Investor sees opportunity, less risk in Kenya

Part of the newly constructed Lenana Place in Nairobi. The new levy on commercial property coincides with City Hall’s plan to raise land rates from 17 per cent to 34 per cent. SALATON NJAU 

Adil Popat, the chief executive of Simba Corporation. Illustration/Joseph Barasa 

By Isabella Mukumu

In Summary

• The Wharton Club of Africa has organised a high-level summit for deal-makers, business leaders, institutional and individual investors that opens in Nairobi Wednesday morning.

The Wharton Club of Africa has organised a high-level summit for deal-makers, business leaders, institutional and individual investors that opens in Nairobi Wednesday morning.

Organisers of the meeting have touted it as a forum in which experienced corporate chiefs with deep insight in the investment arena will share their experiences, find possible partners and negotiate deals that could be closed in 2014.

The Business Daily spoke to Adil Popat, the chief executive of Simba Corporation and a collaborator of the summit on the emerging realities in Africa’s business landscape, the opportunities and challenges, that have accompanied it. 

-----------------------------

What is your association with the Wharton Club of Africa?

My primary association with the Wharton Club of Africa is through my directorship of the Wharton Advisory Board for Europe, Middle East and Africa.

I have been a board member of the Wharton Club’s Africa chapter for a few years now. I graduated from the Wharton Business School with an MBA in 1984 and have since been a member of the alumni club.

The main objective of the club is to provide our membership with high level networking opportunities and to keep in step with emerging intellectual concepts in the arena of entrepreneurship and investment.

What does the Wharton Club of Africa plan to accomplish with the summit that opens in Nairobi Wednesday?

We intend to bring together people from all parts of the world to focus on investment opportunities in Africa. We have tapped like-minded people – business leaders, investors, private equity managers, deal makers and top business scholars to share ideas, find credible partners with whom they can discuss viable opportunities to help drive our businesses.

The key thing here is that Africa has matured and all we need are skills and expertise to help improve quality and efficiencies and I am sure we can get these in associations arising from such forums.   

READ: Nairobi hosts investment summit

Many African corporate leaders have been quietly bemoaning the increasingly difficult business environment in which they are forced to operate. What challenges, if any, do you see in the Kenyan or regional market from where you sit?

We need to eliminate inefficiencies much faster. In many parts of Africa, doing business has become too expensive because of these inefficiencies.

In Kenya, as an example, there is a lack of clarity in key areas such as taxation. It is not always clear what taxes or duties businesses are required to pay and investors have been put in a situation where they must always look over their shoulders.

A lot of inefficiencies also exist in key sectors of the economy such as hospitality that is crying for proper classification of hotels and in the security sector exposing ordinary citizens and businesses to major losses.

The key thing here is to increase the pace of change in order to reduce the difference between return that our economy offers investors and the risks involved.  

What is your take on the economic outlook for East Africa and Kenya in particular?

The prospects are very promising. All the economies, including Kenya, are growing at a robust pace mainly driven by the recent activation of their natural wealth. Tanzania, for instance, has become a resource-based economy that is bound to grow much faster in the medium term.

Growth is certainly much slower in Kenya because it is starting with a much larger base than its East African counterparts. The country’s biggest challenge, however, remains in understanding the Constitution and its provisions on governance, especially with regard to devolution.

The government must correctly understand the role that key pillars of the constitution such as devolved government and the media are meant play in development and give them the right space. 

If you had the opportunity to sit with President Kenyatta today, what would you ask him to do to improve business environment?

Five major issues come to mind. First is security – for the people of Kenya and business. This is a fundamental responsibility of the State and one which we must confront with speed if we are to improve our competitiveness as an investment destination.

Then we must also pay attention to the labour market with a view to improving the skills therein. I mean we need to invest in training to acquire skills that are needed to run a modern economy.

Third, Kenya needs a clear transport policy that can help cut the cost of moving raw materials and goods across the country and the region. It cannot be acceptable that it costs $1,000 to move a 40-foot container from Mombasa to western Kenya, the same as it costs to move the container from China to Mombasa.

This is the surest way to price ourselves out of the market. Equally important is competitiveness in the arena of information technology.

The government has been saying the right things about the IT sector but we need to move fast to own that space.

The State must support this sector in collaboration with private sector players such IBM who are driving it through initiatives such as the planned launch of technology lab at Strathmore.

Finally, we must run a sound economy that is rooted in fiscal discipline and that does not increase the burden of doing business for the private sector.

Simba has been a major player in the motor market but has recently ventured into hospitality with the establishment of Villa Rosa Kempinski in Nairobi.
Is this a pointer to the opportunities you see in the real estate/hospitality markets and are we going to see Simba increase its presence in that area?

Simba Corporation’s strategy was always to play big in the hospitality sector. 

It is our considered view that the industry needs to be supported by top quality service and that is why we have launched our entry with a world class brand such as Villa Rosa Kempinski. We intend to expand our presence in this market with Three Star-level hotels mainly targeting local and regional guests looking for affordable accommodation.

Work on our 96 room hotel in Kisumu is at an advanced stage and we expect to get it operational early next year. We have also started work on a 180 room hotel in Nairobi’s Westlands and plan to put up a 150 room facility in Mombasa.   

This summit takes place only six weeks after the September 21 terrorist attack on Westgate Mall. Was the fact that the organisers did not try to suspend or move it to another location meant to send any message?

The organisers of this summit picked Nairobi as the venue long before the terrorist attack happened and when it did, we decided not to be fazed by it.

Even more important is the fact that Africa is currently on the radar of most investors and no one wants to miss the boat.

Investors, both local and international are seeing great opportunity in the continent and are ready to move in regardless of these hiccups.

The point is that unfortunate incidents like Westgate can happen anywhere as it did on Monday at an airport in the US, the world’s most powerful nation. I think all investors are saying is that they are not going to let incidents like Westgate come between them and opportunity. It is a mark of confidence in the economy.