yeah. Like the, it was Ksh 185,000.

Sam:                                      23:33                     That’s $2000?

Julius:                                    23:34                     Yeah, two thousand dollars. So like that is what I used to buy the two machinery, you see there and the small grinding machine and there are so many various existing tools, equipment and even a few shoe molds, I used the very grant to purchase them. Yeah.

Sam:                                      23:50                     So after Somo project has been completed, at this stage, who is buying your shoes? Like who else was buying the shoes?

Julius:                                    24:01                     Generally, in partnership with the Somo project, I have been in a good position to have an exposure to not only in Kibera, not only in Nairobi city, not only in Kenya, not only in Africa, but globally. That simply means like we managed to make our website, create our social media pages and Twitter handles, so to speak, whereby we can now speak about our brand products to the world and those that have interest or are after to get the shoes they communicate farther and then we negotiate on how we can build the production, deliver all over the world whereby we segment or market to be both local and foreign and we target our main target are the youths age 15 to 40, who are passionate and much more interested in the shoe products more so in the current trending fashion design crazy world. Yeah. So like we go to university students to, to market the products and even in the various occasions that we apply to either pitch, we have also various existing exhibitions in Kenya which we attend and the showcase our products. And there are clients who walk in, there are tourists who come to Kenya and sometimes find their way to Kibera slum and they can pass by the shop, familiarize themselves on the product and pop in to inquire more and even buy I can say even the Somo staff the Somo board members and generally their network, the mentors Somo organization has, even Tunapanda and that is how we get to access our market.

Sam:                                      26:00                     Very good. Okay. And so now, now you have these various different channels by which people can come in and purchase your shoes. So if we look at the, you know, when you first started it was all quite informal and it was, you had Peter who was making the shoes your other friend as well and you are out Hawking. What does the operation look like now in terms of the production of shoes? How, how is that, how would you explain that?

Julius:                                    26:30                     I can start by saying, I mean like when we were three, now we’ve grown to be 15, 15 pro full time producers and we have another 12 brand ambassadors across the world. And Sam you are part and parcel of our brand ambassadors, as I saw you telling a nice story of our brand products in your website,you are part and parcel. So like there are volunteers who are like can tell a story or can share their experience with our product to their network, which as Reafric, we are not accessible or not aware. Yeah. So that one like and also we have like,I can say a small people, a few people who do like hawking and those that we are in partnership directly to, I mean accept our shoe products in their shops as a supplement product to their I mean, shoe products. Yeah. So these are part and parcel of the team which make it to be 42 in number.

Julius:                                    27:36                     Very good. Okay.

Julius:                                    27:37                     The active shoe producers are 15.

Sam:                                      27:39                     People working, so 15 people every day and, and what, what are those 15 people doing, are the majority of them making the shoes?

Julius:                                    27:46                     Yeah, all of them are making shoes, shoemaking is in different stages.

Sam:                                      27:50                     Okay. So I’m really interested. All of the shoes you make are from hand, so from scratch like…

Julius:                                    27:56                     Yeah.

Sam:                                      27:57                     So what are, how many different types of shoe do you make?

Julius:                                    28:02                     We have like I mean kind of five different types of shoes. Okay. You have the official leather for the official attire in the official nature, we have the Maasai sandals and we have the toughees back to school leather and now we have like the fabricated ones, type and now we have a mixture design. A mixture design can be either leather and fabric combined or suede and jeans combined or like jeans on its own. So these are different designs from the normal four we began with. Yeah. So they are like five different types.

Sam:                                      28:43                     Okay, and then within, for example the fabric, there are different styles. There’s, you have men’s shoes, lady shoes, some with heels, some are boots, et cetera okay. And then I’m interested, the actual fabric that you get on it, see within that, there are lots and lots of different options for what the fabric can be on the shoe. All right. These are bits of fabric that would otherwise be thrown away.

Julius:                                    29:13                     Yes.

Sam:                                      29:14                     So from tailors. How does that work? Do you sort of send people out to go to different tailor shops and see what artwork is available?

Julius:                                    29:25                     We give it different approaches. We have like cleanup programs that are currently organized by the inspiration being driven by Reafric in partnership with the various existing organizations. And the local County government as at now I can say have a hand in it and I see the Nairobi governor Sonko is even currently organizing they clean up, I mean kind of forums. Saturdays, once in a month. So in due process, Reafric now has a team of 356 youths who do like daily, I mean cleanups in different parts of the slum because the slumis segmented into different villages, there are around 13 villages. So you’ll find a team today in Olympic Fort Jesus, 42, Jamhuri Woodley, I mean Katwekera, various existing small villages. They’re like estates, but we refer to them as villages, because it is an informal settlement, where like, they do clean up. So we have a team 356. So out of this 356, each and every team we have, we’ve segmented them to be like in a team of 50 and they have team leaders, so 50 50, that is like I mean 350 and then 6 of them leading these seven. I have on my team, I lead a team, one of the 50 which make it to be 357. So like as leaders we ensure like this 50 are doing cleanups in the various parts, but with us we try to talk to the waste emitters, people who throw waste like these small existing industries. We have a so many tailors, almost 1000 tailors in the slum and there are lots of carpenters. You know why? Majorly, these are the cheap means through which they can generate an income or this like, the easiest kind of job they can learn and adapt to. And they do it from their small production site and they emit a lot of this waste, carpenters also emit waste. And now as leaders who lead these teams, we go to them. So don’t tell me to waste, package them somewhere, then you’ll come and pick them as waste.

Sam:                                      31:54                     Okay. Do you pay them for waste?

Julius:                                    31:58                     We don’t pay, we pay for some of the waste.

Sam:                                      32:02                     Really?

Julius:                                    32:02                     Yeah, when you do sorting and they realize this portion of our waste is going to be used as a raw material, and generate money with it, you have to pay.

Sam:                                      32:10                     Yeah.

Julius:                                    32:10                     Yeah.

Sam:                                      32:11                     Okay. So, so people, I imagine that would make people more thoughtful about, before throwing away something. If any of that…

Julius:                                    32:17                     Initially, when we began, we were not paying.

Sam:                                      32:19                     Okay.

Julius:                                    32:20                     But when we go to sell for them shoes, that shoe is out of this waste you used to emit carelessly, we didn’t realize that they’ll now demand to sell to us the waste.

Sam:                                      32:30                     Yeah, they’re smart.

Julius:                                    32:32                     So we pay for some of them. Majorly, those that they consider we use as a raw material, they know how to sort them themselves, put them different from the waste that will automatically go to the dumping site.

Sam:                                      32:44                     Got i.

Julius:                                    32:45                     Yes.

Sam:                                      32:45                     Okay. So you then go and you collect these things and then do what? You take them back to the shop?

Julius:                                    32:51                     To the shop.

Sam:                                      32:51                     To the workshop. Do you have one workshop?

Julius:                                    32:55                     I don’t have one workshop as at now, I have three. Yes, that space is too small and sometimes you may wonder why is it people a few. That space can only accommodate 9 in maximum. So like I have three more people like Peter, whom I’m in partnership with and like I own that one shop, workshop, but the rest of the two remaining workshops, I partner. I partner in terms of referring the trained, already confirmed skilled artisan youths to be part of that team and then I give them a job.

Sam:                                      33:33                     Why don’t you own the other two? Why don’t you, why do you use two other people that you don’t? Why you partner? Why don’t you just do it all yourself?

Julius:                                    33:41                     The thing is we are limited in capital. Just to set up a fully fledged production capacity or production space to accommodate the entire team.

Sam:                                      33:50                     Okay. So you have to, at the moment, you partner with other people. How does it work? Do you say I’m gonna pay you this amount to produce the shoe?

Julius:                                    34:01                     Yeah, so like when I have orders, I give them or when, because there are a lot of demand of these rendered jobless youths who have passion in artworks. So like after confirming them, because my space currently is very squeezed, I take them to the team, the rest of the two, I mean workshops I’m in partnership with and I say no, take these three skilled artisans, put them under you. Even though they are subjected under them, Reafric is the one who would cater for their cost, payments, salaries and all that. I’ll be giving you order. You watch over them. It doesn’t mean I don’t like, like I own 30% or 40% of the other workshops, yeah because I have to take few tools, equipment, to make these specialized, fabric shoes, which they didn’t have initially before I met them. Yes.

Sam:                                      35:02                     Okay, cool. Are those also near your main workshop, these two places, they are close by. Yeah. Okay. Do you have the fabric? How long does it take to train somebody to be able to make a shoe?

Julius:                                    35:20                     It depends. It is a duration of two to four months. When somebody, yeah two to four months and also like depending like we’re training how many.

Sam:                                      35:31                     So let’s say you’ve got four new people.

Julius:                                    35:34                     Four new people will take me four months, two people will take me two months. Okay. You know why Sam? I have two sewing machines. So space will be shared, which is really limiting.

Sam:                                      35:46                     I see. So in what, is there a part of making the shoes? Is it they have to be able to use a sewing machine?

Julius:                                    35:53                     Yeah. They have to learn it. The theoretical and practical part of it.

Sam:                                      35:57                     What’s the theoretical parts?

Julius:                                    35:59                     When we explain to you how the shoe is being made the way I was like explaining to you. You know practically now you will be subjected and be given somebody who is more professional to, to handle you by you seeing now what he it doing? And he’s like telling you do like this until you become perfect. Yes.

Sam:                                      36:19                     And when people have learned how to do it, do you have like you give them a test and you say here’s an order, you’re going to do this completely on your own. Is that how you know that somebody has the skills to do this.

Julius:                                    36:36                     But it takes a while to confirm somebody to be a full professional, perfect skill artisan that won’t be disapointed with a client or the product and this one relies on the more professional people that I entrust this onto their hands. So like we first give, I mean tests, I say make for me, two pairs of shoes, I’ll put them on for the next two months and be running errands with them. And I’d be, I mean viewing them and the verifying the quality, durability, the mistakes that might cost the defect thereafter. Then with time, as you are being tested on that concept. You improve on your perfection and you will be in a position to be even more professional than even your trainer. Yes.

Sam:                                      37:26                     Okay. Nice did you find that there are many issues with the production cause there, I’m trying to think, it might be quite to me it seems that there’s quite a number of steps along the way. Is it something where there that there is things can go wrong or like how, how do, how would you sort of think about the production side.

Julius:                                    37:47                     Issues might be there in terms of poor coordination, poor communication and sometimes misunderstanding in the team, which some you might give an order, they fail to deliver. And that is what made me to hire the management team. So that before a final product comes to us for verification, the executive team, director, the management team has confirmed, qualified, verified and gotten the product satisfying to be delivered to a client without any defect.

Sam:                                      38:27                     So you kind of at like quite a good stage, you know, like roughly how many, if we were to look at like actual numbers of shoes that you’re making now, what would you say is like in a typical month, what’s like a normal amount of shoes that you’re actually making?

Julius:                                    38:42                     Around 150.

Sam:                                      38:43                     Do you think there is demand for more than 150 shoes?

Julius:                                    38:47                     Yeah, I ignore a lot of orders.

Sam:                                      38:49                     You ignore them?

Julius:                                    38:49                     A lot of orders.

Sam:                                      38:50                     Why do you ignore them?

Julius:                                    38:52                     Sam, tomorrow you can come from UK and tell me I have a thousand clients who have paid for it, but I don’t have the capacity to deliver that in terms of the limited machinery tools and equipment and I’ll ignore that. Also, in accordance to the urgency of the order, which will not be in a position to deliver.

Sam:                                      39:12                     Just talk me through the working capital side of the shoe. So like roughly how much do raw materials cost, where do you buy them from? Do you have to keep inventory?

Julius:                                    39:22                     We have various existing raw materials from different industries or suppliers like the shoe sole itself is from a different, a totally different, I mean supplier because it is a recycled cutter, which is a final product, which in the real term, we use a raw material, we buy it, the only thing like through buying it or using it, we contribute to environmental conservation and preservation.

Sam:                                      39:53                     Where do you buy it from?

Julius:                                    39:55                     We are like Makina, but they are being recycled in the, I call it industrial area, nearby the city.

Sam:                                      40:03                     Got it. So in within Kenya there is a company that takes old tires, recycles them, turns them into soles and so these would need to be, so you have various different sizes. So when you go…

Julius:                                    40:20                     It is a sheet like this.

Sam:                                      40:20                     Okay, this is a big long sheet. I see.

Julius:                                    40:25                     Did you see how we smoothed than the grinding. So let you know when you cut it, sometimes you cut it big or it was not straight or uniform, you have to correct. So that is the purpose of the grinder.

Sam:                                      40:40                     What, and so you obviously you need, do you need to pay cash for that? Can you, can you buy that on credit?

Julius:                                    40:46                     On debt it?

Sam:                                      40:47                     Yeah. Can you get it on that?

Julius:                                    40:49                     You cannot get it on debt because we’ve not signed up an agreement on how to lay a permanent partnership with our suppliers. When does the customer pay you? Do they pay you on delivery? Do they have to put down a deposit?

Julius:                                    41:04                     Clients, we have the percentage deposit will cover the working capital which some hesitate to commit to, they want a final product, just cash on delivery but the clients with whom we are currently serving, that’s why we have limited orders to 150, we get a lot of orders.

Sam:                                      41:28                     Okay.

Julius:                                    41:28                     There are people would say yes I mean the upfront fee to cover the working capital is 75%. Let me commit this and the rest of the remaining percentage of the shoe price, we’ll commit it on delivery.

Sam:                                      41:44                     And then talk to me about the machinery. So what are some of the fixed costs that are necessary in your shoe operation? So you spoke about this grinding machine or, what are some of the other things which are important?

Julius:                                    41:57                     We have the sewing machine.

Sam:                                      41:58                     You’ve currently got two?

Julius:                                    42:02                     Currently I have two, but I have like 10 people, 10 employees, sharing the two.

Sam:                                      42:11                     Sharing it. Okay.

Julius:                                    42:13                     Yeah. So we are really limited with this as a fixed, I mean capital cost. We have the grinding machine which I showed you. We need at least five. We have one. That one is the Old version manual. We’ve just modified it to be electric. So we need like a minimum of five.

Sam:                                      42:32                     Okay.

Julius:                                    42:33                     And also we have the shoe molds, which is a big kind of threat to us as we are growing in terms of delivering the demand. So they shoe molds like we need currently 300 to 500.

Sam:                                      42:46                     Okay. So with the sewing machines. So with all of the shoes, you need to do some sewing.

Julius:                                    42:57                     Yes.

Sam:                                      42:59                     And so every single shoe that you have needs to go needs to have some sewing.

Julius:                                    43:05                     Yeah.

Sam:                                      43:06                     But the fact that you’ve only got two sewing machines makes it so it means that you’re limited by the number that you can make.

Julius:                                    43:13                     Production, yeah.

Sam:                                      43:14                     So does that, so that means that every day, every hour, there’s somebody sat of that sewing machine.

Julius:                                    43:21                     Indeed.

Sam:                                      43:22                     If you were to, is it, so you currently got two, if you were to get eight more sewing machines, does that mean that your production would increase by four times or are there other factors? Which means that that’s not the case?

Julius:                                    43:37                     That is the case because as I know I have, like Sam I have 50 pending, youths who have expressed their interest to be skilled artisans into our footwear industry, but we can not absorb them because the space is small, the machinery feel. So like in regard to your concern or question is like, we need more machinery to ensure people don’t share machinery and somebody at the end of the day, an employee delivers the job, in accordance to the demand in the market. But when they’re sharing, somebody is maybe limited, and all of them are ever limited.

Sam:                                      44:26                     There’s always, always stuff that can be done.

Julius:                                    44:28                     That it’s like a limitation to deliver the demand, are you getting it? And that is what make us to ignore more of the orders. Yeah. So we need like the machinery whereby the number of employees which, whom we’ve already confirmed and are permanently working with us, at least each and everyone has his machine. Yeah.

Sam:                                      44:55                     Okay.

Julius:                                    44:55                     Tool and equipment tool to help them in operating in a harmonious way.

Sam:                                      45:01                     And how much does a sewing machine costs?

Julius:                                    45:04                     So the sewing machines vary. The normal old ersion, which we have cost $750 but, and the best sewing machine that can deliver the work and do a quality, I mean work cost $2,500. Yeah. So that is the cost of the kindly needed sewing machine, with our sensitive, unique kind of shoe product we are making, which we are straining to perfect the quality and keep on our standard. In as far as the competition in the, in the market is also concerned I will prefer that latest version of the sewing machine to be put into consideration.

Sam:                                      45:55                     Yes. How much do these plastic molds cost?

Julius:                                    45:58                     A pair of shoe molds in Kenya cost $40.

Sam:                                      46:03                     $40. Really?

Julius:                                    46:04                     $40.

Sam:                                      46:04                     For just a bit of plastic. Sorry, it’s obviously more than a bit of plastic.

Julius:                                    46:09                     That is 4,000 Kenya shillings. And that one, when I go to buy in bulk, like 10 pairs, that is my recent purchase.

Sam:                                      46:18                     That’s so insensitive. Okay. So that’s, so if you’re looking at the things which are limiting the growth of the company.

Julius:                                    46:27                     Yes.

Sam:                                      46:27                     So machines, these molds and the growing emissions.

Julius:                                    46:32                     We also have the small things as tools and equipment.

Sam:                                      46:39                     Okay.

Julius:                                    46:40                     They are invisible, but without them you can do nothing.

Sam:                                      46:43                     Roughly, what margin do you make on your shoes? So roughly how much they sell for?

Julius:                                    46:50                     For apair of shoe to be completed is $20.

Sam:                                      46:53                     Okay. So $20 and that includes, inclusive of labor?

Julius:                                    46:56                     Yeah. Labor fee.

Sam:                                      46:58                     Includes labour fee.

Julius:                                    46:58                     Yeah. And I sell it at $40.

Sam:                                      47:02                     Okay, so you making roughly $20 per shoe?

Julius:                                    47:05                     Per shoe. So like that is 100% profit. Yeah.

Sam:                                      47:09                     Yeah. Okay. So it’s roughly $20 to get them made, $40 to sell them. But of course if you’re sending internationally, you’ve then got the delivery cost as well.

Julius:                                    47:18                     Yeah, we put the delivery, which goes up to $80, $90.

Sam:                                      47:23                     Okay.

Julius:                                    47:24                     Yes.

Sam:                                      47:24                     Cool. Okay. And so what do you, what do you see next for the business? What, what’s your sort of ambition for where the business can go?

Julius:                                    47:34                     I can say I’m very much hopeful with this social venture because you know, if I could think of even selling the shoe, meeting the world and just getting the profit or investment to expand it and let it grow my passion is what is, what does it do or what is the impact it brings to their society? Because I see so many youths languishing in these streets, the slum, engaging into crime activities like robbery, thuggery. Destroying people’s properties, engaging into riots, being spoiled by politicians. And this one is being driven by the fact that they are unemployed and they have nothing tangible to keep them busy. At the end of the day, they don’t have something to sustain them and they’re just hopeless, and you know a hopeless society is a society that is ready for blood, ready to do something like in the name of crime as their means of survival. Are you getting it? What if not only Reafric, but even the various existing social innovations or institutions. What if we bring these people on board? We tell them life is possible. I realize your passion, let’s help you build on it and then we acquire you fully in our team. And at the end of the day, this one becomes an income generating activity that is sustaining your livelihood. What if we are in a good position to give back by, for example Reafric offering scholarship to these bright, needy children who have very bright future, very sharp and can at one point be great people in their society. Not only in this slum, not only in our nation, not only in Africa, but at one point the entire globe. What if we give them the chance by like supporting their career dreams? Yeah, because most of them are school dropouts and that is what contributes to the high rate of unemployment crisis. These people cannot even, they’re not graduates, they don’t have any skill that can expose them in the job market or can inspire them to initiate something tangible, are you getting it? What if we get hold of their hands and build, help them build on their careers and give them only like, I mean, 10 years maximum, they will be people who are great in the society. Somebody can now go on and further his/her studies abroad or pursue a career of his/her dream with ease, are you getting it? Once their foundations are well laid. Okay. What if you’re in a good position to expose this unique fancy product to the globe? To the global market? I mean, are you getting it? I went to France and Sam, over 80% of the population that I engaged with were interested to buy the shoes. I didn’t have any pair of shoes.

Sam:                                      50:40                     Let’s perhaps talk of this. Do you, were, you recently went on a plane to Paris?

Julius:                                    50:45                     Yes.

Sam:                                      50:46                     And spoke at a conference. How did that come about?

Julius:                                    50:51                     Through the various partnerships which I have in Kenya.

Sam:                                      50:57                     Within Kenya you’ve got, there’s a parnert, you partner with the French embassy or something?

Julius:                                    51:03                     No, I don’t partner with the French embassy as such. I am one of the youth leaders in one of the biggest organization. We call it an umbrella body, umbrella body of the social enterprises in Kenya, this called social enterprise society of Kenya. SESOC. S I’m one of the founders or co-founders of SESOC because when it was starting with that people who get in. So it does over a hundred different entrepreneurs. So the CEO of SESOC always speaks about our social ventures in general and those that are interested either in buying our product, engaging in partnership or networking on either a different way. They just call you. So when SESOC went to speak about our social venture in the French embassy the french commissioner was there and he was the organizer of this summit in France. It is called packed for impact.

Sam:                                      52:02                     Packed for impact, okay.

Julius:                                    52:03                     So when it came to Kenya, he was looking for two Africans, who can accompany him there.

Sam:                                      52:09                     Yea.

Julius:                                    52:09                     Yeah, because it was a global thing. And when this it talked about all the hundred and 50 ventures, he found an interest to come and see my venture. So when he paid a visit in the, in our shop and verified everything, he found an interest that I may go and give a speech of this to the world, yeah.

Sam:                                      52:31                     So you, was this your first time on a plane?

Julius:                                    52:34                     Yeah.

Sam:                                      52:35                     How was it?

Julius:                                    52:35                     Yeah. It was great but I feared the plane, it goes so far.

Sam:                                      52:41                     Yeah.

Julius:                                    52:42                     Yeah, I feared but I enjoyed it. At the end of the day we are over 300 people on the plane. So there’s is nothing to fear. People are just walking here and there.

Sam:                                      52:56                     Did you watch a film?

Julius:                                    52:58                     Yeah, a lot of films. Yeah. I watched films. Yes, indeed. It was a very great, and to me it was an inspiring experience, so to speak. Yeah.

Sam:                                      53:08                     Nice. What did you think of Paris?

Julius:                                    53:13                     I’m sorry, you know, like it was very funny being out of Kenya, my first time and my dream had been to be in London, New York and Dubai, Paris was very cool.

Sam:                                      53:27                     And you, you might be going back again soon.

Julius:                                    53:29                     Yeah. I’m looking forward to go back. I’ve been given an official invitation letter to go back September. Yeah. Because the team which I met had seen the potential behind the innovation and are considering it to be well spoken or communicated to the world. And the summit, which I went in the past was only having a thousand people and this one has 10,000 people. So with my passion or I mean not even passion, with my vision of dominating the global foreign market, I thought it wise that the, so many different people from different ethnic backgrounds in terms of profession, business wise, government officials, investors, donors and I’m just aiming on how best I can get people who will come one-on-one. They position the table to help me set up the shoe shop across the European, I mean markets in the major cities. And I think that is what is driving me to look on how I can go back.

Sam:                                      54:36                     Yeah.

Julius:                                    54:36                     Even though we are still in negotiations as I told you.

Sam:                                      54:39                     Well, that might be quite good placed to, to finish it, Julius. I mean, thanks. Yeah, really, really interesting chat. The whole story from the beginning, you know, you starting out, you seeing the idea, all the influences you’ve had along the way the place you’re at right now where there’s great demand for a product but you’re kind of limited, limited by the capital that you got in the business. If anyone’s listening and they’d like to learn more about the company, they’d like to perhaps buy some shoes or even look at you know, if they can think of any grants that you might be applicable to or perhaps come on as an investor, what is the best way for people to learn more about what you do.

Julius:                                    55:24                     We have our website where we have the full information on the product varieties and how best you can either engage, by either buying or contacting us directly. We also have our Facebook, Instagram.

Sam:                                      55:40                     The website is R E dash A, F, R, I. C?

Julius:                                    55:45                     Yeah, that is R E dash, A, F., R, I, C. Reafric.

Sam:                                      55:51                     Reafric.Com.

Julius:                                    55:53                     Afric of Africa. So yes .com. So that is the website through which once you Google, you’ll find us and see whatever we are doing and the product we are making. Yes.

Sam:                                      56:04                     And you’ve got Facebook?

Julius:                                    56:05                     Yeah, Facebook page, it is just Reafric without the space or hi fen, Reafric page then Instagram too, Reafric, Twitter handle is Reafric.

Sam:                                      56:17                     Got it.

Julius:                                    56:17                     Yes.

Sam:                                      56:17                     And we’ll link to all of those in the show notes as well, so people can head to The East business

Julius:                                    56:24                     Okay.

Sam:                                      56:24                     And they can find the show notes for this interview and we’ll link to all those, as well as some pictures that we’ve taken today. Wow, very cool. Well Julius, thank you so much?

Julius:                                    56:34                     Thank you so much to Sam for the time and having the passion with whatever we are building.


The opportunities and challenges of making affordable socks in Kenya


This week we’re talking with two friends who have set up a business making socks in Kenya.

Both Vidyesh and Bishell grew up in Nairobi to entrepreneurial families, and after education in the UK returned home to begin a business.

They are also friends with Sumit, who featured in the board game cafe episode.

Vidyesh and Bishell decided on socks, as they felt there was a gap in the market and that by starting with a relatively discrete market (school socks) they could grow the business.

It’s a very interesting conversation that goes through the practicalities of building a manufacturing company in Kenya.

One of the challenges they state is, for example, the high cost of electricity, and its unreliability, but also the opportunities that come from getting a loyal customer base in an emerging economy.


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Sam:                                      00:07                     Intro.

Sam:                                      01:51                     So we’re here today with Vidyesh, Vidyesh welcome to the show.

Vidyesh:                              01:54                     Alright, thanks.

Sam:                                      01:56                     So to get started, can you tell us a bit about your business?

Vidyesh:                              02:01                     Yeah, so it’s a manufacturing business. We manufacture socks and hosiery products. We started the business about two and a half years ago. We sort of looked into the market and identified a sort of gap in the quality of products that were manufactured locally. And we thought we could do it a lot better than what was actually being offered in the market. And then we sort of went ahead and did a bit of market research and found that this is something that’s, something we can get into, something where there’d be a decent return for us and where we could do something better than the, our competitors are currently doing.

Sam:                                      02:39                     Very cool. Okay. So mainly socks, is the thing you’re doing, like why did you choose socks of all the things?

Vidyesh:                              02:46                     I think it’s one of those products that everyone will always need so they’ll, I don’t think demand for it will ever die down. So yeah, but although that being said, we manufacture mainly for schools. So 90% of our production is catered for all of the schools in Kenya.

Sam:                                      03:05                     90% of your production is for all of the schools in Kenya?

Vidyesh:                              03:08                     Basically the schools.

Sam:                                      03:10                     Okay.

Vidyesh:                              03:11                     Based in Kenya, yea.

Sam:                                      03:11                     Cool. How difficult is it to make school socks?

Vidyesh:                              03:15                     It’s not, I wouldn’t say it’s like the hardest thing. It’s just finding the right recipe or raw materials testing them and then offering that to the market obviously taking into account the price sensitivities. So of course you can go for like the most expensive raw material, but the market locally, domestically is very price conscious. So then you’ve got to turn around and find something that works and is affordable by the local people, by the local parents. So we went around and, you know, got a bunch of different raw materials, tested them, you know, checked out the qualities, found the one that we were happy with but also was affordable by the local market. And still we are, we do manufacture the highest quality product currently in Kenya.

Sam:                                      04:03                     Perfect. Cool. Okay. So if we take a sort of step back. So have you always had an interest or have you had experience in the textiles industry? How did this come about?

Vidyesh:                              04:13                     Personally, you know, I mean, as a family, we’ve had businesses in textiles, we’ve had a, we had a textile mill early seventies, and then we then sort of as competition grew, became harder against you know, China and imports coming into Kenya we found that we weren’t competitive, so then we switched from, you know, manufacturing the fabrics into, and then we went into garments. And when I say we, this is, I guess my family. My dad and his brothers and then we’ve been in retail for garments and we did a lot of export back in the day as well.

Sam:                                      04:56                     When you say garments, what does that mean?

Vidyesh:                              04:56                     You know, shirts, trousers. Yeah, yeah. And then Bashil’s family was also involved heavily in distribution of garments. So there is that background of being in sort of the textiles, garments industry. But in terms of personally, between the two of us, not really. We, I think both of us have always had an interest in manufacturing, in setting up business in East Africa. So we actually were, we both studied in the UK and then you know, I worked out there for a couple of years. Bashil, he studied there further on and then we moved back and we set the business up basically. But yeah, for us, I mean I think there’s a strong interest in manufacturing and not just specifically within textiles and garments but there is a wider interest within manufacturing.

Sam:                                      05:48                     I should note we’ve got Bashil in the room as well and whose sat next to us.

Bashil:                                   05:53                     Hi.

Sam:                                      05:53                     Cool. So, that’s interesting, so you’re sort of, both of your families have had this heritage in producing garments in Kenya. Just out of interest, what were you, what were you doing when you’re in the UK? Were you in…

Vidyesh:                              06:05                     Yeah, so you want to go first?

Bashil:                                   06:07                     I studied economics, university of Manchester after finishing, I lived in London one year. Did a bit of work experience Vidyesh came up with the idea. So we did both the research on it yeah, I decided to move. He moved a few months earlier. I moved after, three months after him. Yeah.

Sam:                                      06:32                     Alright, so the idea for it came…

Vidyesh:                              06:34                     Once we were there.

Sam:                                      06:35                     When you put, you weren’t living in Kenya at the time?

Vidyesh:                              06:38                     No.

Sam:                                      06:38                     Interesting. Okay.

Vidyesh:                              06:39                     So yeah, for me, I was I went to school in the UK. I had been in the UK for almost 12 years. And then of course after school, went to university of Nottingham graduated. So I studied finance and then I was in banking for about four years. So I used to work for one of the big banks in the UK. It was fun. It was good experience. It wasn’t something that I was going to be doing indefinitely. It was, for us we’ve just always had an interest in going into like entrepreneurship or, and specifically manufacturing so…

Sam:                                      07:13                     You’re like, let’s go ahead and make socks.

Vidyesh:                              07:15                     Yeah. Pretty much. You know, everyone’s going to need socks. No one’s going to stop buying socks. I mean actually socks are the most common Christmas gift in the UK. So you know, like it’s just one of those things that people won’t ever stop buying unless, you know, we start wearing alternatives. But yeah.

Sam:                                      07:34                     Okay, cool. So let’s perhaps sort of talk a bit about the Kenyan sock market and so what’s the, what’s the current state of play in terms of producers here and yeah, let me just talk on the supply side first, what’s the current situation in terms of producers?

Vidyesh:                              07:50                     So I guess we can break that down into two segments. There’s the importers and then there is the manufacturers. Importers is a huge diverse sort of there’s many players and the businesses that import socks and hosiery products into East Africa with that, I think the biggest is something called ‘Mitumba’ which is basically second, yeah, second hand clothing. So the Kenyan government many, many years ago formed an agreement with the United States government where we would export garments, finished fabrics to the US but you know, as a bilateral part of that agreement, we were to import secondhand clothing from, from the US and then that slowly grew into Europe, China, India, Dubai. Actually Dubai, funny enough, is one of the biggest exporters of secondhand garments into Kenya and it’s not necessarily that there’s an agreement with Dubai, but it’s more, it’s a, as you say a hub of consolidation from all over the world and then it’s a good tap and it’s comes into West Africa and East Africa and Kenya. So we’ve got a huge secondhand clothing market and there’s a lot of socks there and then of course there’s the importers of socks that are then targeted at the middle class market. The middle, I think I should just…

Bashil:                                   09:15                     Also, since many Chinese have moved here, so now instead of secondhand, there are many replicas coming from China as well.

Sam:                                      09:24                     So for example, like if there’s a Ralph Lauren brand…

Bashil:                                   09:28                     So they’ll be much cheaper than the second hand ‘mitumba.’.

Sam:                                      09:34                     Really? The Chinese socks will be cheaper than secondhand?

Bashil:                                   09:36                     Yeah.

Sam:                                      09:36                     Really? Why is that?

Bashil:                                   09:36                     They’re not paying duties or anything on it. It’s brought in illegally basically.

Vidyesh:                              09:49                     They’ll just fill up their suitcases when they come here and then offload everything.

Sam:                                      09:54                     I see. And that can undercut?

Vidyesh:                              09:57                     Yeah. So for people who then bring it in legally playing, all paying all the duties, VATs you know, all the freight charges of course they can’t compete against something coming in as a second hand product or also illegally. So there is a, the market is restricted in that way, but yeah, there’s again, like I said, so there’s importers of all sorts of socks. So happy socks are in Kenya, there’s importers of people bringing in happy socks.

Sam:                                      10:24                     What’s happy socks?

Vidyesh:                              10:24                     Happy socks is actually one of the, I’d say in the last four years it’s become a very big brand. They do very funky, colorful designer, not designer as in like labels, but you know, cool designs, lots of animation and very bright and bold and loud. So it’s actually a Swedish company which gets it socks manufactured in Turkey, but it’s a huge, huge, huge…

Sam:                                      10:54                     So currently they are exporting them to Kenya?

Vidyesh:                              10:57                     Yeah, so not in a big way because there’s a very limited market. You know, like I said in Kenya you’ve got the low income, the middle market, and then the high end. So there’s a lot of price sensitivity. Those socks would typically be targeted at the high end and then the upper end of the middle, middle class market.

Sam:                                      11:14                     So that’s the imported, what about in terms of local manufacturing?

Vidyesh:                              11:20                     So there are at least, I’d say a handful of manufacturers five to six of us. We, very few of us will be doing socks for the mass market and that’s because it’s very difficult to compete against the ‘mitumbas’ they are, you know, there’s stuff coming in illegally and also the very cheap, very poor quality products and that’s because of course there’s challenges with logistics. We’re bringing in our raw materials from a country that’s far, far away and then you’ve got a lot of bureaucracy in Kenya, which sort of makes it harder for us. And I guess the other biggest, the very huge important factor for us is the cost of our electricity. So if you compare Kenya to Ethiopia and Uganda and Tanzania our costs are almost double relative to Ethiopia. Yeah. It’s higher than Ethiopia it’s higher than Uganda so for us to then manufacture and compete against some of the varying low cost socks which are coming in is almost impossible.

Sam:                                      12:38                     What percentage of the cost of the sock is electricity? Is it, I mean, is it like 5% or is it, is it relatively significant?

Vidyesh:                              12:46                     Again, it varies based on the capacities of the factories that are the scale of the factories. But you know, typically I would say actually it’s way high. It’s about 15%.

Sam:                                      12:59                     15%?

Vidyesh:                              12:59                     Yeah.

Sam:                                      13:01                     The cost of electrricity?

Vidyesh:                              13:01                     Yeah.

Sam:                                      13:02                     And so if you were in Ethiopia, that would be 7.5%.

Vidyesh:                              13:08                     Yeah. Or less even. But yeah, a lot lower than us. And you know, that for us is a huge thing. Again the other challenge, and like I said, you know, the logistics side of it historically you could import a container of your raw materials from, you know, anywhere in the world and it would dock at, the ship would dock at Mombasa port, and then you can put your container onto a truck and bring it directly to your factory, which was, it was done within five days. So five days from landing at the port, it would be in your factory, whereas now, yeah, three to four weeks.

Sam:                                      13:49                     Three to four weeks? Why is that?

Vidyesh:                              13:49                     Yeah. So it’s a double edged sword, this one. But basically, there was an SGR that was built.

Sam:                                      13:58                     This is the train?

Vidyesh:                              13:59                     The railway. Yeah. And of course for it to become feasible, there needs to be volumes moving on it. And so there was a blanket rule that was placed by the government that said any importers what not. Yeah. Any importers outside of Mombasa. So Nairobi, any other place outside of Mombasa, have to put it on the SGR. Now the SGR is, you would think that it would be cheaper than, you know transporting the containers on a truck but it’s actually a lot more expensive. So because of these certain factors we are slightly uncompetitive relative to manufacturers, you know, based in Asia other parts of Africa.

Sam:                                      14:47                     I mean, I imagine that would have been, they would like the government or whatever would have known. Okay. If we’re going from a truck system to a train system, there’s going to be a bit of a shift in prices, is it always going to be the case or is it that there just needs to be other infrastructure?

Bashil:                                   15:07                     They’re trying to recover the cost of building the SGR.

Sam:                                      15:09                     Okay. So they’re just saying regulation, you must do this and the price is as is so they can recoup the cost. The people who are feeling the pinch are…

Vidyesh:                              15:20                     Everyone who’s importing anything and yeah, because for us, again a lot of the raw materials that we use are not manufactured locally in Kenya so we don’t really have an option so we have to import it, and then we obviously manufacture here, but I think for us, the two biggest, those are like our…

Sam:                                      15:42                     The two big challenges.

Vidyesh:                              15:43                     Yeah. Of course with the delays, drops in production in the factory and…

Sam:                                      15:54                     Yeah. Is this a bit more unpredictable?

Vidyesh:                              15:57                     Yeah, I think, like I said, the bureaucracy and red tape that is, it’s kind of the…

Sam:                                      16:04                     Yeah. Right. Well, those are some fairly significant challenges. Talk about talking about the upside, like what’s the, what’s the positive thing?

Vidyesh:                              16:12                     So of course like doing business anywhere in the world I think is fun. It’s exciting, there’s a lot to learn you know, it’s always it’s nice to kind of make changes in other people’s lives. So, you know, we’ve got a staff of 35 people and they, they have families that depend on them. So it’s always nice to know that, you know, you’re kind of indirectly improving other people’s lives and of course for us, you know, started from where we are and we’ve grown and grown and grown. So it’s actually a very exciting journey for us. And along that journey we’ve learned a lot and understood the market and you know, understood how to get better at what we’re doing you know, of course without compromising the quality of the product. So for us it’s always we want to manufacture something that’s going to be very, very good, if not the best but always sell it at a very affordable price to the, to the mass market, to the local market, our target market basically.

Sam:                                      17:08                     And how, how big do you think this market is?

Vidyesh:                              17:11                     I wouldn’t say it’s very big because like I said to you, our we have, we don’t have a very big factory, but 90% of our production is purely for schools.

Sam:                                      17:20                     I’m not quite sure what the best way to like gauge capacity, but like how many socks are you producing in a year. What’s the, what are some of the ways in which you…

Vidyesh:                              17:30                     In a in a day we do again, it depends on the type of socks that we manufacture, but typically we could potentially do about 2,400 pairs of socks a day.

Sam:                                      17:44                     Okay.

Vidyesh:                              17:44                     Yeah.

Sam:                                      17:45                     Right. And those are, then maybe we’ll get more into that, but okay. You’re current 2,400. Is that after the, my impression of manufacturing is that sort of capacity goes in steps rather than in a straight line. Is that, is that kind of your capacity or is it something where you could quite easily?

Vidyesh:                              18:06                     So for us, we’re almost running at 95% of our capacity on those numbers. We would, we are looking at bringing in new machinery and then of course we’ll be able to do a lot more, but also that helps us because then we get economies of scale. So the more machinery we have, the more output we get and therefore our unit costs also drops. So again, I wouldn’t say it’s like, it’s a simple equation where the bigger you grow, the lower your cost becomes. It does kind of stagnate at some point before us were acquired, you know we’re in the infant stage so to speak. And so we’re finding that sweet spot where the more output we get, you know, the more we can split our costs across that and become a little bit more competitive, but not enough to still fight the illegal imports and the imports and all sorts of stuff.

Sam:                                      19:00                     Okay. What sorts of startup capital was necessary to, to get this going? You don’t, you don’t need to sort of say specifics, but just rough figures.

Vidyesh:                              19:12                     We put in about, I think $750,000 into the entire project. Yeah. And then of course now it will be, as we grow, we’ll be putting in more and more. Yeah.

Sam:                                      19:23                     And so you’ve sort of said you’ve got the double whammy of high quality and affordable price. Does that mean your margins are quite thin?

Vidyesh:                              19:35                     Yeah, right now our margins are thin because we’re still you know, our brand is still quite new in the market, so we’ve got to stay lean. We’ve got to keep our prices low so that people, you know, sort of accept the product. And then with time, I think once it’s been accepted, they will turn around and say, okay, we’re confident in the plan will buy it. So the price sensitivities will remain, but our penetration will be higher basically. And, and then there’s a knock on effect into the neighboring countries of Uganda and Tanzania.

Sam:                                      20:11                     Okay. How do you brand yourself?

Vidyesh:                              20:14                     H and F.

Sam:                                      20:14                     H and F?

Vidyesh:                              20:15                     H and? F, yeah. So we’ve got a couple of other brands in the pipeline as we’re growing, we’re bringing in new machinery. We are going to be launching a couple of new designs, different types of socks. Like I said, predominantly right now we’re just doing schools. So our school brand is H and F, but you know, when we do launch our new products in the pipeline, they are going to be new brands coming in for those. Yeah.

Sam:                                      20:37                     How did you land on H and F as your?

Bashil:                                   20:40                     It’s our grandparents initials.

Sam:                                      20:42                     Your grandparents are friends as well?

Vidyesh:                              20:44                     They might’ve been, we’re not too sure, I don’t think so. I don’t think they are. Yeah, we are. We are at some, there is some connection between the two families but yeah,

Sam:                                      20:54                     But why did you choose your grandparents initials and not your initials?

Vidyesh:                              20:59                     So again, okay, now I guess it’s an important point that we, like we discussed earlier, our families have been in business in Kenya for, you know, mine since the 1940s and yours around about the same time before that. Yeah. So because of that there is people, I wouldn’t say people, but a lot of businesses are aware of who our families are. And so we wanted to capitalize on that from the marketing point of view, from sort of market penetration point of view because it’s easy to leverage on that and you know, and get cross sells and new introductions. So that was kind of the thinking rationale behind…

Sam:                                      21:47                     Anytime your grandkids will be using your initials. Okay. So what, so you’re currently making 2,400, you have the ability to make 2400 pairs of socks a day. What happens when they leave the factory? Where do you…

Vidyesh:                              22:09                     Yeah, mainly it’s retailers and distributors and wholesalers and then they turn around and sell it on to, so the retailers of course and customers, but the wholesalers will then, it might go to another wholesaler or another distributor by the time it gets to retail, but ultimately we’ll end up at a retailer.

Sam:                                      22:31                     Retail is just like a shop?

Vidyesh:                              22:31                     Yeah.

Sam:                                      22:35                     Has it been straightforward to get into these retailers?

Vidyesh:                              22:39                     It was difficult in the beginning. The market in Kenya is not one where, you know, if you offer something that’s cheaper at a lower quality, sorry, at a better quality it’s not necessarily that they will go for it. So like I was saying to you earlier, our product is the cheapest in the market right now and it’s the best quality. So we’re offering a Mercedes Benz at the price of a Toyota but you know, the market here is a bit different in the sense that they’re skeptical. So it takes time to sort of assure them. And it’s not necessarily that it’s the owners of the businesses that we’re selling to. It’s more the end market user.

Bashil:                                   23:24                     The reason why is because it’s very seasonal. When school starts, parents by socks for their kids for school, so when they go to shop, the process of them going to that shop and it’s really hard for the shopkeeper to explain to them that this is a better quality. It the one that’s at the shop I get at that it’s really difficult for them to explain which one to go for.

Vidyesh:                              23:51                     They’re used to seeing a particular brand, which they’ve seen there for years, and then they’ll just pick up that brand and go with it. The other thing is also, you know we use materials that are a lot nicer, a lot nicer to feel, they’re more comfortable to wear, but like Bashil said, you know, they don’t always have time to showcase or explain that, but equally, you know, when, when they might pick up our socks, again and compare it to someone else’s but it’s not, it’s, it’s the decision. The thought process is in, you know I’d say a very normal one where you know, you see something that’s, it feels nice if cheaper and you’d go for it. So because of that, it was very difficult for us in the beginning. We also did contract manufacturing, which meant we couldn’t launch our brand immediately after we started the business. So we did a contract manufacturing for about a year.

Sam:                                      24:54                     Why did you decide to do that?

Vidyesh:                              24:55                     So for us it was good it was one of those things where anything and everything that we made, we’d sell it to one buyer and they would pick up everything that we made in our factory. So it was a good sort of start, a good boost for us. Of course then we faced our own internal challenges and we said we need to get our brand recognized as well you know, customer concentration, there’s all sorts of risks that come along with them having one big customer. So we wanted to just diversify our risks and we said that it’s now, we’re now ready to sort of go in with our own brand and sort of hit the market hard.

Sam:                                      25:36                     How did your buyer take that?

Vidyesh:                              25:38                     They still buy from us, but they, it’s now just on a purchase order basis as opposed to, yeah.

Bashil:                                   25:45                     Theres a lot of product awareness.

Sam:                                      25:49                     Yeah, I’d say it must be a difficult one because as well, I mean even though the socks are going to be worn by the kids, that’s right. It’s still the parents who are going to making those decisions. I mean, stressful, buying uniforms and stuff for your kids, I imagine is very stressful experience and your side, Oh my God. Just like make this as easy as possible. I’ll have what I had last year, get in, get out. I’m interested in how you try and break that, how you try and break that mold. Like can you go in and do like demos at schools or like what, what’s what are some ways to try and break that?

Vidyesh:                              26:27                     I think, I think that is one of the ways that we could do it or anything is then we are, we’re kind of limited with time and we’d be too stretched out if we went to individual schools trying to sell the product, we will be sharing the products to the students who may not necessarily have a say but with time what’s happened is that the, like I was telling you we’ve leveraged on our network to give that assurance of a very good quality product. They will then turn around and push our product. So the historic way of kind of selling the product without, you know, really taking time to teach or educate the parents on what, what, what’s available. They starting to do that slowly. And then, you know, the first time a parent buys a sock you know, they’ll see that it lasts a lot longer. It’s a lot more comfortable. So then they’ll buy it again. And what we found then is that the more shelf space we were getting, the more people would, they’re getting, they’re warming up to our brand.

Sam:                                      27:41                     Signals?

Vidyesh:                              27:42                     Yeah. It’s still difficult, you know, having said that, you know, even though we’ve got now bigger market share than we had last year, it’s still difficult for us to then fight the big guys because their brands are very strong in the market. They’ve been in the market for 20 years or so. So you know, it’s, there’s always that challenge when a newbie comes in to sort of persuade the consumers to shift but with time and with a bit of education that will change. The thing is, as a, as a new business, we don’t undertake any marketing, you know, adverts or commercials it’s quite expensive. We try and stay as lean as possible. So we’re just letting the brand and the quality speak for itself but yeah, it’s like Bashil said people are accepting it. It’s getting better and we’re seeing that and it’s, it’s, it’s getting better.

Bashil:                                   28:42                     The main season in December, January, so about, I think two, three seasons.

Sam:                                      28:46                     School socks were you’re sort of first thing, do you think you’ll soon start going into other types of socks?

Vidyesh:                              28:58                     Yeah, I mean we’re definitely gonna try it wouldn’t be a big market for us.

Sam:                                      29:03                     What would it be?

Vidyesh:                              29:05                     So socks for the mass market. So for if you go to like you know, high end retail stores, we might have a couple of very high quality socks in there, but we won’t be able to manufacture something that will be bought by the mass market, you know, anyone that needs socks, we’ll be like, Oh, we’re going to buy H and F socks. No. That’s going to be very difficult, purely just from a price point of view you know, even a difference of 10 shillings for a buyer here is, it’s a game changer.

Sam:                                      29:38                     Is the plan to sort of do do socks until we’ve nailed it and then go into other product lines or we begin to look at other product lines before you’ve…

Vidyesh:                              29:49                     Yeah, we’ve actually already started looking at other lines. It’s just the thing is we don’t want to jump too quickly. We want to make sure that this business is doing as well as it can and then it’s kind of becomes a cash cow for other businesses that we invest in.

Sam:                                      30:08                     What’s you don’t have to disclose, but you, how do you think about what you do next? Do you think about growing trends in fashion or do you think about the types of products that people buy as incomes rise or similarities in the production process to socks?

Vidyesh:                              30:26                     Not really, actually. It’s just for what the market requires.

Sam:                                      30:30                     How do you gauge that?

Vidyesh:                              30:32                     Just understanding the market. So market research, basically speaking to people, how they’re spending the monies. I mean simple things. Just like us last week I was speaking to a couple of guys who were painting a property ours and yeah. It’s like asking them, you know, where do you spend most of your money and how much do you end up saving? And from what you save, what are you spending your money on? So just understanding the, what striving consumerism or and if there’s a better word to use, yeah.

Sam:                                      31:00                     Aspirational?

Vidyesh:                              31:00                     Yeah.

Sam:                                      31:03                     Okay. So you basically based on that, we think that…

Vidyesh:                              31:06                     If there’s a gap in the market somewhere where we can do something a little bit better than what is being offered, then that’s something that we would, yeah.

Sam:                                      31:14                     Okay. In terms of what makes a better sock, like what are the, what are the characteristics you mentioned, you mentioned raw materials.

Vidyesh:                              31:24                     Yeah. So I mean when you wear socks, you, for anyone that wear socks, you know, you don’t want to wear socks that get sweaty. Yeah. You want something like, yeah. And it’s gonna last, no marks on your legs.

Sam:                                      31:39                     I hate marks on my legs, yeah. How many sort of distinct processes are there to go from raw material in to socks out, is it like first you do this then this then this then you’ve got sock, like how many of those things are there?

Bashil:                                   32:00                     So first the machine spins the yarn to produce the product.

Vidyesh:                              32:05                     Knitting.

Vidyesh:                              32:07                     And, and it goes, so, Oh yeah, it’s all open. Then it gets linked with another machine, after that it gets checked, if there’s any coils or like if it’s perfect, the yarn is perfect. And after that, it gets boarded and steamed and after that it gets packed.

Sam:                                      32:32                     It gets steamed?

Bashil:                                   32:32                     Yeah, for the shape.

Sam:                                      32:36                     Oh, okay. So the same idea.

Vidyesh:                              32:37                     So the fibers in the socks then basically you get sort of glued together and this improves their elasticity and also the life of a sock. So it doesn’t loose shape very quickly. So yeah, there’s a…

Bashil:                                   32:54                     Many companies have this process.

Sam:                                      32:56                     Many companies do you have that process? And that means that they are…

Vidyesh:                              33:06                     Say cheaper.

Sam:                                      33:07                     Elastic. And what is the raw material? Is it wool?

Vidyesh:                              33:11                     No. So you’ve gotten many different types of raw materials. You can have, wool is one that you couldn’t use. You can use cotton, you can use nylons, you can use polyesters, you know, you can use acrylic yarns. So there’s a lot of synthetic yarns, which are the polyesters, nylons, acrylics, and then you’ve got the natural ones, which are cottons and you know, you’ve got bamboo and you’ve got…

Sam:                                      33:37                     Bamboo?

Vidyesh:                              33:38                     Yeah.

Bashil:                                   33:42                     It’s like really, it’s one of the best right now.

Vidyesh:                              33:42                     Yeah. So we are, we’ve actually just trialed bamboo socks and we’ve got some really nice socks that we made for the two of us with bamboo yarn.

Bashil:                                   33:50                     It’s expensive.

Vidyesh:                              33:52                     But it’s also more…

Bashil:                                   33:53                     Really good quality.

Sam:                                      33:54                     So they just sort of take, cause bamboo’s quite hard, do they sort of soften down?

Vidyesh:                              34:01                     Yeah, yeah. Yeah. So they break down they pulp it up and then they from fibers, then they spin it into yarns. The thing is with bamboo, you get very short fibers. Whereas like with cotton you can have really long fibers. So harder to make bamboo socks. It’s not necessarily the shortest, but it’s just it’s a harder yarn to make.

Sam:                                      34:25                     Okay.

Vidyesh:                              34:25                     Yeah.

Sam:                                      34:26                     And what are the advantages of bamboo socks?

Vidyesh:                              34:27                     So, you know, like the world is becoming more and more environmentally conscious. So for example, cotton requires more water to cultivate. So the same amount of cotton if you take a kilo of cotton yarn and kilo of bamboo yarn, bamboo yarn requires less land and less water.

Sam:                                      34:48                     Okay.

Vidyesh:                              34:50                     Yeah.

Sam:                                      34:50                     In terms of the, the wearer,

Vidyesh:                              34:54                     It’s just like cotton, if not better. Yeah. You can’t really tell like, if you give it to someone.

Bashil:                                   35:00                     It absorbs sweat much better.

Vidyesh:                              35:00                     Yeah.

Bashil:                                   35:00                     It’s breathable.

Vidyesh:                              35:04                     Yeah. If I gave you a pair of socks between cotton and bamboo and I didn’t tell you what was what, I don’t think you’d be able to tell the difference. But they both nice. They both feel good on the feet breathable, comfortable. One’s obviously more environmentally friendly than the other.

Sam:                                      35:22                     And so, just a few more questions, if that’s alright. That’s interesting, since you, so you said you’ve been going for about two and a half years, what have been some of the biggest insights you’ve, you’ve had since starting?

Vidyesh:                              35:37                     Wow.

Bashil:                                   35:38                     When we got feedback compared to our competitors, they tell us that the customers like, now just want to buy our product. It’s like a good feeling.

Sam:                                      35:50                     Yeah.

Vidyesh:                              35:51                     Yeah, I think, I think like again, with the insights, you can break it down into two parts. Yeah, you can for us as a learning experience and you can, I can segregate that into a silo of doing business better. And then also on the other side where we get customer feedback. And so like Bashil said, we’ve got very good product and everyone buys it, Will buy it again and keep buying it. And there’s not a single person that’s ever given us negative feedback on our socks not one that we can recall, like that’s said that to us directly and that’s why we’ve been able to grow year on year. And then on the other side it’s learning about the business and learning about the economy. Cause like, you know, the two of us, we had no experience of running a business in Kenya and so that was a lot of fun. It can get very frustrating at times as well. So I would say that, you know, we discussed well like being in Rwanda, being in Tanzania and being in Uganda, being in Kenya. And if you look at the sort of data which is available on the internet, you know, Rwanda is easier to do business in than Kenya and it’s not necessarily that Kenya is a bad place to do business. It’s just, it has its own challenges. So for us, like there was a lot of learning, you know, how to deal with the bureaucracy, how to get the best out of our people of all of our staff, you know, how to motivate them better.

Sam:                                      37:22                     I mean, have you found any interesting ways to motivate people?

Vidyesh:                              37:25                     I think for us the main thing is just treat them that the way you want to be treated. I think we just keep them happy. We keep them you know, when there’s something good we can talk about it.

Bashil:                                   37:40                     Of course add some incentives like once they hit theior targets, they get their bonuses.

Sam:                                      37:43                     Okay. And so would you say when something’s good it’s in like we nailed production today, there were no difects.

Vidyesh:                              37:48                     Yeah. I mean, you know, the more you talk about something that goes well, then everyone just naturally feels better about it. They feel motivated.

Sam:                                      37:58                     And in terms of the incentives, that’s what are some of the targets or metrics that you…

Vidyesh:                              38:04                     So we’ve got targets that they have to hit every day for each department, you know, packing, plating trimming, linkingknitting itself. So, you know, it can be as simple as giving them a kilo of flour. So either as simple as that.

Sam:                                      38:26                     And is that explicitly made known as in if you beat your target today, you’re getting a kilo of ‘unga.’

Vidyesh:                              38:33                     It’s not on a daily basis, but yeah, we, they are aware of it. The thing is…

Bashil:                                   38:39                     You can’t just do it for one day, you know, if they hit their targets at least 80% of the month, then they’ll be rewarded with the ‘unga’ or bonuses.

Vidyesh:                              38:53                     Yeah. They get bonuses, end of month bonuses, all of that sort of stuff.

Sam:                                      38:58                     So that sort of gets them.

Vidyesh:                              39:00                     Yeah. Yeah.

Sam:                                      39:01                     Has there been anything that surprised you in running the business?

Vidyesh:                              39:05                     I think for us it was just more how we managed to get into the market and like we’ve hit it really hard and then, you know, we were bullied when we started, you know, there were people who discouraged us from starting, like, why you’re putting up a socks factory. You know, you won’t know. You don’t know what you’re doing you, you won’t be able to last. You know, this is not a job for you guys, but all of those things. And it happens, you know, even with our customers, you know, at one point they said, you know, don’t buy these guys’ socks but we overcame that and, you know, we hit that, we passed that hurdle. And I think for us that was quite nice. The others, I think the other positives, I mean, there’s a lot of course, like the growing the business, you know, seeing our turnover grow year on year that was naturally enough forecasts anyway, but you know, to see that as a tangible result and that’s also quite satisfying.

Sam:                                      39:59                     And if we were to come back, let’s say that again a couple of years time, well, what do you think H and F would be looking like then?

Vidyesh:                              40:05                     So, yeah. Socks. We want to be the market leaders in East Africa we’re kind of making big strides in…

Sam:                                      40:11                     Just how many songs do you think is, is possible to sell in a year in East Africa?

Vidyesh:                              40:17                     In East Africa? I mean, I wouldn’t be able to give you a…

Sam:                                      40:19                     Maybe 13 million pairs.

Vidyesh:                              40:22                     I guess to put this into perspective, right Primal across the whole of Europe sells, there’s a number that I read about 200 million pairs of socks.

Sam:                                      40:37                     200 million across Europe, okay. So imagine, I’m trying to think.

Vidyesh:                              40:42                     So that’s one company.

Sam:                                      40:43                     Yeah. How many pairs of socks do you buy a year?

Vidyesh:                              40:46                     So on average people will have like 10 to 15, well, I used to buy 10 to 15 pairs of socks when I used to live in the UK and that generally lasts you. But yeah.

Sam:                                      40:56                     And then there’s, what the general population?

Vidyesh:                              40:58                     So in Kenya there’s 44 million people. 48 million.

Sam:                                      41:01                     So across the region, you’ve got 150 million?

Vidyesh:                              41:05                     Across the region. Yeah, probably about a hundred million. Ethiopia, I mean, you take that Ethiopia, so you just look at Uganda, Tanzania.

Sam:                                      41:12                     Kenya and Rwanda.

Vidyesh:                              41:14                     Yeah. Yeah. Easily Over a hundred million I’d say. But again, you have to remember that not everyone wears socks. Yeah. So you’ve got to, it’s different market segments that you need to then kind of break down into.

Sam:                                      41:33                     Is this the sort of thing where people buy, they buy it fairly regularly so everyone buys more than that on buys. So it’s potentially hundreds of millions of pairs of socks. Obviously you kind of reduce that down, but it’s not like you’re selling some niche products which people are going to buy once and they never buy it. I can see how if you have that brand, it’s something which gets…

Vidyesh:                              41:55                     It’s something that will keep growing. I think for us more it’s like we want to really get into the export market getting into like shops in the UK, Europe, US, Australia. For us that would be great. I think that’s where now we can really hit volumes. I mean, we can do it in East Africa but it’ll, it’ll be a lot more difficult than…

Sam:                                      42:18                     Yeah. If you’ve got your export markets so cool. And people who are listening, how can they learn more about H and F and sort of the journey that you’re on?

Vidyesh:                              42:28                     Okay. We was just in the process of developing a website but coming by social Kenya. Yeah, we’ll have a website up in a couple of months. I mean, I’ll share that with you at we don’t really, like I said we don’t really focus heavily on marketing but we relying on just brand awareness and the customer loyalty. Now the customers that we have they’re going to keep growing, but yet in with time we’re going to invest in, you know, social media marketing, have our website up. Just right now our market is quite small in terms of the specific market that we’re focusing on and they don’t necessarily use the avenues that we’re discussing. Where in the future we will have these things. Yeah.

Sam:                                      43:18                     Cool. Well, Vidyesh, Bashil, thanks so much.

Vidyesh:                              43:21                     Yeah, thanks.


Cracking the nut industry: how Kenya adopted the world’s most valuable nut, with Charles Muigai


Do you know what the world’s most expensive nut is?

It’s the macadamia nut.

Similar in shape and colour to a chickpea, but up to twice the size, it’s originally from Australia and is now grown in several tropical locations around the world.

In Kenya, the first trees were grafted and planted in the 1970s with a few disparate growers and aggregators each individually trying to generate a market.

Ten years ago Charles Muigai founded Nutpak an industry body for nut processors in Kenya.

They deal with peanuts and cashews too, but the real business in macadamias where they represent Kenyan producers both at a national government level and internationally.

Charles and I chat about all angles of how this industry is growing in Kenya including the minimum “farm gate” price set for macadamia farmers, the process by which they are packaged and ultimately exported, and lessons other burgeoning industries can take for their role on global stage.


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Sam:                                      00:08                     Intro

Sam:                                      01:58                     Cool. So we’re here today with Charles from nut pack, Charles welcome to the show.

Charles:                                02:03                     Nice. Thank you Sam.

Sam:                                      02:06                     And so to get started, can you tell us a bit about you and a bit about Nut Pak?

Charles:                                02:10                     My name is Charles Muigai. I’m the chief executive officer of Nut processors association of Kenya. The association that is the umbrella body for industries that are processing macadamia, cashew peanuts and also adding value to the same for the end market. The industry is as old as, say 45 years old. But the initial years it was a more of a monopolistic industry. But towards the year 2005 more players came into place and the industry from then started to expand. By 2009, there were four processors and based on the competition and the competitive lobby of the industry, there was need to consolidate. And this is when, now we founded Nut Pak or nut processing association of Kenya, in 2009. And the main thing was to create a platform that one will back, will support production and make the industry more sustainable in terms of what it produces and through our smallholder farmers and also to interact globally. So it was now back and forward from production to the marketing and also placing the Kenyan product at the global level as a competitive product that can compete alongside South African or Australia. The major driver of the industry in Kenya is macadamia, however, peanuts and cashew nuts are still allied to the same because most of these processes are composite and, they do these three nuts. So this platform has, over the years, engaged the government about policy influence also advocacy. And in 2009, we managed to lobby the government to put a ban on export of unprocessed macadamia nuts and cashew nuts. And that has seen the industry grow five fold because at that point the industry was producing around 10,000 metric tons of macadamia. But right now we are towards 45 to 50,000 metric tons. So, and the plantings across the small holder farmers in Kenya is growing by leaps, then it’s growing very fast.

Sam:                                      04:48                     Very good.

Charles:                                04:49                     So what you can say, that the consolidation of the industry and this platform has done a lot to bring the industry to the limelight because hitherto the registration of this organization, not to many people knew about macadamia. Right now as we speak, we have 27 licensed processors. So you can see from 2009 from 4 to 27, that tells you a story that many people came to understand the industry, found it attractive. They have come in. But now the next challenge is how to create a sustainable industry.

Sam:                                      05:25                     Yeah. So we’ll perhaps go into some of those a bit later in the interview. So just to be clear, Nut pack is a, like an industry body like you said. Yeah. So you basically represents the process but not processes that exist. And whereas before it might be difficult for one individual company to go and lobby the government, when they, when they come as part of a group, you then have much more power.

Charles:                                05:49                     Have legitimacy and the voice.

Sam:                                      05:51                     Exactly. Is it, out of interest, is your, is your background in nuts?

Charles:                                05:56                     No.

Sam:                                      05:56                     Alright. How did you, how did you come into it?

Charles:                                05:59                     I would call myself an agribusiness you know, consultant.

Sam:                                      06:04                     Okay. Alright.

Charles:                                06:04                     I’m an exert in trade and also agribusiness.

Sam:                                      06:07                     Sure.

Charles:                                06:07                     So, and I think that at that point, that’s where I came to organize a workshop for the industry. And…

Sam:                                      06:14                     Why did you choose nuts?

Charles:                                06:17                     Well, it just happened by chance. I was facilitating a workshop on sustainability of the industry, sponsored by their ministry of agriculture as a consultant. And then the thing we discussed then was that why should we look at it as a hostile competition arena? But I said it can be complimentary again. So it’s a question of how you look at it. And I think the wisdom that revealed then was that we can bake a bigger cake and then we would get a healthy slice of it.

Sam:                                      06:47                     Yeah.

Charles :                               06:47                     So and that is how, now they, want called the focys of NUT pak is, create a more sustainable industry, stimulate more plantings, stimulate more production, and then everybody gets a share of a sizable amount of produce.

Sam:                                      07:05                     So basically you said you should do this. And they said, go on the Charles, you do.

Charles:                                07:12                     And here I am, 10 years down the line, I’m still doing it.

Sam:                                      07:14                     Very good. Okay. So for people who are perhaps unaware could you give like just a brief overview of, of like the Kenyan, Kenya’s’s history with nuts. So you mentioned macadamia cashew and peanuts. So those are the three. Historically, those always grown here or have they been a recent recently like…

Charles :                               07:35                     Macadamia was first introduced in Kenya by an Australian, Bob Harris early seventies, in Thika.

Sam:                                      07:46                     Thika is like an hour from Nairobi?

Charles:                                07:48                     Yes, an hour from Nairobi. And from there the first plantings were not commercial but eventually the commercial production started, by around 1974. That’s when the fast company, the Kenya nut company started processing macadamia.

Sam:                                      08:05                     Okay. And what does it look like? So nuts are grown on trees or are they not plants, is they, how are they when you say that the first macadamia nut were brought here…

Charles :                               08:17                     It was brought as a seed, a seed nut.

Sam:                                      08:19                     Brought as a seed, and then…

Charles:                                08:20                     Then it was planted. And then multiplication through propagation and grafting, that now gives, multiplies the seedlings. So macadamia is a tree.

Sam:                                      08:32                     A tree, Okay.

Charles:                                08:33                     Right.

Sam:                                      08:33                     Is it a big tree?

Charles:                                08:34                     It’s a big tree yes. Is a sizeable tree. So medium, medium sized tree.

Sam:                                      08:38                     Okay.

Charles:                                08:38                     Yeah. That can produce even up to 50, 60, 70 kilos depending on how you feed the tree. Is a tree that has a lot of longevity.

Sam:                                      08:47                     Okay.

Charles:                                08:48                     In terms of the tree can span 50, 60 years still in production. So once you farm the siblings, it takes around five, six years for optimal production.

Sam:                                      08:58                     Okay.

Charles:                                08:58                     You’ll get enough produce from the sixth, seventh, eighth, ninth, 10 year, all the way to maybe another 50 years the tree will still productive.

Sam:                                      09:05                     Okay. So the first macadamia trees were planted when Bob, was it Bob Harris, when he came, they are still producing.

Charles:                                09:14                     They’re still producing.

Sam:                                      09:15                     Yes.

Charles:                                09:15                     Yes. And they’re still okay. And what’s sort of, and then eventually the tree will die?

Charles:                                09:19                     Eventually the tree will die, yes as…

Sam:                                      09:20                     As altruistic.

Charles:                                09:23                     Yeah.

Sam:                                      09:24                     Okay. And so what does it with the macadamia nuts, is it like a pod? How does, I’m trying to visualize whether or not it’s all on the tree.

Charles:                                09:32                     No, they’re not. It’s a fruit. Let’s say it’s a fruit.

Sam:                                      09:35                     So basically, so you’ve got a macadamia tree. It has these, so imagine that it’s a fruit that’s growing on it. And then within that fruit, when you crack it open, they’re really, they’re nuts. Similar thing with cashews?

Charles:                                09:45                     Yes, similar thing with cashews. Cashew is an apple, is an apple like, but with an offshoot of a nut also that you you crack again to get the kind of insight. Yeah.

Sam:                                      10:01                     Yes. And then what do you do with the Apple?

Charles :                               10:03                     Well, in other places in the world, especially West Africa, I have seen they’re making apple, you know, cashew apple juice.

Sam:                                      10:10                     Cashew apple juice?

Charles:                                10:11                     Yes. Making that they are also making cashew wine…

Sam:                                      10:15                     Really?

Charles:                                10:15                     From the apple, yes. So…

Sam:                                      10:17                     Do you do that here?

Charles:                                10:18                     No, we don’t do it here.

Sam:                                      10:19                     Why not?

Charles:                                10:20                     We are not doing it because we don’t produce enough cashew. There are challenges that are particular to where it grows, especially at the costs. They think…

Sam:                                      10:29                     Cashews grow at the coast?

Charles:                                10:29                     Yes, majorly grows at the coast. Although we have some belts in the Eastern province in Tharaka Nithi county where we also growing some cashew nuts.

Sam:                                      10:40                     What is a reason why they grew at the coast?

Charles :                               10:43                     I would say because of the Sandy soil. It’s also a coast base crop, I think that’s the ecological zone for it? Yes. So are there other parts in East Africa or Africa where…

Sam:                                      10:54                     It’s still growing at the coastline?

Charles:                                10:56                     If you come from Kenya, Tanzania all the way to Mozambique, you will find, yes. If you go to the coast of West Africa from Cameroon there you will goal the way to Senegal, are not native to…

Sam:                                      11:16                     So macadamia is not native to Kenya. It’s native to Australia.

Charles:                                11:19                     Australia.

Sam:                                      11:20                     So they’ve come, are there any…

Charles:                                11:21                     And Kenya is a first African country to start macadamia production.

Sam:                                      11:26                     Are there others that have now followed.

Charles:                                11:28                     Then South Africa followed and then other smaller countries. Mozambique, Malawi, Zambia, Zimbabwe, Rwanda have now started and Uganda is coming up also.

Sam:                                      11:42                     Yeah.

Charles:                                11:42                     But Kenya is the third major producer of macadamia in the world.

Sam:                                      11:48                     So Australia…

Charles:                                11:48                     Australia number one, South Africa number two or thereabout, Kenya number three. Then we have other countries like Guatemala, we have Brazil, we have Vietnam. They also grow macadamia.

Sam:                                      12:00                     And so they’ve all taken this, this seed from Australia and taking it and began their own production in other parts

Charles:                                12:08                     In other parts of the world, yes. Yes.

Sam:                                      12:10                     Okay. So it takes about, so from the, it’s quite interesting. So 1970, this is when the first macadamia nut came and since then it’s been sort of flourishing who, who is growing the macadamia nuts?

Charles :                               12:24                     Right Macadamia in Kenya as opposed to the rest of the world, especially the big two South Africa and Australia. They grew macadamia through plantation, large scale plantations. But in Kenya we are majorly on smallholder scale and these small holders, you’re talking of a farmer with 10 20 trees, whoever is doing it more is maybe putting one Hector or two hectares, but majority you you’ll see it’s a number of trees that is a main denominator here as in we have 10, 50, 30, 40 or something like that.

Sam:                                      13:02                     Yeah.

Charles:                                13:03                     And macadamia grows within the central Mount Kenya region.

Sam:                                      13:06                     Okay.

Charles:                                13:07                     That is the home of macadamia.

Sam:                                      13:09                     And so what happens, so the, the farmer, smallholder farmer, they will buy some macadamia seedlings and develop a tree and then five years later it begins to…

Charles :                               13:22                     Yeah. What happens is that most of the processors in their own interests propagate seedlings.

Sam:                                      13:28                     Okay. So the process. Got it, so it’s not the farmer that starts the process. It starts the cycle…

Charles :                               13:35                     It is the processor who propagates the seedlings and then they avail the seedlings to the farmer at some price. Then the farmers, now plant the trees take care of the trees. Then the processors of take the produce from the farms process package.

Sam:                                      13:51                     Yeah.

Charles:                                13:52                     Export.

Sam:                                      13:52                     Export.

Charles:                                13:53                     Yes. The main export destinations being Europe and the US.

Sam:                                      13:58                     Got it.

Charles:                                13:59                     Though, also, Japan is also a buyer.

Sam:                                      14:01                     Really?

Charles:                                14:01                     Yes.

Sam:                                      14:02                     Japan. Is that a recent thing? Japan wanting to buy macadamia nuts?

Charles :                               14:07                     Yes, it’s a traditional buyer of macadamia since macadamia processing started in Kenya.

Sam:                                      14:11                     Okay.

Charles:                                14:11                     Yeah.

Sam:                                      14:12                     Okay, so the main agents to sort of the main person to get this thing going is macadamia nut processing plant. Nobody said, right, we’re going to set us up and then right. In order for us to process, we need to get some macadamia so we’re going to go out into the local community and give people these trees to them.

Charles:                                14:33                     Yeah. I would call macadamia processors the epicenter or the business as in the business both ways oscillates or revolves around them. In terms of, as I said, the production, they reach down or upstream, whichever you want to call it. And they go down, shoot to the market after they process. So they are in between.

Sam:                                      14:56                     Got it.

Charles:                                14:56                     Meaning that there needs to be, and this is what the association is up for, to make sure that the farmer and the processor are tied to the hip. They must collaborate because the processor doesn’t have his own orchard. He’s relying on what the smallholder farmers producing. The smallholder farmer doesn’t have his factory to process so the two must work together. Right. So it’s a partnership of win-win and that is why now the processors find it in their interest to propagate the seedlings, supply the farmers, create some intimacy with the farmer to make sure that the farmer is supported on production and best practices. And then the processor will off take the produce right from the farmer through different buying stations across the farmlands. And then after that they will bring to the factory process and then forward the processed material now to the end markets in the US Europe or wherever.

Sam:                                      15:59                     Very good. Okay. What does, in what state do the processes by the macadamia nuts, as in are they still shelled? They still in their shell?

Charles:                                16:11                     Yes. They macadamia. Macadamia is ideally supposed to drop on the ground when it’s ready for harvesting.

Sam:                                      16:17                     Okay.

Charles:                                16:18                     Yes.

Sam:                                      16:18                     The farmer just goes around and collects.

Charles:                                16:20                     Yes. They’re supposed to drop.

Sam:                                      16:21                     How many seasons does it have exactly once a year? Does it happen all year around?

Charles:                                16:26                     There are trees that are all year round, but there is a peak and the peak season for macadamia is between April, June, July and August. Then we have a short crop. November, December. Yes. So, but basically what happens is that the farmers now will consolidate the produce, they will remove the outer casing. We call the, the outer casing, the green outer casing, so that now they, they, they can now produce the nut itself, right. Once they get the nut, the nut itself is what the processor will buy.

Sam:                                      17:03                     So the farmer will remove the outer pack. The outer casing?

Charles:                                17:06                     Yes.

Sam:                                      17:07                     Okay. And then take a, take a bag and go to the processor.

Charles:                                17:12                     They will go to different buying centers that are located within the villages.

Sam:                                      17:19                     Okay.

Charles:                                17:19                     Who watch are sponsored by respective buying companies.

Sam:                                      17:24                     The smallholder farmers, they can choose which processor…

Charles:                                17:27                     Which processor to sell to, they’re at liberty to sell to any, they are not bound by one. However, they are processors who have contract farming arrangements with particular farmers, especially those farmers who are producing organic macadamia. So they have a pact between the two.

Sam:                                      17:48                     And if they were to do contract farming, the processor would say I promised so long as they meet certain quality,

Charles:                                17:55                     Yes,

Sam:                                      17:55                     I promise…

Charles:                                17:57                     They’ll put the parameters in.

Sam:                                      17:58                     Yeah.

Charles:                                17:59                     And then they’ll put the price index for it and then the processor will go for the nuts probably the nearest point. Where the farmer is.

Sam:                                      18:10                     Okay roughly how much does it cost for, let’s say, kilo of unprocessed macadamia?

Charles :                               18:17                     We call it farm-gate price for the clients, and farm-gate price for macadamia in Kenya is, I think the closing price for the season 2018, 2019 was $2

Sam:                                      18:32                     $2? So $2 per kilogram?

Charles:                                18:35                     $2 Per kilogram.

Sam:                                      18:35                     Is the Farm-gate price. Okay. So the, the processes there, if they want to buy a hundred kilograms, they’ll pay $200 and they got up cooked

Charles :                               18:47                     And that makes macadamia the most lucrative crop in this country. Yes.

Sam:                                      18:52                     It’s a pair of kg, basis,

Charles:                                18:54                     On per Kg business, is the most lucrative.

Sam:                                      18:56                     And why. Is that? Just because it’s…

Charles :                               18:59                     It’s just purely an export. Next port. It’s 97% export. Okay. So what I can tell you is that the global production of macadamia, is under 220,000 metric tones.

Sam:                                      19:12                     Okay.

Charles:                                19:13                     Yeah. And it represents 2% to 3% of the tree nut or the tree nut family.

Sam:                                      19:24                     What do you mean the tree nut family them.

Charles:                                19:25                     Any nut that grows on the tree cashew included, peanutnut, walnut yeah.

Charles:                                19:32                     So it’s 2%, 3%. Okay. So the farm is Ivanka is $2. What are the main things that the processor is doing?

Charles:                                19:41                     The main thing is that because the farmers don’t have that technology to, to preserve macadamia at the farm level because macadamia is sensitive, you need to dehydrate.

Sam:                                      19:53                     Okay.

Charles:                                19:54                     To remove moisture from it. So the first of the first thing that we need to do is to remove the moisture. Most of the times that farmers will give their produce at 20 to 30% moisture content and the processor has to drive that down to 1.5.

Sam:                                      20:09                     And how do do that?

Charles:                                20:11                     They do it through dryers , there are dryers that are blowing out. I could be the first year with a fund years on boilers and all that to kind of expel the excess moisture in the nut to around 1.5.

Sam:                                      20:23                     But what happens then? So they’ve be en dried out. What’s the next step.

Charles:                                20:26                     Then? The next step is a cracking crack.

Sam:                                      20:30                     Cracking?

Charles:                                20:30                     Cracking. Yes. Cracking is now. Shelling, removing moving the shell.

Sam:                                      20:34                     Okay, so you drive them whilst they’re still in their shell.

Charles:                                20:36                     Yes. You dry while the’re still in shell.

Sam:                                      20:39                     I would’ve thought it makes sense to do it.

Charles :                               20:42                     No, no, no. It will change its biochemistry if you are to break it and then you’ll be roasting it and the roasting is the last stage.

Sam:                                      20:49                     Okay. I’m getting ahead of myself. Alright, so then you crack the shell.

Charles:                                20:54                     Yes. You crack the shell and then from there you start the grading process. Yes. Remember you have bought from everywhere, macadamia is graded according to sizes, they are like seven or so grades from stair zero to stair seven.

Sam:                                      21:13                     Okay.

Charles:                                21:13                     Yeah. Well that is Kenyan, but the other origins that have different classification for it.

Sam:                                      21:19                     And the basic thing they’re looking for is like size.

Charles:                                21:23                     Size is the basic premium size.

Sam:                                      21:26                     The bigger, the more expensive?

Charles:                                21:27                     The bigger, the more expensive.

Sam:                                      21:28                     Okay.

Charles:                                21:29                     Yeah.

Sam:                                      21:29                     So you get graded and then what happens? So then does that mean there’s like the all the grade seven going one bucket, all the grades…

Charles:                                21:36                     No. You see different customers require different sizes for different purposes. For instance, the small that pieces and all that may be required to go for the ingredients market. Well you want to make cakes using macadamia, you want to make cookies using macadamia as an ingredient?

Sam:                                      21:51                     Ingredients. Yes. Sorry. So they, yeah, they don’t care if it’s a really big executive, just what…

Charles:                                21:57                     You see now for the snacking sector of the market, you want to have that good appealing big nut.

Sam:                                      22:06                     And then they get roasted or was there…

Charles:                                22:08                     It gets roasted, salted and whatever people want to do with it up there.

Sam:                                      22:13                     This all happens in the same?

Charles:                                22:14                     No, it doesn’t happen basically in one factory because some of the buyers in the US would want to roast it near the end market so it will be sent to the US or the Europe in that intermediate form.

Sam:                                      22:26                     At which stage do they normally get sent off?

Charles:                                22:29                     At the kernel, we call it the kernel, kernel meaning you have removed the shell.

Sam:                                      22:36                     Okay.

Charles:                                22:36                     And you have graded based on size and then you can send it as such. Then it will go on the final step in the end market. We are by now the final value addition will be done.

Sam:                                      22:47                     Some so…

Charles:                                22:50                     But some are done here and that’s why you find their products in the supermarket, the finish products that you can, ready to eat.

Sam:                                      22:56                     Do you export to some countries when you have rest of it?

Charles:                                22:59                     Yes, there are some people who are sending their brands to Europe.

Sam:                                      23:04                     Okay.

Charles:                                23:04                     Yeah.

Sam:                                      23:05                     So that means that, so you, you basically said, you know, here it is. Did you package it for those European…

Charles:                                23:13                     Yes. You package for them. You will find them also in the airlines. You find British airways is using Kenyan macadamia product, go to Kenya airways, you’ll find they’re using Kenyan macadamia products.

Sam:                                      23:26                     But the branding is…

Charles:                                23:28                     Yes. The branding is, is a joint branding between the airline and the local company.

Sam:                                      23:33                     Yeah.

Charles:                                23:33                     Yeah.

Sam:                                      23:34                     Okay. There were four, there are now 27.

Charles:                                23:36                     27 players right now and counting.

Sam:                                      23:40                     And counting. Alright. Have you got some new ones?

Charles:                                23:42                     Well people get into the business every year. New people. We definitely have to get excited.

Sam:                                      23:48                     I mean, how attractive is it as a business, like what’s the sort of rough startup capital you’ll need? What are the sort of returns?

Charles:                                23:58                     I think that the major challenge to new entrants is what I can call “barrier to entry” because you have to buy the produce from farmers upfront.

Sam:                                      24:13                     Okay.

Charles:                                24:14                     You either have the cash or you don’t.

Sam:                                      24:16                     Yeah. And typically in order to make it, in order to do it properly, how many kilograms do you think you’re going to need to buy?

Charles :                               24:23                     I would say you will be sustainable, you’ll breakeven at around 300.

Sam:                                      24:29                     300 tons?

Charles:                                24:29                     300 tones.

Sam:                                      24:31                     Okay, so you need, you need to pay $600 of raw material if it’s 300?

Charles:                                24:36                     So what we’re saying is that you need 300 tons. The metric tons.

Sam:                                      24:40                     Tons not Not kilograms?

Charles:                                24:41                     No.

Sam:                                      24:42                     So three, so 300 times a thousand times two. Alright. So you need one that’s about 600 600 thousands?

Charles:                                24:50                     Yeah.

Sam:                                      24:50                     Six. Right? So in order to be valued…

Charles:                                24:52                     US dollars.

Sam:                                      24:54                     $600,000 dollars, that is what you call a barrier to entry. Yeah. Okay, so…

Charles:                                24:58                     You can see the figure is prohibitive.

Sam:                                      25:00                     Yes.

Charles:                                25:01                     Yeah.

Sam:                                      25:02                     And then how much would the equipment cost?

Charles:                                25:05                     Depending, you can go manual and crack with a ball pain hammer, which is now labour intensive again, that pushes the cost of labour high and they also, there is food handling and all that where you can go now for roller crackers that now are mechanical that you will now crack, crack bigger volumes at a time, you know, bigger batches at a time. It depends on the size that you’re buying, but I think at the processing point you will need to probably put $20,000.

Sam:                                      25:43                     Okay,

Charles:                                25:43                     $20,000. Maybe the infrastructure you need at the processes stage.

Sam:                                      25:49                     Okay.

Charles:                                25:49                     You will need to put down…

Sam:                                      25:50                     So looking at roughly $620,000 to get going, but what, what’s the upside? So how, let’s say you’ve got 300 tons, let’s say, so a kilogram costs $2 at the farm-gates. Once it’s processed, how much, how much might you be selling?

Charles:                                26:09                     You are starting to understand for you to process one kilo, you need 4 to 5 kilos.

Sam:                                      26:16                     Really, Oh there’s that much?

Charles:                                26:17                     Yes. There’s that difference because you see the shell is heavy also and you don’t need the shell. You need the inner.

Sam:                                      26:22                     Okay.

Charles:                                26:22                     Yeah. So it’s not kilo to kilo.

Sam:                                      26:25                     Okay.

Charles:                                26:25                     There’s a ratio between now the kernel you get that is now the consumable part and now the fruit, the farmer sales to the processor. And then remember you bought this macadamia at 20 to 30% moisture content. You’re going to dehydrate that to 1.5. So it’s not, as in corresponding, there are several processes that are here and that’s what I’m saying, a factor of four.

Sam:                                      26:52                     Okay, so…

Charles:                                26:53                     One to four.

Sam:                                      26:54                     So for every four kilograms of macadamia.

Charles:                                26:56                     In shells, in not form will yield.

Sam:                                      27:02                     Okay.

Charles:                                27:02                     Yes.

Sam:                                      27:03                     So when you say they need to buy 300 tons, they need to get 300 pounds…

Charles:                                27:07                     Divided by four.

Sam:                                      27:09                     Okay. So they’re going to end up with 75 tons making. So, okay. So how much does a kilogram of processed.

Charles:                                27:20                     It depends again on a good and a bad year, but I could put and again the grades that I could probably put per kilo at around $15.

Sam:                                      27:35                     Okay, so four to one. So basically you’re saying you need to pay roughly $8 at the farm-gate to gets $15. Okay. Is this what most companies, most procssors are doing? They’re basically playing the volume game.

Charles:                                27:52                     It’s a volume game. If you’ve seen the minimum is like 300 tones, what’s the maximum capacity that a processor has?

Charles:                                28:01                     The big processors are doing a 8,000,

Charles:                                28:05                     8,000 okay.

Charles:                                28:06                     8,000 metric tons. But then you will find that people who are doing 1000, 2000, 3000, 4,000, but the largest in Kenya is doing around 8,000.

Sam:                                      28:17                     You said that most of is going to exports.

Charles:                                28:21                     Yes, it’s 97%.

Sam:                                      28:24                     How’s that sort of like facilitated as in, is this, is this the sort of thing where you need to have trade ageements or is it? Buyer to buyer so to speak? As in, I’m there several buyers in the U S and commodity traders or brokers who are linking to the end users and supermarkets and such.

Sam:                                      28:48                     Okay. So it’s made me going through, it makes me a minute. So basically you’ve been treated as a commodity, so it’s going to say that…

Charles:                                28:56                     It goes as a commodity. So it’s not like distributed in different places. I see. So is that like the macadamia nut exchange? I’m sorry, is that like no,

Charles:                                29:05                     There’s no formal exchange like the coffee.

Sam:                                      29:08                     Okay. There’s not, there’s no auction.

Charles:                                29:10                     It’s not auction driven. What there is is that they are commodity brokers who collect and then sub end markets.

Sam:                                      29:18                     I see.

Charles:                                29:19                     Yeah. Or there are also directives to supermarkets. Big supermarkets that are, will go on value and even roasters, independent roasters who also will buy go and roast and then have their own, they’re a retail brands.

Sam:                                      29:32                     Okay.

Charles:                                29:32                     In the end markets.

Sam:                                      29:33                     Is it that the macadamia nut industry is still in its infancy and that one day it will get like an auction like there is with coffee and tea or is it that the dynamics are, or the characteristics different?

Charles :                               29:49                     I would say that maybe there would be an auction market for macadamia, but again, it must be voluminous for it to modify to be in an auction system.

Sam:                                      30:04                     Okay.

Charles:                                30:04                     It must also attract enough players for, you know, enough players to, for it to qualify to be at that stage. So it’s a volume and players kind of dynamics that are critical here.

Sam:                                      30:16                     Okay.

Charles:                                30:16                     And again, it depends, will it be necessary? What solution will it be solving because if the market to market, business to business model still works, then maybe the need for an independent auction system, is not necessary, because price discovery between major buyers and sellers, the interacting one on one and still they’re finding it comfortable because the price points they get is agreeable. So again, that may not make the auction necessary.

Sam:                                      30:50                     Yeah. Okay. So the fact that there is enough transparency in the market.

Charles:                                30:54                     Yes.

Sam:                                      30:54                     Doesn’t, doesn’t probably make it necessary. Okay. Interesting. And when you say things like the supermarket, so we’re talking about like a US supermarket.

Charles :                               31:06                     Yes, you’re talking of the Costco.

Sam:                                      31:08                     Okay. And so they will say they will be wanting to do Costco own brand Macadamias. So I’m trying to think. So if I own Costco I’m like, but I’m the head of Costco and I say, right, we need to get our own in brand macadamia nuts and I’ll, I’ll then say, right go out and find a broker, someone who can go and source them. That broker will be speaking directly with the macadamia nut processes in Kenya.

Charles:                                31:36                     Yes.

Sam:                                      31:37                     Understood, understood. And then they’ll say, okay, well these are the conditions we’re going to buy. We’ve been engaged in a contract, we’ll buy this many tons for the next 12 months and where does Nut pak play in that sort of interaction that’s happening.

Charles :                               31:53                     What happens? You see we are, what we can call, we’re also are trade facilitator.

Sam:                                      31:57                     Okay.

Charles:                                31:58                     Right. Because as the association that, our interest is to make the business environment, local and international conducive and supportive of the entrepreneurs and the processors to do business.

Sam:                                      32:13                     Yeah.

Charles:                                32:14                     Right. And we also are the voice of the Kenya macadamia, Kenya nuts family with other origins because others associations, there’s SAMAC of South Africa, there is AMS of Australia and other others in different countries. You see all of us now form the international macadamia symposium, which is our biannual meeting point to share best practices in terms of production and, especially majorly on production.

Sam:                                      32:53                     Okay.

Charles:                                32:53                     Then we have the annual meeting that is under the auspices of the international, nut council.

Sam:                                      33:00                     International nut council?

Charles:                                33:01                     Yes. That now is what we can call the market benchmark.

Sam:                                      33:05                     Yes.

Charles:                                33:06                     Whereby now the buyers and sellers and all, you know, meet annually, kind of to share their experiences, the love innovations their statistics.

Sam:                                      33:15                     Where do they meet?

Charles:                                33:17                     We meet in different capitals of the world.

Sam:                                      33:19                     Okay. Where was the last one?

Charles:                                33:21                     The last one was in the US. We met in the United States in Miami, Florida.

Sam:                                      33:26                     Miami, okay.

Charles:                                33:26                     Yeah.

Sam:                                      33:26                     International nut council. That sounds quite a fun organization.

Charles:                                33:29                     Yes. It’s a huge organization that is based in Spain, Barcelona.

Sam:                                      33:34                     Based in Spain, okay. And so that’s basically any nut people, anybody in the nut industry would want to attend.

Charles:                                33:43                     Wow! That is the mega, you know, the Mecca of the nuts industry, everybody wants to do, to do that.

Sam:                                      33:53                     Did you go?

Charles:                                33:53                     Yes, I was in there.

Sam:                                      33:54                     I mean, was there, is there any sort of rivalry between nuts, if you meet someone and they’re like I’m a macademia nut farmer, and they’re like Oh, and I do cashews or, or someone’s like, I’m wondering purely of like, are there certain nuts which are seen as more prestigious?

Charles:                                34:14                     Definately. Macadamia is more prestigious than all the other nuts, it’s called the King nut.

Sam:                                      34:18                     So in, so when someone meets and you say, I do macadamia nuts, Oh my gosh, I only do walnuts like you’re not.

Charles:                                34:24                     Not necessarily to that extent. Because you see when you talk all the walnuts and you talk almands, you know the dynamics of how they grow is different from macademia. So they are voluminous like produce a lot.

Sam:                                      34:38                     Yeah.

Charles:                                34:38                     So it’s not a question of which is superior than the other.

Sam:                                      34:43                     Okay.

Charles:                                34:44                     Not necessarily, so.

Charles:                                34:45                     Okay. Alright. And there’ll be various people who are giving talks about best practices. What I’m interested, what are some of the innovations that are happening in the macademia nuts industry?

Charles:                                34:56                     You see the major innovation and especially at the international nuts and dried fruit council is looking at nutrition research, is looking at different ways and cuisines that can take macadamia. How many other ways can we consume the nuts in general?

Sam:                                      35:18                     Okay.

Charles:                                35:18                     Right. Do we go heavy on snacks? Do we go heavy as ingredients in other food items? So it’s a question of the versatility of consuming these nuts in different forms in different homes, in terms of also demographics, how your children find there nuts more palatable. So that’s a research point, right? If you’re talking about nutrition challenged people, in what form is it pulpy, how do you give it to them and all that. Again, that’s a research point? We’re talking about now that people want to eat more nutritious foods, we want to run away from issues of heart attack from issues of cholesterol, you see you got, that’s a research point again because we’ll say macadamia is cholesterol free. So you see, you need to disseminate that research needs to be done. So most of the things is about doing research across the board. Innovations in terms of processing what are the new machines that are more efficient, more cost effective and all that, that require. So what I can say is that the conference around international nut council is around the innovations, production, marketing, consumption, data sharing, statistics, what’s the market outlook. So it’s quite dynamic it’s full of information that is across the industry, that makes you now more prepared to do business.

Sam:                                      36:56                     Got it.

Charles:                                36:56                     If you’ve got now to the international macadamia symposium, it is majorly now on the production side, the agronomical post-harvest management systems around it just to see how can we produce the best nuts. What is the research on the best yielding varieties, what’s the best research on crop husbandry, best practices in crop post-harvest management and all that pest management. You know, there’s all those issues around production. How do we optimize production. So that is majorly the symposium issue.

Sam:                                      37:31                     Very cool. Okay. Has one of the, the themes recently been this trend of people eating less meat and nuts being a good source of protein?

Charles :                               37:44                     That’s the thing we’re talking about, it’s substitute. They’re saying macadamia oils or macadamia nuts themselves, it has unique nutritional parameters that are better than animal proteins or animal fat or something. Right. But anyway, that is the progress now of the medical nutrition research people. Yes.

Sam:                                      38:07                     Okay. Alright, cool. Okay. Is there a, is there scope, do you think that if and more, you know, if supply was able to increase…

Charles :                               38:19                     If supply was able to increase and the farm-gate prices what to go down, then the end market shelf, supermarket shelf price or retail price would go down.

Sam:                                      38:30                     What do you recon is a realistic farm-gate price?

Charles :                               38:34                     We did a gross margin on macadamia production at farm level and it cannot go beyond 0.4 of a dollar, right?

Sam:                                      38:46                     So currently it’s at $2 and they weren’t able to go below…

Charles:                                38:49                     It’s good. Their production costs can not go above 0.4 of a dollar.

Sam:                                      38:54                     I don’t quite understand when you say the production costs.

Charles:                                38:55                     You’re talking of, you see production cost means all the investment you put in place before you harvest or before you sell.

Sam:                                      39:06                     Before you sell. Okay.

Charles:                                39:07                     And I’m saying it cannot in any way be more than 20% of the sale price.

Sam:                                      39:17                     When you say it cannot…

Charles:                                39:19                     Because we have done the gross margin analysis for the crop, what does it take for you to produce a kilo of macadamia, and we’re saying in Kenya for you to produce a kilo of macademia, your investment cannot go beyond 0.4 of a dollar.

Sam:                                      39:37                     Okay.

Charles:                                39:37                     Yes.

Sam:                                      39:39                     What are some of the ways in which macademia nuts are being eaten?

Charles :                               39:42                     It’s majorly, the major market for it is snacking, the way you get a snack on the way, but the growing one is macadamia being incorporated in other speciality foods.

Sam:                                      39:58                     Okay.

Charles:                                39:58                     Yes. As an ingredient. Yes. And that is now the growing area.

Sam:                                      40:02                     Cause what is it about macadamia nuts which makes them, what do they have which other nuts don’t have?

Charles:                                40:08                     One, they have a very nice taste profile. Probably that’s why you like eating them, they have a superior taste profile, they are crunchy very palatable. They have quite a good character around it. And then as I say, the nutritional analysis for it, they are one cholesterol free, they will give you, I don’t know how they, all the nutritional parameters, but you will see…

Sam:                                      40:35                     It’s very good.

Charles:                                40:36                     It’s very good. Yeah. It’s recommended as a healthy snack, especially for weight, choolesterol lowering and all that. So it has a good position in the nutritional matrix.

Sam:                                      40:50                     Okay. So we’ll just do a few more questions if that’s all right. What I’m interested in is, as you said, 10 years ago, you were an outsider. You didn’t, you didn’t really know much about the industry and now your here sort of the head of the industry body. What have been some of the biggest insights you’ve had along that journey?

Charles:                                41:13                     I think the thick of the insight is that it’s looking at the sustainability factor for an industry and for you to make an industry competitive, you got to understand the issues of the denominator.

Sam:                                      41:31                     Of?

Charles:                                41:31                     Denominator issues.

Sam:                                      41:33                     Okay.

Charles:                                41:33                     Understanding that you must protect denominator issues and then fight above or compete above the denomination and denominator issues means the fundamental issues that you need to sort out first.

Sam:                                      41:46                     Okay.

Charles:                                41:46                     You need to sort the issues of production. You must produce enough in terms of good quality. You must produce enough also in terms of good pricing points, right? You must produce through smart agriculture so that, you know, whatever you’re doing is in tandem with best practices for it. You must also work within an environment, create the conducive environment for you to be able to acquire the raw materials. Remember most of the processors here don’t have their own farms. So they are relying on the farmer. So they must do production support and that’s what I’m calling the denominator issues first. Then you compete when you have sorted the fundamental issues. If you start fighting below the fundamentals, you collapse the industry. Right? So to create competitiveness, the word competitiveness is very important. Competitiveness at farm level, let the farmer earn their due margin then let the processor earn he’s due margin and let the customer get the best value for the product they buy. Yeah. So that trajectory is what will create a stable industry. Then again, the learning point is about the collaboration with government. Government requires to understand that for an industry to thrive, you got to provide the right policies for it. And as I have said, I have seen the ban on exporting unprocessed macadamia in Kenya has accelerated the growth of the industry from four to 27 from 10,000 metric tons to 45,000 metric tons in a span of 10 years. That tells you the growth factor is good.

Sam:                                      43:38                     And I mean, and I guess that also means that rather than selling produce at $2 a kilogram and selling it at $15 a kilogram.

Charles:                                43:46                     That’s the thing, value extraction is high.

Sam:                                      43:48                     And that all the extra $13 is kept.

Charles:                                43:52                     It’s captured here, it’s retained in the country.

Sam:                                      43:54                     Yeah.

Charles:                                43:54                     So value addition is important in my view because they retain the value to the origin country’s high. Why would you want to export dollars and jobs?

Sam:                                      44:07                     I mean was, was there any backlash?

Charles:                                44:09                     There was a backlash because you see people will have their own vested interests around every issue, but you see the bigger picture or the bigger agenda will always prevail.

Sam:                                      44:19                     I was about to say how did you overcome it?

Charles:                                44:21                     We lobbied the minister responsible for, for agriculture to really understand what is this value capture that we are fighting for? Because what you’re saying is that can we keep as many jobs local? Can we earn as many dollars and bring them to the country? That’s foreign exchange and such. How do we do that? We do that by manufacturing. There’s no country that develops by exporting raw materials.

Sam:                                      44:52                     And what, what do you think is next for Nut Pak, in the next…

Charles:                                44:55                     The next thing is now to consolidate the industry further.

Sam:                                      44:58                     Okay. We say consolidate, what do you mean?

Charles:                                45:00                     Consolidating means that we are looking at the success factors and how those success factors hinge on making the entrepreneurs and processors more profitable.

Sam:                                      45:12                     Okay.

Charles:                                45:13                     Right. We are looking at how rather than having it fragmented is a question of how do we bring everything together so that everybody benefits from the synergies that accrue from joint effort.

Sam:                                      45:26                     What does that look like in practice?

Charles:                                45:28                     In practice. What we mean is that we are looking at what are the issues that we need to address. We need to have early warning systems around the crop. Will there be a crop failure and next year we need to have an early warning system around it. We need to understand what are the agronomical challenges facing our farmers and address those issues including extension. How do we go and disseminate best practices across our farmers, crop quality, how do we manage the crop quality across these diverse farmers, what are the programmings that we need to put in place to make sure that we consolidate and standardize production across many farmers so that we can have a crop that is as good as what you find in Australia, as good as you find in South Africa because all of it is competing in the same marketplace. Yes.

Sam:                                      46:23                     And that’s something which nut pak will probably…

Charles:                                46:25                     Yes. That is a cutout for the association to make sure that synergies are brought together and people are achieving the grand picture or the strategic picture together.

Sam:                                      46:42                     How does nut pak make money?

Charles:                                46:44                     The association gets its money from subscriptions.

Sam:                                      46:48                     Because of the 27 processors.

Charles:                                46:49                     They each pay based on the size.

Sam:                                      46:54                     Okay. So you’re basically saying based on your production?

Charles:                                46:57                     Based on the, not production, processing, the amount of nuts you process.

Sam:                                      47:03                     Okay.

Charles:                                47:03                     So we have a formula.

Sam:                                      47:05                     And now they’ll pay an annual fee.

Charles:                                47:06                     They pay us at an annual fee. Yes.

Sam:                                      47:09                     And so just to sort of finish up, you know, fit people who are looking to learn more about what, nut pak does or looking to perhaps you know, buy some very nuts, buy nuts that grown in Kenya. What are some of the best ways that people can learn and learn more about what it is that you do and perhaps get in touch with some, some other producers?

Charles:                                47:28                     I think what do is that we have our learning platforms especially at the farm level. We do a lot of field days to educate farmers on the emerging best practices and giving them my expectations as processors on what we required them to do so they can produce the right quality material. We also disseminate the research, the new research that we get from our international partners that are doing macadamia and such. We also lobby and educate government, especially the county governments to really understand the position of the crop and how it can change and impact the lives of the common person, especially the farmers in the radius. As we have said, it’s one of the most lucrative crops on our farms. That means it’s an engine that can be very formidable in poverty eradication and such. So more resources needs to be put there naturally if something has the potential to change the lives of people. But you see that comes from awareness. We need to disseminate this picture, quote to the value proposition across to the counties so that they can see the value of the crop also. And then again to kind of support the environment around processing lobbying issues on energy, costs of power, cost of doing business across a country, licensing law that, you know, we will get involved where we feel that it’s adverserial to doing business.

Sam:                                      49:09                     And people who are listening at home, how can they learn more about some of these things, is there…

Charles:                                49:14                     We have radio programs that we do with vernacular radios that disseminate our information.

Sam:                                      49:19                     You have radio programs?

Charles:                                49:20                     Yes. Yeah.

Sam:                                      49:23                     You’ll go on the radio and talk about?

Charles:                                49:25                     Yes, we gone radio, we do announcements based on when we expect the crop to be ready and all that.

Sam:                                      49:31                     Okay.

Charles:                                49:31                     So we do announcement to say where we have some educational platforms, you know in collaboration with key stake holders. So the messaging to farmers. We also use mobile phone, a s ystem whereby we disseminate now SMSs based on different parameters or different information points that we feel are necessary to farmers.

Sam:                                      49:53                     And if people want, if people want to buy macadamia nuts in Kenya, what’s the best way for them to do that?

Charles:                                49:59                     The international buyers?

Sam:                                      50:00                     Yeah.

Charles:                                50:01                     The international buyers, as I said, we have a platform for the international nut council where the buyers and sellers mingle make their deals.

Sam:                                      50:10                     Okay.

Charles:                                50:11                     So yeah.

Sam:                                      50:12                     Fantastic. Very good. Cool. Well Charles, thanks so much.

Charles:                                50:14                     Thank you Sam, excellent.


Move over Tesla, Opibus has a better way to get electric vehicles on African roads


We’ve got a very interesting interview this week, one that brings together using modern technology with a compelling market need.

It’s all about electric vehicles.

Now, you’ve probably heard about Tesla and some other companies building cars that don’t run on petrol.

It turns out that, for now at least, these vehicles don’t work in the East Africa context.

Opibus is a Swedish company founded by a group of engineers looking at how to get more electric cars on the road.

One route is the Tesla approach of building an electric car from scratch.

The approach of Opibus is to take existing vehicles, rip out the petrol engine, and put in an electric engine instead.

What that leaves you with is a much quicker and more flexible way to get electric cars being driven in different conditions.

Interestingly, despite being a Swedish company, other than a few prototypes the company’s operations have been almost entirely in Kenya.

Several factors, such as the presence of lions and elephants, have made it the ideal place for the company to start.

Mikael, the head of the commercial side of the business, and I discuss this, and all manner of things in this episode which I hope will leave you feeling positive on the role and room for innovation in the region.


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Starting with safari

The big challenge with electric vehicles is the charging infrastructure. Battery-powered vehicles have a range they can manage and, especially if you’re making unpredictable trips, it’s unclear where your next charge is coming from. Safari lodges don’t face this issue. It’s typically a relatively short trip that begins and ends at the same point. It’s also a market where customers are willing to pay a premium for an environmentally friendly experience.

International cars not fit for African roads

The quality of roads in Kenya mean that many international car companies don’t want to have their cars being driven here. These cars are made for smooth roads, and things such as the suspension, bearings etc. will break more frequently on East African roads. This is a bad image, as well as affecting things like the length and depth of warranties that are given. Anyway, all this means that many modern electric cars can’t be put on Kenyan roads. The solution that Opibus have decided on is to take cars that are already built for Kenyan roads (e.g. suped up Land Cruisers) and fit them with an electric motor.

Pay back in 1-6 years

Beyond environmental concerns a big selling point is lower operational costs. This comes mostly from not needing to buy petrol, but also ongoing maintenance. Petrol engines have innumerate parts, cogs and pistons that need fixing. Electric engines are just one. All this means that the upfront price of buying the engine can be recouped in saved costs. The savings are greater the more the engine is used (i.e. saved petrol) and this varies from 6 years, all the way down to a year.

The engineering

Electric engines have better torque (power) than petrol engines as well as being lighter in weight. There’s therefore no issue with them being deployed in tough environments (i.e. the savannah)

The road from assembly

Right now parts are imported into Kenya and put together by Kenyan welders and engineers. In time Opibus is looking for more of the manufacturing to be done in Kenya.

Hiring engineers from university

The CTO has been training up smart engineers on the particulars of electric engines. Kenyan universities produce good engineers, it’s now a case of finding those excited by electric vehicle engines, and training them.

Fixed points for charging

As Opibus (and indeed the electric vehicle market in general) looks to expand it’s offering the fixed points of charging are important. As such, public buses are being viewed as the next step, as they typically transport people back and forth from regular spots. There’s not technical reason why trucks can’t be fitted with electric engines too.

Corruption is frustrating

It’s real. There have been instances where Opibus have had cargo shipments stuck at the port for six months. Apparently regulation changes mean that the battery components can’t be allowed into Kenya and the only way out of the predicament is to pay an official $8,000. Opibus have taken the stance to never engage in corruption, though this has definitely slowed business.

Financing expansion from grants and elsewhere

A company like Opibus will need capital to scale. Right now they’ve been largely self-financed adopting the approach of selling the solution before it’s been made, and then making sure the design fits what the customer wants. As such, they have decent cash flow. When it comes to getting grant money for, say, promoting environmentally friendly solutions they’ve not quite got the track record that donors want yet, but that should come soon.

Social Media Links



Twitter: @opibus1



Sam:                                      00:00                     Intro

Sam:                                      02:02                     Cool. So we’re here today with Mikael From Opibus. Mikael, welcome to the show.

Mikael:                                 02:06                     Thank you very much Sam. It’s lovely to meet you.

Sam:                                      02:08                     Yeah. So just to get started, could you tell us a bit about you and a bit about Opibus?

Mikael:                                 02:13                     So I’m one of the co-founders of Opibus and we’re a company working with energy solutions and electric mobility here in east Africa. And our vision all along was to bring electric vehicles down to Africa. So we started this company back in Sweden about three years ago. And then today we deal with everything from electric vehicle conversions without which I would probably talk more in detail with you later. And then making solar panel installations and also working with lithium battery technology.

Sam:                                      02:43                     Got It. Okay. So you’re a Swedish company, you, Mikael, you’re from Sweden? Right. Is the company operating in Sweden as well or is it just operating here in Kenya?

Mikael:                                 02:52                     So we did all the developments and started the company back in Sweden three years ago, but right now we’re only operational in Kenya. We do have plans though because, as I’ll tell you more abit later, this technology is very versatile and scalable. So we’re probably looking at opening up businesses in Sweden. And all around the world as well. Yeah.

Sam:                                      03:13                     Very cool. Very cool. So we’ve actually just come from your workshop. Would you call it a workshop would you call it a factory? An assembly plants an probably, yeah, but it’s kind of like a, a factory unit is, how would you, how big, how big is it? I can’t really gauge its about 6,000 square foot, 6000 square foot. So it’s kind of like, it feels like you could fit a small airplane in there, I guess you can. Yeah, it’s sort of that sort of a…

Mikael:                                 03:36                     we fit about eight to 10 vehicles, where we do these electric conversions instead, and then of course keeping stock of everything and yeah, it’s a, we, we recently moved there from a smaller place and I think we’re going to move in the next upcoming six months again, actually.

Sam:                                      03:51                     Very cool. And the core business that you do at the moment is, and which I think is fascinating. So you take vehicles and you take out the petrol motors and you put in an electric motor and that then makes the car an electric car.

Mikael:                                 04:05                     Correct. So the sort of technology or the process, it’s called conversion technology. So the idea is to utilize vehicles that already are running on diesel or petrol. And then instead of of designing something from scratch where you make a new chassis, a new car, you can simply take those vehicles and you make the drive chain electric instead. So that means removing the petrol engine, diesel engine, fuel tanks, gearbox. And then we utilize that space to put in battery boxes and electric motors. So with this technology, you can actually turn any vehicle into electric. And the idea from the beginning was to, to have a strategy where we can quite, you know, quick implement electric vehicles into Africa. And the problem is that, you know, there’s not many vehicles that we have in the European market or American market that actually works here because the road ratings are different.

Sam:                                      04:58                     So would we say the car doesn’t work here?

Mikael:                                 05:01                     I would say that many of these big companies, they, they feel it’s a risk to deploy these vehicles here because of the, the bad roads, for example. So one of the most popular models is called Nissan Leaf. It’s a, it’s a Japanese company and they will not simply deploy these vehicles here because the roads are too bad. Right? So that in that way we can take vehicles that are designed for this terrain, for this area, and we can make them electric instead.

Sam:                                      05:25                     Okay. So Nissan Leaf is a electric car, which is on the roads in Japan.

Mikael:                                 05:32                     Right. And all around the world even in Europe, America…

Sam:                                      05:35                     But the quality of the road, is there like an indices or an index for roads, how’s that measured.

Sam:                                      05:46                     So yes, a lot of these automobile companies, you know, they look at how would the vehicles perform and how much problems would there be with the you know the bearings and the suspension and everything. And if they, if they find, you know, a country where the roads aren’t good enough, they simply won’t take the risk at the moment.

Sam:                                      06:01                     Cause, like in Japan for example, they might say we’ve got a three year warranty and assuming that the roads are smooth, one in 10,000 cars is gonna need to go in or whatever, whatever…

Mikael:                                 06:11                     If all the cars break down in one year, that’s a bad image for, Nissan leaf as well. Right? Yeah. So I think the important is that, you know, we want to design and build something here for the African market. We work with transfer technology. So we bring the technology of electric vehicles and electric drive chains, but we want to incorporate the, the African design. So we make a vehicle for Africa.

Sam:                                      06:31                     Okay. So why didn’t you design, did you, I’ll rephrase it. Did you ever consider designing an electric car for Africa or for, for bad roads from scratch?

Mikael:                                 06:42                     So, as I told you, the idea was to bring something quite quick to the market and that’s why we start with this conversion technology, but obviously, the idea in the future is to maybe go from an assembly plant to more actually production. So maybe five years down the road and we can actually produce, you know, complete new electric vehicles here in Kenya, perhaps as an OEM solution to Nissan for example. Maybe they don’t want to touch this market because they don’t know how it works. Maybe we can be the guys they work with for electric drive chains for example. But yeah, so if I just roll back a little bit. So right now we deal with electric safari vehicles. Oh, okay. So there’s different markets for everything. But, why we started with this market is because, there’s no electric vehicles in Kenya at all and there’s no charging infrastructure and those two goes hand in hand. You can’t have the other one without having the other one. Right. But there’s a foreign industry, they drive short distances less than a hundred kilometers a day, which sort of reduces the range exciting that we have in Europe and everywhere else. And then they also start from one point in the, there’s a foreign lodge, so to speak, and they drive out with these tourists and then they come back to the same point. So we only need one charger. So it’s an easy investment in a car, in one charger, and then it fills the whole application. Right? Yeah. So that’s where we start to showcase. And then also, yeah, show people that, you know, this works. And then this year we’re also moving towards other types of vehicles, which we might speak about more today.

Sam:                                      08:20                     Yeah. I mean, the safari thing, that sounds like quite a smart idea. Was that like a light bulb moment or was that a, okay, we need to find parts of the industry which have these particular characteristics.

Mikael:                                 08:32                     Yeah. We, when we assessed it, the market back in Sweden, we realized we need to find a market where it makes sense today. And when it comes to city cars, you need to make huge investments in charging infrastructure to make it, you know, possible. So, yeah, we simply identified this market as an entry market where we can, you know, start doing this business, we can showcase the products and get all the experience that we need for the next several months.

Sam:                                      08:57                     So Opibus is operating in Kenya. Like if, if Kenya didn’t have lions or elephants, you probably wouldn’t be here. Yeah. And so you’ve gone to the safari lodges and I take, you’ve got to pitch to them and say we can turn your current vehicles into electric vehicles.

Mikael:                                 09:21                     Definitely. So I’m the sales chief, right? So I mean, the, the main part is that, you know, they want to be able to attract tourists, right? And now we see a trend in the tourist industry in East Africa for ecotourism. So it’s simply customers that have a little bit more understanding of, of the, you know, the conditions of the world and in how we can make it a better place. So think more about, you know, environmental choices where we might not, you know, put more emissions in there. So many of these camps have already started installing solar panels to show customers that they really care about this and they care about the wildlife and the environment. And the next step for all of these, these camps is to bring, bring the vehicle electric, make it make it electric. So one of the main points when I sell these vehicles is, of course, pushing on, on the environmental aspect. You know you can market this as an ECO solution for tourists. But then, the important thing is also that this terrain is quite demanding. You know the Maasai Mara during the rain period, they get the black cotton mud, which is one of the worst one in the whole world. And you need to have a vehicle with a lot of torque and performance. Maybe many people don’t know about it, but electric vehicles are actually more powerful than normal conventional vehicles. And I, we can go into depth later about the technical specifications, but that’s actually the truth. So it’s about the environmental, you know, advantage. And then also about the performance. And then they actually reduce their running costs as well because electricity is cheaper than diesel, especially if you were generated through a solar panel system. So our customers today have a payoff time of about six years, four to six years, depending on how much they drive. So, you know it’s a cocktail of all of these different advantages, but of course the incentive for, for using the running costs is a big one as well. So I think they get hooked by the, by the vision and the idea, but then practicality when they actually look at the model and the they see the, they save money, that’s when they go for it. Yeah.

Sam:                                      11:31                     Okay. So if we can, can we just sort of talk a bit about the economics of, of how it works. So how much does a Petrol safari, cause these are kind of like big land rovers…

Mikael:                                 11:46                     Land Cruiser and Land Rovers can work with right now.

Sam:                                      11:49                     And it’s kind of like eight or nine people who sit in the back.

Mikael:                                 11:53                     Yeah, its nine people. Yeah.

Sam:                                      11:54                     Um, so how, how much does one of those cost if you were to have yourself a petrol motor?

Mikael:                                 11:57                     So is it just to, to buy or to operate?

Sam:                                      12:00                     To buy. Upfront.

Mikael:                                 12:01                     So right now with the, with the local assembly plant, order cars here in Kenya, it’s maybe an end price of about 60, $70,000.

Sam:                                      12:10                     Okay. And then what sort of the, the rough on ongoing costs with that per year?

Mikael:                                 12:16                     So when there’s two things, one of course is the, is the petrol or diesel. And one of the problem is that these camps, they’re quite secured. They’re in the middle of nowhere. So first they need to transport all these few out in the middle of nowhere, which costs, you know, an extra extra costs on the diesel. But then, with the conventional, because you also have a maintenance needs, you need to change the oil filters, you need to work with the, with those maintenance on the gearbox and the engine. And there’s a lot of moving parts that can go wrong, right? But when it comes to electric vehicles, you only have one moving part. And that’s the electric drive shaft. So, the different things that, that make them, you know, save money and it’s a, it’s quite a lot. We usually have a reference saving costs of about 80% of the normal running costs. Yeah.

Sam:                                      13:06                     Okay. Cool. Okay. Um, and so roughly is it like when you do the calculations, when you say, when you add up petrol and calling out a mechanic and all that stuff, do you say it’s like, what, $10,000 a year or something? What’s

Mikael:                                 13:19                     so the service we usually, eh, we calculate, I think it’s about, um, yeah, about $5,000 a year probably. And then petrol, it’s, it’s, it’s probably about eight to $10,000. Yeah.

Sam:                                      13:35                     Cool. And so you can go to them and say, we’ve got this, yeah. This kit, this solution. So if you don’t mind, like how much is it, how much does it cost to?

Mikael:                                 13:42                     Yeah. So for us, we, we would like to offer our customers you know different options, right? Because some of these camps, they might have a, a big, a bigger demand for range. There might go longer distances. So we have options where we can put in more battery packs. We can put in faster charging, but the, the main idea, a normal conversion starts at about $37,000 today. Yeah. And that’s when they bring their vehicle and we converted to electric. So that’s not the whole card service of making it electric. Yeah.

Sam:                                      14:15                     Yup. And cash up front duty financing.

Mikael:                                 14:20                     So we have a verity of different options, but, it’s a mix of deposits to be able to secure all the components and then, you know, loan or we’re actually working on PPA solutions as well.

Sam:                                      14:32                     whose PPA?

Mikael:                                 14:32                     So it’s a, you know, when you, when you pay for and the distances you drive. So imagine if a finance company, they take investment and then, they have, a contract with the customer. So if they drive a hundred kilometers, they pay for those a hundred kilometers. Right. So they pay off as. They go. Yup. Yup. And this model has been, it’s been very popular in Europe, in other regions of the world. But I think in Africa it’s really picking up the PPA to actually be able to, to pay it off as you go.

Sam:                                      15:05                     So what does PPA Stand for?

Mikael:                                 15:07                     So it’s power purchase agreement,.

Sam:                                      15:09                     Power purchase agreement, and it basically means pay as you go.

Mikael:                                 15:12                     Right. Correct.

Sam:                                      15:12                     Very cool. Okay, has it been a tough sell?

Mikael:                                 15:18                     Um, so I’m the sales chief and it’s been going great. I mean the idea of bringing, you know, fully carbon neutral vehicles to this foreign industry, everyone loves it. It’s, it’s been, it’s been very, very good support. And…

Sam:                                      15:35                     How do your meetings, you just call people up?

Sam:                                      15:37                     Yes, it’s a mix of, you know, in every sales organization it’s about, you know, reaching out, doing all the cold calls and then you try to market and network as much as you can. And then right now it’s been, it’s been mostly trying to meet up, bring them to the workshop to show them everything. We do perhaps have a small demo where we show the car, we drive it around a little bit, but yeah, it’s been very successful so far. Yeah.

Sam:                                      16:02                     Nice. How many safari lodges are there in Kenya?

Mikael:                                 16:05                     So when there’s a lot of them. I would say it’s a, it’s more than a hundred in Kenya. And so every lodge has everything between five to 50 vehicles. Right. And there’s also some companies doing only the tours. So some companies have their own camp where they offer accommodation for the tourists, but some other companies, they only offer the drive. So they, they start from maybe Nairobi and then they go out to the national parks and they, they come back to Nairobi. Right. Yeah. So in total, there is a, as probably a, you know, several hundred thousands of these land cruisers and Land rovers out there. Yeah, it is. And I mean, this, this sort of model with, with Land Cruiser, it’s been very popular, not only for the safari industry, but for any type of purpose because the roads are bad. Right. Then when you, for example KPLC, the, big power generation company in Kenya, you know, they do a lot of utility rounds where they go out to the, you know, the off-grid systems they have and all these power stations where they need to have vehicles where they can, you know, get through the terrain. So these types of vehicles are very popular in Kenya

Sam:                                      17:19                     Is part of the set, I’ll rephrase. I remember hearing that one of the things about electric cars is they hardly make any noise. Right. Do vehicles that have been converted, do they also not make much noise or is that, do they still sound quite quite loud?

Mikael:                                 17:35                     Yeah. So it’s actually funny that I missed this point because it’s also a, you know, a big advantage for the safari industry because I mean, you know, having a ride where you don’t have to listen to the rumbling engine, but you can, just be close to the nature and experience everything. That’s also a very, very good selling point. Yeah, some, I’m surprised I missed it. But yeah, and obviously electric vehicles, they don’t have any, any pistons that move in the engine. And then there’s a lot less things moving so there’s less noise, but there is a humming noise. So when you exert energy from the motor, you get a humming noise, but yeah, it’s much less than a normal convention vehicle and it’s very good for the safari industry. Yes.

Sam:                                      18:12                     Yeah. Very cool. And so the vehicle that’s being converted, it sounds just like a Tesla, for example, when that’s been built from scratch.

Mikael:                                 18:22                     Yeah. So obviously when you convert, there are some things that you can’t… You can’t design everything because there’s already a, you know, an existing drive axles and differentials and everything that we can’t touch because that’s the part of the original solution. So of course there’s a lot of mechanical sounds that can come from our solution that doesn’t come from Tesla. But in general, it’s silent and it’s much less than a conventional vehicle. But yeah, that’s the picture. Yeah.

Sam:                                      18:50                     Very cool. Now I’m not an engineer, right. But, I’m interested in sort of some of the mechanics of how this works. I mean, how, how technically complex is it? Cause we were in the workshop, like the Bonnet was open and it was just, it had been gutted out completely, putting in a new one and it looked like, I’m going to simplify, you were just connecting up the wires, like what’s actually going on there?

Mikael:                                 19:13                     Yeah. So right now, as I told you in the beginning, we’re more of an assembly plant. So we work with the different suppliers all over the world. We buy batteries from China, like everyone else. We have motor suppliers from Switzerland, really high quality. We’ve got Palestinian units from America, but all these units, we make sure that they fit together and they fit with our design. So we simply, we disassemble vehicles, you know, removing the combustion engine, the fuel tanks and everything. And then we use that space to design and put in our drive chain. So, of course there’s a lot of electrical work. You know we need to make all the cables and the wiring of a battery management systems and high voltage cables for the motors, but then there’s also some productions that we do. We do, for example, the battery boxes here in Kenya and also mounting points for the motor. So there are some elements of production and metal work that we do as well, but yeah, right now we’re more of an assembly company, but I think more years down the line we would like to move some of the production of some of these components to Kenya. So maybe doing partly assemble, assembly of the motor, the electric model and maybe some other, yeah, PCB boards and BMS systems as well. So yeah.

Sam:                                      20:34                     Cool. I’ll be honest, this again, it might be because I’m quite inexperienced, but it didn’t look that, it looked quite complex, still. It’s, you know, the’re people there that were welding, there was like pretty high spec stuff going on.

Mikael:                                 20:48                     Yep.

Sam:                                      20:48                     How easy is it to find people to do that? Like, is this a completely new skill set? As I said, it’s an existing skill set that you’ve had to tweak it. Like…

Mikael:                                 20:59                     Right. Definitely. It’s a new skillset. There’s a lot of good engineers here in Kenya, right? Yeah. Electrical and mechanical engineers. But when it comes to the electric vehicle side, we’ve simply had to, you know, teach everyone from the start, you know, what is a battery, what is electric motors? How do they work together? So when it comes to sort of recruitment of all our employees, it’s been a lot of interviews. It’s the only way to do it. You reach out to the, to a lot of different engineers.

Sam:                                      21:31                     How do you do that? Is it going…

Mikael:                                 21:33                     Right. So one of our strategies from the beginning was to have collaborations with universities here in Kenya because they have a great knowledge pool of engineers and you know, these young guys, young people, young girls that are really excited to do things. So, this is sort of where we started. We started targeting these sort of engineers in the beginning. We had a lot of different interviews and we ended u, with a few people, the people that started with an internship with us. And then these people, they get more, you know, knowledge and more experience in the, in the company and they go towards smarter than employment and then, you know, maybe even a, a management position as well. So yeah, it’s been, it’s been fairly easy to find people that are excited and really good at engineering stuff and, and just us giving them some pointers and teaching them about electric vehicles has been more than enough. So we’re very happy with the people that we looked at. Yeah.

Sam:                                      22:31                     How do you have to like, give them a practical thing as in like, here’s some metal and some wire and like, can you make it into something or is it, you know…

Mikael:                                 22:42                     It’s more of hands on practical things You know, doing all the connections for the battery cells, making sure that they don’t connect two of the terminals at the same time because then it goes, you know, a small spark and stuff like that, but yeah, it’s, it’s a, it’s been… One of our co-founders is called Phillip and he’s our CTO. So he’s sort of the mastermind behind the whole design and all these different components. So He’s been taking a lot of different classes so to speak with our engineers in the workshop and teaching them how to do everything. Yeah.

Sam:                                      23:13                     That’s good. Does Phillip, does he have a background in cars?

Mikael:                                 23:16                     Yeah. So actually all of us in the management team that started this company back in Sweden. We have a background in engineering and it’s engineering with less physics, but a little bit more energy cause it’s an engineer, energy engineer. But Philip has even more experience from the electric vehicle side, he’s been doing hobby projects since he was a little boy, converting an old Porsche and stuff like that. So he’s really, really good with these type of components, yeah.

Sam:                                      23:46                     I hope there’s a picture of Little Philip in your pitch deck.

Mikael:                                 23:49                     Huh?

Sam:                                      23:49                     I hope there’s a picture of Little Philip with his porche in the pitch deck. Are there other people doing this at this sort of thing around the world?

Mikael:                                 23:59                     Yeah. So I think this sort of technology and processes is picking up in you know, Europe, America all over the place, but it’s been mostly on a, on a hobby level. So people wanting to convert their vehicle into electric and they’re doing it as a hobby project at home. But the commercial businesses hasn’t been around for that long. So in Europe it’s starting to pick up and we actually have some collaborations with other European companies doing it on a commercial scale for city cars, but in Africa it’s quite new. It’s very new and we know of two or three other people doing it in Africa, but it’s been also on more of a hobby level. So we’re actually one of the first one in Africa to do this on a commercial scale for converting vehicles to electric. Yeah.

Sam:                                      24:49                     As you sad, one of the limiting factors seems to be this infrastructure of charging points. And so I guess it’s a case of, you know, one can’t put one before the other. And if you’ve got these instances where there’s this fixed location where people basically do round trips, right, that works out quite well. Have you begun thinking about what your next market is going to be?

Mikael:                                 25:13                     Yeah, I don’t know if I mentioned it yet, but there’s a foreign industry at the entry market. And then today and this year we will move towards electric motorcycles and also electric public transport buses, which is called ‘Matatus’ down here in east Africa. And the reason why is because their vision all along was to bring the solution to Kenyans. Right. And actually when you think about it, the safari vehicles, the electric safari vehicles, It might affect more the tourists than actually Kenyans. So it had to be our entry market because of all the reasons I’ve been discussing about before. But we really want to move towards, you know, the cities and give a solution that everyone can benefit from. And as you probably know, it’s, it’s quite struggling for many people in Kenya working with, you know, Taxify and all these taxi services and also a motorcycle taxi service. And if we can give them a solution where they can save, you know, $3 or $4 extra everyday, that just massive for them. So I think, um, we really want to bring this to Kenyans. That’s the goal. Yeah.

Sam:                                      26:18                     Cool. What’s the pitch going to be to motorbike taxis? So say for context, like a very common way to get around Nairobi is to hail a motorbike and then you’ll sit on the back and the driver will give you a helmet and you’re going to drive around, but you’ll be sort of sat on the back of this motorbike.

Mikael:                                 26:38                     Correct. Yeah.

Sam:                                      26:38                     That’s a very common way of moving about. So you’re saying that you’re going off to that market or all the personal people who own motor bikes for their personal…

Mikael:                                 26:45                     No. So it’s the, it’s a commuter, the commuter business. Yeah.

Sam:                                      26:48                     Okay.

Mikael:                                 26:48                     So, um, yeah, as you, as you said there, there is a lot of motorcycles or ‘boda bodas’ as we call them down here, that you know, makes the transport industry work in Kenya because they drive people all over the place. It’s very cheap form of transport. And as I said as well, there’s a very big group of, you know, low wage people that do these services and I think if we target that market, it’s partly, you know, the volumes. There’s a lot of these ‘boda boda’ businesses and then also targeting a group that really can benefit from this. So it’s important for us to make a social impact, right? Yeah. But I can tell you more about the motorcycles if you want. So the idea is to target this market and make an electric motorcycle, they can go about 50 to 80 kilometers on one charge. But the difference is that we want to have a battery swap system. So you can, you can actually, when you charge the vehicle, you remove the entire battery from the motorcycle you’re putting into our charging rack. And you take a new one and putting into that motorcycle and this means that we effectively charged the vehicle in 10 seconds instead of waiting hours. Right. So by having this system, it’s really good for us because we can sort of implement the new charging infrastructure that works for our bikes and it also good for the consumer because they can quickly charge and just continue with their services everyday services instead of waiting.

Sam:                                      28:16                     Consumer here being the motorbike driver?

Mikael:                                 28:18                     Yeah, correct.

Sam:                                      28:19                     Yeah. Okay. And so what’s you pitch to the motorbike drivers?

Mikael:                                 28:23                     So it’s a, it’s simply, we want to offer them a solution where they can lower their operational costs because for these guys, they don’t care that much about the environmental aspect, but they do care a lot about their finances and everything they spend on fuel every day. So we offer them a solution where they lower their running cost from day one because we will work with financing options and leasing and everything and asset finance companies and then offer them a solution where they can go with electric motorcycles and swap them with battery sale.

Sam:                                      28:56                     So will this also be a conversion? Will this be getting a motorbike if it’s built specifically for this?

Mikael:                                 29:04                     Right. So in the beginning it will be a sort of converted bike. So we will take frames that are already assembled here in Kenya and then putting our electric motor and controller and batteries, but a few more months down the line, it’s going to be a completely new design that we manufacture from scratch. Cause this is a, it’s, it’s easy to design and produce a motorcycle than a whole car. It takes in less money in development and it’s more easy to do it here

Sam:                                      29:34                     Cool so if I’m a, an existing motorbike taxi driver, if I come to Opibus, I will be basically, will I be still using the same motorbike I’m driving in?

Mikael:                                 29:46                     So, no, what I’m saying is that the first customers that we have right now will not be the, the battery sub system. It will be targeted more towards maybe commercial businesses to do logistics, specifically for their own company. And that’s where we’re going to get all the pilots out or the first products. And we’ve already have an order of about 50 motorcycles going out now in October. But the next sort of the big phase for the, all the commuter bikes will be a complete new solution with a battery subsystem. Yes.

Sam:                                      30:17                     Okay. So if, if I’m, if I’m a motorbike driver and I’m wanting to be part of the Opibus system, I will have to get a, a bike specifically made for the Opibus?

Mikael:                                 30:28                     Yes, correct. And the idea is that already today there’s asset finance companies that finances these motorcycles on the market. So an asset finance companies takes the risk of investing in the motorcycle and then the, driver pays it off daily. Everyday. He pays a little bit every day. And since these financial solutions already exist and these drivers are used to it, we can just tap into the same system. Right. So we can then offer a motorcycle, within asset finance companies. So they don’t have to pay anything upfront. Yes.

Sam:                                      31:01                     How much does the motorbike cost?

Mikael:                                 31:03                     So if we were to sell it as a one off to maybe these logistic companies that I talked about in the, in the beginning, it’s probably about 2000 to $2,500 for the most.

Sam:                                      31:14                     This is not.

Mikael:                                 31:15                     No. And a new, a new really cheap TVS that is imported from India. It’s about $1,300 today on the market. Okay. But then they would pay quite a lot in petrol and the maintenance cost, right?

Sam:                                      31:30                     Yeah. Do you like, I can’t get the economic argument. Do you foresee any or has it been any resistance in just the notion of an electric vehicle and like what if it rains or like what if we run out of power every, those sorts of like other challenges or things that you’ve come up against?

Mikael:                                 31:51                     Yeah, I mean we always get the same question about, you know, if it rains, what if the, what if there is night, there is no sun can they, can it operate. Yeah. There’s a lot of these questions and obviously it’s about teaching people how it works, show them how it works as well. But the main, the main idea for this market is that they want to save money and if they see a solution that you know, brings down their operational cost, they will jump on it. They love it. Yeah.

Sam:                                      32:16                     Very cool. Okay, so you’ve got actually, the safari cars, we’ve got ‘bodas’ are the motorbikes. Did you say something after that?

Mikael:                                 32:25                     Yeah. The, the last, or the next market would also be public transport buses.

Sam:                                      32:30                     Yep.

Mikael:                                 32:31                     Yep. So it’s very interesting because the more you drive every day, the more you actually save because that’s, you know, more kilometers that you don’t have to put petrol into your car and you put electricity instead and it’s cheaper. And these Matatu so the, the public transport buses, they drive long distances every day. It’s up to 500 to 700 kilometers a day.

Sam:                                      32:55                     Really?

Mikael:                                 32:55                     Yeah. Which is insane. Some of them operate inside the city, but some of them operate, you know, into connection between cities. So maybe Nairobi up to Machakos or Nairobi to Narok or, or stuff like that. So since they drive so long distances, the economic model for them is, it’s crazy. And if we offer a solution today to these, public transport buses companies or a Sacco as they’re called, they would have a pay off time in one year.

Sam:                                      33:25                     Wow. Okay. And the battery engine is able to move up to 500, 600 kilometers a day.

Mikael:                                 33:35                     So there’s a few things we need to do to make this, you know, application work for them. I think the range for one of these public transport buses would probably be maximum 250 to 350 kilometers. But the good thing is that they don’t drive 700 kilometers in one go. The drive may be 150 or 200 in one go, and then they stop, they wait for people to get on the bus and then they go back. So while they do these routes in total, they make about 700 kilometers a day. And this means every time they, they stop at one of these end stations, they have time for charging. And when we’ve been talking to these companies today, they wait about one hour before they fill the vehicle for the next round. And this hour is perfect for full charging.

Sam:                                      34:22                     Okay. And I guess, yeah, so I suppose again, this is another example of you don’t need the full network of charging stations. You’ve got the, in this case, just the two points.

Mikael:                                 34:31                     Correct. And this is so interesting because usually if we want to implement charging infrastructure in Kenya, we need to have huge governmental support. You know, a lot of grants and money and investments and right now the market isn’t that mature. So I think the Kenyan government, which we might talk about later as well, they are not ready to do, you know, these sorts of investments. So this means we have to do it ourselves. And the ‘Matatu’ or the public transport bus industry is quite interesting for this because we don’t have to have chargers everywhere because we have to have one charger at one station and one charger at the other end station. So it’s two charges for one route and that can can make, you know, one route be operational on electricity instead of diesel or petrol. And if we do that for the other lines, right, we can organically build the charging infrastructure of Kenya and maybe opening up these charging stations for other types of vehicles in the future as well. So actually the public transport bus industry is one of the solutions to lock up the, to unlock the, the infrastructure of charging. Yeah.

Sam:                                      35:42                     So you see I’ve never, yeah, I’ve never sort of quite thought about the little steps you can take before actually sort of building up. I’m trying. What’s, what kind of comes after a ‘matatu,’ what’s between a ‘Matatu’ and a private car?

Mikael:                                 35:55                     Yeah. So I think the end result is to do any vehicle like, you know, comes into our workshop and if it’s city cars, if it’s a big year, 50 seat bus or a, you know, even an airplane in the future as we talked about in the workshop. But, these are the natural steps to, approach the market today.

Sam:                                      36:12                     Can you trucks?

Mikael:                                 36:13                     Yeah. Everything. Yeah. But right now we can’t do it because every time there’s a new model we need to develop, you know, battery boxes, the right design for the Moultrie power and, everything.

Sam:                                      36:24                     But is there like an upper limit as to how much power a battery engine can like produce?

Mikael:                                 36:34                     No. I’ve, I would say today with all the different components and, you know, companies that produce these components, there’s no, there’s no limits. I mean you can buy an engine with 3000 horsepowers that is perfect for a truck or you can buy a small electric motor for only a motorcycle. So these components definitely exists.

Sam:                                      36:53                     And the 3000 horsepower one, it’s not so big that it can’t be fitted into a truck.?

Mikael:                                 37:00                     No, it’s actually the opposite. Electric vehicle components are much more power dense. So, for example, when we, when we retrofit or convert the safari vehicles, we remove about 400 kilos and we add about maybe 300 kilos. So actually when we’re done, we actually reduced the weight of the vehicle and this is going to be the same for trucks, because they have huge fuel tanks. Right. And every lead during that fuel tank weighs a lot of, yeah, it weighs a lot.

Sam:                                      37:29                     Yeah. Wow. Okay. So you say trucks is a plausible next step, cause that’s another one where you have a start point and end point.

Mikael:                                 37:35                     Correct. Yeah. Yeah, so trucks and the city cars will definitely be the next step.

Sam:                                      37:39                     Very cool. So far it’s quite expensive. How, how have you sort of financed the business so far?

Mikael:                                 37:44                     So, yeah, it’s incredible. We’ve actually managed to do a lot with a little, and I think that’s one of our companies, you know, models to do as much as possible with as little as possible because not always, you can, you know, you can have support of a big grant funds and all this. And so our sort of main thing has been to work with sales because we want to sell first and then develop. This is very important for entrepreneurs in every business because if you develop something first and then you show it to the customer and try to sell it and they say, no, you need to go back and redevelop and redesign and everything. But if you sell an idea to someone and they buy it right and they need develop what you say, what you’ve sold to them, it’s already done right. The sort of downside is that it might be a, you know, issues with delays and also, there might be some design steps that we need to do, you know, while we’re delivering the vehicle to the customer, but this has been one of our approach because we can very quick, you know, show the proof of concept, start getting, getting revenue into the company and yeah. And show people that it works.

Sam:                                      39:04                     Okay. So have you been self-financed the whole way?

Mikael:                                 39:08                     It’s, it’s almost, we’ve taken loans from different Swedish banks and we haven’t done any equity round at all so far. And right now we sell about six of these vehicles a month, and we sell ’em perhaps about a thousand solar panels every month. And we’ve been awarded a big project of 300 lithium battery storage systems going to be installed all over Kenya with the auto valuable but $1 million. So everything is really picking up. But yeah, it’s been a, it’s been almost only self funded from the start.

Sam:                                      39:43                     Is it, is this a sort of business that needs to have investment to kind of take it to the next level or is it something where you can kind of grow…

Mikael:                                 39:55                     Investments are definitely needed. Yeah. So this is sort of the, you know, the proof of concept showing everyone that we can do this. We know what we do, we also get experienced in the market, but we, yeah, in the near future we will do some big equity rounds to bring in the capital needed to, scale up and also to scale up to other countries. Cause it’s very interesting that the markets in Kenya are very similar to markets in Tanzania, in Uganda. You know, they have the same sort of public bus system with the Matatu, they had the same motorcycles and everyone is in need of, you know, reducing their running costs. And they also have a lot of sun four for charging of, you know, through solar panels. So I think, yeah, definitely in order to scale up, we need to have investments. Yeah. Okay.

Sam:                                      40:41                     Okay. Now, to me, this seems like a good use case for like grant money.

Mikael:                                 40:49                     Definitely.

Sam:                                      40:50                     If you, I don’t know anything about it, but I can imagine there’s, a big fund or report money somewhere, which is saying we need to promote, energy efficient or like environmentally friendly solutions in developing parts of the world. Are they, do those things exist?

Mikael:                                 41:07                     Yeah, definitely. And we thought the same from the beginning that, you know, this is the perfect, the perfect project for grants and funding to, to put their money on. But I think we’ve been applying for probably, you know, five or 10 of these applications and some of them are still in progress and I think we’re probably gonna get a few of them quite soon. But so far we haven’t got that much. And I think the reason is that everyone talks about bankable projects, how you can find projects that actually, you know, make a profit and are a good investment in some way. And these are the projects that they tried to find. And when we have is sort of, you know, destructive and very innovative idea that is quite risky because we bring in a product to Africa that has never been here before, even though even though it sounds really good, you know, some of these institution and the, and funding might not like the risk. Yeah.

Sam:                                      42:05                     Oh, it’s a shame isn’t it?

Mikael:                                 42:06                     It’s such a shame. Yeah. We’re really close to getting a few of these. I think so, yeah.

Sam:                                      42:10                     I’m sure if you can, you’ll get some good use cases. It becomes more bankable

Mikael:                                 42:13                     definitely then. And that’s the way, because we need to, we need to show the proof of concepts so they know that, you know, the grant will actually do some impact socially and environmentally. So we need to show the proof of concept, which you’ve done now and then, you know, have a scalable idea of, how to proceed. Yeah.

Sam:                                      42:30                     How does, like how technical do you need to be in terms of the efficiency gains in terms of, from an environmental perspective? Is it, can you just kind of just say like a petrol engine emits this amount of fuel fumes? We don’t, here’s this, here’s a calculation, we’re better, or do you need to like actually take readings of stuff like this?

Mikael:                                 42:54                     Yeah, it depends on how you want to do it. But what’s really important if you want to get the whole picture is to look there, look at the design life of the product. So, for example, when we put in batteries and electric models, these batteries and motors needs to be produced somewhere, right? And in the manufacturing process and even in the resource process where we get all these resources out from the, from the ground, because some motors in some batteries requires some really rare earth metals, which are quite difficult to, to get. So if you look at the whole picture, you know, it’s, it’s definitely, it’s not, you know, it’s not the, the miraculous solution to everything, but, it still makes sense. And I think it’s very important to build the infrastructure. And the, how should I say it? The mindset of, you know, we shouldn’t put petrol or diesel anymore in our cars, which use electricity because you know, years down the line it will get more efficient, the batteries will be, will be more efficient as well, and we’ll get everything to be more and more environmentally friendly. So yeah, even though if you look at the whole picture, it still looks really good in comparison to continuing using petrol. But obviously I would say electric vehicles has a little bit more carbon footprint in the manufacturing process. But then in the use, it’s almost nothing except when you, when you change the batteries. So it is definitely much better than conventional vehicles. But when you look at the whole picture, you need to take some things into account. Yeah.

Sam:                                      44:25                     Correct. Okay. So with this all being said, even when you’ve been able to demonstrate that this is a, a bank or like already bankable investment, is that, do you feel there’s an, is there enough grant money out there where you can just kind of keep it up and not give away too much of your business? Or do you think you are going to have to go behind? What type of investor are you going to sort of go around?

Mikael:                                 44:51                     it’s going to be a mix of, you know, impact investment and just, you know, when we look at the investment that we really want to work with the investors in the region, we just, we don’t want to bring in someone that only comes with money. We want to have someone that brings, you know, maybe some knowledge or experience or in our business perspective on everything. So we’re very picky when it comes investments and I can say that, you know, we’ve had a lot of different opportunities but we’re very picky to choose the right ones. And I think you shouldn’t, if you have enough Cash flow and you know, everything works well, you shouldn’t stress it out too much. Obviously everyone wants to bring in the money to make the big expansion of the scalable project. But I think as long as you, as the other viable product that brings some revenue, I think you can, you can take it a little bit slower. And then other VC companies usually say, they always say, you know, if you don’t bring in us now for 50% of your company, you’re screwed. You can’t do anything. But, I think that’s wrong.

Sam:                                      45:52                     Okay. Weird question. As grants involve getting money into the company, is that your responsibility or… Cause you’re head of sales?

Mikael:                                 46:01                     Yeah, so…

Sam:                                      46:02                     Cause it’s because it’s to do with like bringing in money, right? You have to do it or can someone else do that?

Mikael:                                 46:06                     So first of all, to define the company properly, we are sort of in the, the, you know, the, in between being a startup and a really, you know, established company in Kenya. So obviously in a startup, you know, there’s a, there’s a lot of different things to do. So usually, you know, we have our responsibilities and our departments, but you know, if something needs to be done, you know, everyone helps out. So yeah, I’d be working, I’ve been working on these grants as well, but it’s not, it’s not my, my only only thing, my main purpose. Yeah.

Sam:                                      46:33                     Yeah, yeah. Okay. And why is it called Ou Bus?

Mikael:                                 46:36                     So Opibus means resources in Latin.

Sam:                                      46:40                     Okay.

Mikael:                                 46:40                     And I think the idea is that we, you know, we like to work with the resources and how we can, how we can make the most of out of the, you know, the smallest things.

Sam:                                      46:50                     Yeah.

Mikael:                                 46:51                     And, yeah, that said. Yeah. I guess, yeah.

Sam:                                      46:55                     What was the, was it easy to come up with that name? What did you have like a big selection and your like, cool…

Mikael:                                 47:00                     It’s the same in every startup, but you know, it’s, it’s like you almost agree on everything with the business idea and the concept, but like, when it come to the name, it’s always, you know, it’s difficult to, to choose. But yeah, we, we stuck with this one and then, we haven’t had time to, you know, pause and actually think about, and maybe there’s a better name or something. And so, yeah. It stuck with us?

Sam:                                      47:21                     What were some of the other names you considering?

Mikael:                                 47:24                     You know, I can’t really remember, but you know, some of the really classic ones, like, you know, electric safari vehicles practical ones, but yeah. We really like the name now and I think whatever, whatever name you choose and when you, when you become an established company and more people get to know you and the company and the image, it just sticks and everyone likes it. So I think, I think Opibus is quite, quite established now in Kenya.

Sam:                                      47:55                     Um, cool. So we’ll just do a few more questions.

Mikael:                                 47:57                     Yeah, sure, sure.

Sam:                                      47:58                     So company is going for a few years now, you’ve been in Kenya for 12 months per se. What have been some of the surprises, both positive and negative you’ve had? So if you compare, roll back the clock 12 months, if you were to say, yeah, in a year’s time, this is what Opibus will look like. What are some of the surprises you’ve, you’ve had in terms of positive and negative?

Mikael:                                 48:21                     Yeah. So, positively, I mean, the market has responded really well. There might be, we haven’t, you know, we haven’t got that big yet, but there might be a push in the future from, you know, oil companies that have connections. Maybe some, some ministers or someone up in the government that might, you know, want to, you know, quiet us down or maybe want to push us in another direction. So there’s a lot of these forces that we thought could be an issue, but it hasn’t been so far. And I think we’ve had sort of a stealth strategy where we, you know, we develop and then we just go big. So no one has time to, really, you know, put us in place so to speak. But yeah, positively, the market has responded really well and it’s actually, it’s been, it’s been quite, quite good having a company in East Africa and obviously we didn’t know that much about it from the beginning because there’s so many, you know, different things, both the cultural and financially. And then, you know, the rates, interest rates in Kenya is like, you know, eight to 12%. And in Sweden it’s 2%. So there’s a lot of things that they’re really differs from Sweden for example and Europe, but negatively. There’s so many things that don’t work out in the same way as in Sweden for example, logistics, you know, the Kenyan government, when they impose these new customs rules, for example, they can do it overnight and it can, it can just screw up the whole, you know, logistics chain. And we’ve had batteries. There’s been stuck in the port for six months. Like, no one can clear them because they changed the regulations on which papers they need, but the parks has already been sent before they changed it. So there’s just these nightmares that are so difficult to, you know, foresee. And then obviously corruption. Is a, very, it’s a big problem in Kenya and Africa as a whole.

Sam:                                      50:20                     How much have you faced it?

Mikael:                                 50:21                     Yeah, so, you know, you face it every day almost. It’s everything from, you know, traffic police officers to, at the customs or stuff like that. But, we have a policy where we don’t do anything that has to do with corruption. So for example, this example when we had to wait six months, you know, we could probably, you know, pay someone off or stuff like that to make it happen faster. But we just simply said no, like we we’re not going to do it. And finally it worked out, but it takes longer time and it really, it screws up the whole plan. But, corruption has been a really, really negative thing for, yeah, for operations down here. And, I think we’d been managing it so far. But you know, they, they can be a time when just other companies would pay off the government and they get all the products and projects, you know, a Chinese company coming in and doing exactly the same thing, but they give a, you know, $200,000 to the top minister and then maybe we will be out of business. And these things are so difficult to foresee. Also the elections, I don’t know how much you are informed about the elections. Last time it was quite aggressive and it really affected the tourist ministry in all the businesses in Kenya. And this happens every four years, if I’m not mistaken. Yeah. And that’s also a risk, you know, every fourth year maybe you just shake the market completely and you can’t do business anymore. So there’s a lot of risks. But we’ve been managing everything so far and we’re really happy to work here and really, you know, put these new solutions to to Kenya and East Africa.

Sam:                                      52:00                     Fantastic. And people who are listening who might be interested, you know, in Opibus, either for themselves, let’s say they own a Safari lodge, or they’re interested in just learning more about the company. What are the best ways in which people can sort of learn?

Mikael:                                 52:12                     So I think, going into our website, the as in Sweden, we are going to get a, yeah, we’re probably gonna get a Kenyan as soon as, well, I’m actually the guy designing the website and I’m doing all the design work for the brochures and everything. But sometimes it’s difficult doing the big deals and doing the design at the same time. So we’re probably gonna kind of improve that? But going into the website, you know, sending us an email, there’s contact details to all of us in the, in the management team. So if you’re interested in sales, you can contact me if you’re interested in something about the, you know, the technical stuff, you can probably talk to our CTO. But yeah, in general, send us an email or call us. That’s the best way.

Sam:                                      52:49                     Very good. Awesome.

Mikael:                                 52:50                     Cool.

Sam:                                      52:50                     Mikael, thanks so much.

Mikael:                                 52:52                     Perfect Sam, thank you very much.