Discussing Latest Trends in the Packaging Industry in East Africa with Akshay Shah of Silafrica

Interview with Akshay Shah, Group Executive Director at Silafrica

Could you give us a historical background of Silafrica?

Silafrica has been in the business of manufacturing rigid plastic packaging in East Africa for about 60 years now. We started our first factory in Tanzania, which was actually started by another company, and then we acquired it. That is how Silafrica got started. We then started the second factory in Kenya in the city of Nairobi. After that, we started the third one in Nigeria which we closed after a few years. We started another factory in the UAE during the global financial crisis but it did not work out well, so we closed that. Then we started another factory in Ethiopia, which was successful and it is still there, and we started another factory in Uganda, which did not go anywhere after two years, so we closed that down. At the moment, Silafrica has a manufacturing footprint in Kenya, Tanzania and Ethiopia, and we have plans to expand into other countries in the Sub-Saharan Africa regions.

Could you also brief us on your scope of business?

Silafrica manufactures rigid plastic packaging. We are the first packaging company in Africa to be a global signatory to the Ellen MacArthur Foundation, which basically means that we have made public commitments to only manufacture 100% recyclable rigid plastic packaging. We will reach that commitment by the end of 2025. Right now, we are probably at about 90%. The areas that we really specialize in is packaging for the beverage industry, agriculture industry, food and dairy industry, and lubricant oils. It is quite a wide variety. We also do packaging for cosmetics and pharmaceuticals, basically anything that requires really high quality packaging which can provide supply chain efficiency as well as help our customers to elevate their brand. This is where they come to Silafrica for good quality recyclable packaging.

What are your competitive advantages? What makes Silafrica stand out?

There are three competitive advantages that we keep on building upon and enhancing all the time on a continuous basis. The first one is all about performance delivery, as customers who run their own businesses depend on our packaging to come to them on time, in the right quantity and with the right quality. That is the basic promise that we make to our customers: when they do business with us, their business will not be compromised because we are not able to deliver the right product at the right time and the right quality. That is our performance guarantee, and there are a lot of things that we do behind the scenes to be able to deliver that type of performance. We never let our customers down.

The second area where we stand apart from the competition is when it comes to innovations. This could be investing in the latest technology to be able to innovate on new products to maybe make the products more recyclable or to make them in a more sustainable way. Then, there is also technology innovation through product design, such as coming up with new products that can help our customers to get higher brand elevation or better supply chain efficiency. There is continuous innovation on our end, and we invest in innovation all the time. Every year, we put millions of dollars into the company to keep improving our technology leadership role in product innovation and process innovation.

The third area is around circular economy. This is very important because plastic is an amazing material for packaging, unless it is not managed properly in the supply chain. We first of all make it easy for our customers to use our packaging – be it the returnable, reusable or refillable. Then, the packaging itself is also designed to be 100% recyclable, which means that, at the end of the line, the packaging can easily be recycled. In some cases, we provide that recycling capacity ourselves so that our customers are able to get a complete circular solution for their packaging. In that area, we also do a lot of work when it comes to supporting positive legislative changes in the countries where we operate, so that governments are also bringing in the right circular economy, friendly legislation, such as extended producer responsibility schemes, and producer responsibility organizations, making it mandatory to join these things, which then enable funding to come back into the economy to grow the recycling capacity in each country.

What is the impact?

In 2019, we were successful in launching what was called the Kenya Plastic Action Bar. That was a very well presented document with recommendations to the Ministry of Environment in Kenya to adopt a circular economy approach, which was achieved. There were recommendations within that document on how a country should move to circular economy, which is to create producer responsibility organizations that can implement EPR schemes. Since then, when it comes to the packaging area – so we are talking about plastic, paper, glass, metals, composites, paper, etc. – any kind of packaging material can belong to a producer responsibility organization. Through the support of the Kenya Association of Manufacturers, we were able to launch this producer responsibility organization called KEPRO, which stands for Kenya Extended Producer Responsibility Organization.

Then, that organization was formed by a very diverse board from all the representative of the entire value chain, from raw materials, to packaging manufacturing, to packaging users, to retail, and then waste collection sorting and recycling. That was launched in early 2020. Since then, we have been able to implement an EPR scheme for flexible plastic packaging. Now, we are working on doing the same for other materials, such as flexible composites, glass, paper, and so on. It has been quite a success and the government is fully supporting us. Initially it was more of a recommendation to adopt this approach. And in these two years there has been a lot of work to get the legislation passed as well, so that it becomes mandatory. We are expecting the legislation for all packaging materials to belong to a PRO and contribute to EPR schemes to come through in this year itself, probably in the next couple of months.

What are your thoughts about the packaging industry in Kenya post COVID?

The awareness for hygiene and cleanliness has improved, and people are no longer comfortable going to a restaurant if the table has not being cleaned. The level of hygiene and cleanliness is just on to the next level. That means that there is a lot of packaging that is required in that particular area. The second thing which has happened as a result of the pandemic, is the shift towards consumption for meals, as opposed to going to a restaurant, it has become a normal thing for people to say, well, let me just order in. Again, that requires a different type of packaging for food delivery at home. Another area is packaging for general ecommerce. That again has increased because when retail, supermarkets and shops were out on the lockdown, a lot of people started to discover how easy it was to buy things online and get them delivered at home. Some of these practices are here to stay, especially when shopping is not a social experience. It will probably just become an online ecommerce home delivery type of experience.

Another thing that is also a consequence of COVID is the shift towards more resilient supply chains, as opposed to cost efficient supply chains. With the whole global supply chains being disrupted quite significantly, it means Chinese manufacturers closed down. The world cannot rely on a global supply chain, which is built around cost efficiency. Instead, the world has to be thinking about more resilient supply chains, and that probably means becoming more regional and even more national. That again has an impact on packaging. It probably means more local value addition in the countries where consumption is happening rather than importing a finished product from outside. The bottom line is that the pandemic has probably increased the demand for packaging in various areas. But it is our responsibility as a packaging manufacturer to make sure that all of this packaging does not end up in the environment and make it worse. We cannot let the solution become the problem. We need to keep focusing on that circular economy pillar as we produce and meet the demand of increased packaging in the region.

How do you position yourself in terms of competition?

During the pandemic, our business did not grow, but we did not go down or we did not go up – except we did have a problem in Ethiopia, which had more to do with the war that was going on there. But there is a lot of growth potential that is coming up over the next short to medium term because of this behavior shift and Silafrica has to adapt to that change. For example, we wanted to take away containers before, but now we need to start focusing on that. The demand is there, but we have to adapt to that demand. And that is where we see the future growth coming. But during 2020, 2021, our business – except for Ethiopia – was more or less stable, because people still had to eat and drink. If manufacturing is going to happen in more localized regional supply chains, as opposed to global supply chains, then obviously that is a benefit for packaging, for example, if somebody is going to manufacture a product in Nairobi, which would have otherwise been imported from China, such as certain critical medicines or PPE. Several countries are saying that we cannot depend on another country to get access to PPE whenever the next health crisis happens. If PPE is going to be manufactured in more local and regional countries, then the packaging for PPE will also become more local. So the demand for packaging will become more local than global.

The second thing is that companies can have a cost advantage to manufacturing packaging, but packaging tends to be something that companies buy and adjust in time, depending on their needs. Companies do not buy packaging and keep it for three months in stock, because sometimes packaging can be quite bulky. In any case, it consumes a lot of working capital. The best companies really understand that for them to succeed in the market, they need their packaging to be supplied just in time from a local producer, who is able to meet global packaging standards.

What are some of your innovative products?

Most of our innovation in the last two to three years has been focused on returnable and reusable packaging. That is where the majority of our investments is going. The first innovation is the injection molded crate that we designed to be manufactured out of recycled yogurt cups. We take the packaging waste out of yogurt cups and make a crate out of it. We then embed this crate with a tracking technology, using a microchip. Then it becomes possible to track this crate across the supply chain. One of our customers, a company called Twiga Foods in Kenya, is able to use our crate and track it right down to an individual crate level. They are able to know from which farm the banana in a specific crate came from, and how it is moving through the whole supply chain right up to their back house, and then onwards, outbound to their distribution, all the way to the last mile. Let us say on the last mile somebody picks up an onion, a tomato or banana or anything that moves across their fresh produce supply chain, and it is found to have a problem, maybe the onion has some vegetable disease. It is important to immediately say from which farm this product came from so that all the products out of that farm can again be immediately tracked. The ability to trace right down to an individual crate level is a massive innovation that we were able to launch in partnership with our customer Twiga.

The second innovation was to look at how to make the packaging for export of fruits and vegetables more sustainable. Let’s take the example of avocados. Avocados are being exported from Kenya in corrugated cardboard boxes that have holes in them to allow the avocado to breathe while it is going in transit. But this corrugated cardboard box is quite a heavy cardboard box. It has got multiple layers. We came up with an alternative, which is a plastic folding crate. The crate basically assembles, you fold it and then you pack your avocados in it, you lock it, and then you put another crate on it. The crate is designed in such a way that it has four columns on the side, which holds the weight of the subsequent crates with the avocados in it. The crate is fully ventilated, meaning there is no need to add separate holes in it. This crate is already being used to export avocados. The beauty of it is that the avocados are packed in such a way that they can go all the way to the supermarket in the country to which the avocados are being exported to. There is no need for repacking. The avocado that is picked from the farm in Kenya and put into the crate is not going to be touched until it reaches some consumer in London who is going to pick up that same avocado out of our crate. What happens to the crate at the end of that whole journey? The crate is simply going to be unfolded. It can be flat packed, so it becomes very thin. Then the crate can be used for other purposes, or it can even be sent back to Kenya, and then we can have it reused. That is another innovation that we launched. And the beauty of it is that the design is so efficient that even the price of the plastic folding crate was not much higher than the cost of that corrugated cardboard one. It was a big win, both commercially as well as for the environment. Otherwise there would have been tons of corrugated cardboard boxes landing up in those countries, wherever they are importing avocados. Then they have to deal with that waste and it pollutes their environment.

The third one is a service innovation. We have customers like Coca-Cola, Pepsi, Heineken, SAB Miller, Dear Joe, all the various beverage companies. They use a lot of crates for their supply chain in various countries. Sometimes, when these crates get damaged, they are just lying there in the environment waiting for something else to happen. We essentially put a mini recycling center inside of a mobile container, and then this container can go to wherever the waste is, and literally just help to recycle it in the field. Then we can bring the material back and make new crates all over. That has been an amazing innovation that has helped many of our beverage customers to really move much more towards a circular economy approach and clean up the environment at the same time.

What are some of your success stories?

During COVID, we did not stop expanding. In Tanzania, we have added more capacity to produce packaging for the beverage sector. In Kenya, we just launched our new line to manufacture packaging for yogurt with 30% lower energy cost and about 30% less weight. It is really great for the environment, but also very affordable. As a result, we have several SMEs in the yogurt sector which are now able to afford our global standard of packaging for their brands. Therefore, their sales have also increased during this time. Some of these small companies are making high quality yogurt, from cows eating organic grass. But unfortunately, the packaging that we were getting before did not really represent the quality of the yogurt. Now, with our packaging which really elevates the brand and their great amazing quality yogurt, consumers are actually able to see and taste the difference. Therefore, many of our small and medium sized customers have also seen a lot of growth in Kenya.

In Ethiopia, we had to take a bit of a pause to see how we could re-strategize and regroup because of the forex problems. They had a drought before the war broke out, and then the war itself added to the crisis.

We continue to add more customers in our beverage packaging area. I am happy to say that this year we are now bringing in additional lines. The good news is that we have continued to grow in spite of these very uncertain times.

Also, Silafrica has always been a learning organization. Now, we are transitioning over to a professional management which has been going on for the last few years. My team is taking over and I am focusing much more on innovation and circular economy mergers and acquisition, so we have to make sure that the culture of the company as a learning organization continues. One of the things that we did was launch an online learning platform for all of our employees. We have a curriculum based towards learning and employees can download different chapters of the various curriculums, such as maintenance for example, or how to do production planning, how to do energy conservation, etc. We have about 20 different chapters that help manufacturing organizations to become world class. Each chapter has different layers of learning. Our employees can download a particular chapter, and learn it on their mobile phone without using data, because they just use the company Wi-Fi to download it. Then, in their commute or when they are at home, they can continue to learn on their device. And whether there is a lockdown or social distancing, the learning does not stop in Silafrica. That is the reason why, as we are coming out of the pandemic, we are actually stronger than we were before.

How do you see the company in three years time?

We are on a path towards continuing to grow the business, strengthening our position as a world class packaging manufacturer for this region, and add other countries to our portfolio. We want to bring in a strategic player in the global packaging space to partner with us, because as we know, our customer base in East Africa and the surrounding countries are increasingly growing with global brands. Our strategy has always been to grow and become the East African partner for a global packaging company to come in and invest in us. The pandemic obviously slowed that down because packaging companies themselves had to regroup their own activities and figure out what to do during this very uncertain period. But because of hygiene, cleanliness, ecommerce, and all of those other reasons, the demand for packaging is not only going to grow, but it is going to become much more regional and localized.

What is your business philosophy?

I have a great team now. Our group CEO Gavin Dehning and the rest of his team are able to run this business and they have been able to prove they can run business better than I ever was able to run it before. When you find someone who can run the business better than you, then it is better to start focusing on how else you can support this business to continue to grow and expand. For me, the transition has been to focus much more on circular economy. I am still very passionate about that, and I am probably not just looking at circular economy from the legislative or the environmental perspective, but also from the technical perspective. Having been in manufacturing and packaging for 30 years, I understand how circular economy can be practically achieved at the technical, environmental and legislative level. That has been an area that is taking up some of my time. As we look at expanding into other countries, as we look at attracting investors, the area of M&A is already an area of focus for me to talk to other companies and other investors. Innovation is still very much in my DNA. What helps me to get up in the morning and be excited about what I am going to do is knowing that I am going to innovate on something and solve some big problem, whether it is through product innovation or process innovation. That is really what drives me. As long as I find myself doing something innovative, that is really what will keep me getting out of bed even when I am 90 years old. If it is not going to be innovation in plastics, maybe after 5 years or 10 years, I might be innovating in something else. There are other things I have started to get into, and one of them is in the area of digital healthcare, so innovation is in my DNA.

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