Drilling machinery for infrastructure projects in Ethiopia and East Africa | Baraton Trade Plc.

Interview with Aboma Taye, Managing Director of Baraton Trade Plc

First of all could you give us a brief history of Baraton Trade Plc and your journey to becoming a market leader in machinery in East Africa?

We started our business as a leasing company of construction machinery such as bulldozers, excavators, mixer trucks, etc. The machinery that we used was mostly Caterpillar equipment and we started this business as a rental company. I travelled to Korea once to import spare parts and I found a used rock drilling machine and I imported it to start using it in the rental company. We started leasing this machinery and it was generating good income, we actually got our money back in 4 or 5 months. So I went back to Korea and imported another used drilling machine! It is excellent for a business to make get investment back in less than 6 months! So I thought that this must be a good business and we started to study the market and I began to visit all the local stone quarries here. I saw that they already used Furukawa drilling machines but very old ones; the machines were perhaps 25 years old. I said why don’t we start using these same machines but the newer versions from Furukawa directly? So I contacted the company through their website but no one contacted me, so I got a bit frustrated and said let´s just import the used machines. One day the Furukawa vice president for this region, Mr Tata Hiro, a Japanese man whose office is based in Amsterdam, came here on behalf of the government as Furukawa machinery was also being used by the Ethiopian Road Authority to construct most of the country´s roads. He called me and invited me for a coffee two hours before his flight back to Amsterdam. We met and I took him to my workshop and showed him the drills that I had. He was surprised that I had these drills already and so many spare parts. He said “why don’t you come to Holland? I would be happy to discuss business with you.” So I went to Holland and I met with the general manager over lunch and I told him all about my background. I told him that I have worked in the third largest Toyota dealership in the world which is based in Boston and that I was one of the top 50 Toyota salespersons in the world. Toyota is also a Japanese company and so he was very interested. He said he would give me one month to test the market in Ethiopia and to get back to him to say whether to go ahead or not. So I went back to Ethiopia and I started advertising immediately using my own funds and we found potential buyers. Within two months we organised a big contractor’s association meeting. We invited all the contractors, quarry owners, government Ministers etc. and I invited the Furukawa representative and we had a big gathering at this dinner event. We even had our local media there. At that gathering we made a deal for 5 brand new machines. This is how we started.

In the last 2 years we have sold 35 Furukawa drills and when we started with Furukawa we also started with Airman which is also a Japanese company that works with Furukawa supplying air compressors. We have sold about 45 air compressors in the last 2 years.

We set up a good marketing team and we advertised a lot. We went door to door to every construction company. We approached 50% of these companies with a Japanese representative and the other 50% was approached by our marketing team alone who went door to door to each company. We were successful and have sold a lot of machinery.

Six months ago I was asked if I want to represent East Africa as they felt they were not able to find anyone who was reliable enough to represent them in East Africa. I told them to let me try it. So I went to every country and I went door to door again to every company and I found good partners in Kenya, Uganda, Sudan and South Sudan. We had our regional meeting four months ago and I invited everyone to Ethiopia including the Japanese representatives from Furukawa and we have now set up our regional sales offices. We have travelled a lot and set up good offices and marketing teams in each country. We give good training to all of our partners and employees and I think we are moving in the right direction. We have already made sales in Kenya and we have a potential sale of about 30 units in South Sudan. I shall be travelling to Uganda this week to finalise a few deals. We are trying to set up a solid base here in East Africa with regards to Furukawa and Airman machinery.

Ethiopia has been growing well, with 11% growth so far. Do you see opportunities for investment and expansion into other areas and markets?

Ethiopia has a large population and the population of young people is particularly large. The government is focusing on industrialisation. The main focus has always been on agriculture and I think it shall probably always be on agriculture but they are pushing industry now. If you look about 40km outside of Addis you will see that some big industrial complexes are being built by different foreign investors from Turkey, China, and India etc. These are big complexes and some of them have already started functioning. I see a big potential in industry because a lot of factories are coming from Asia to Africa and Ethiopia is a continental hub here that has seen steady growth over the last 6 or 7 years. I think it is a good destination to invest in. It is a very safe place to do any kind of business and relatively our currency has been stable; we actually have one of the strongest currencies on the continent. 1 US dollar is exchanged for 19 Ethiopian birrs as opposed to 1 US dollar being exchanged for 1,600 Tanzanian shillings or 80 Kenyan shillings. So we have a stronger currency and a good workforce with a good work ethic. I see a big future for industry here. I think in the future industry will be the key for the country, more so than agriculture.

What type of growth has your company experienced in the last couple of years and do you see that continuing going forward?

We started 6 years ago with a capital of roughly 500,000 US dollars. That was the money that we used to invest in buying machinery from Caterpillar and importing from Europe particularly Holland, Italy and our local Caterpillar dealer. We have grown by at least ten times that in 6 years. We are one of the big tax payers in the country. We have done our business very cleanly and we don’t involve banks in our business we do everything on a cash basis. We hope to grow more in the future because the country is carrying out lots of infrastructural projects that we can be involved in. We have a large growth potential especially because the business field that we work in will continue to grow so long as the country invests in infrastructure.

Is there any competition in your line of business? What strategy are you pursuing to stay ahead?

Our main competitor in the drilling business is Atlas Copco and worldwide our biggest competitors are Furukawa, Atlas Copco and Sandvik. Atlas Copco is a Swedish company and Sandvik is also Scandinavian; these are companies that have been in the business for years. Furukawa has also been operating for more than 123 years.

Our competitor in Ethiopia is Atlas Copco but their agent in Ethiopia is not really competition to us because they represent over 40 brands whilst we represent just 6 that are really focused on the drilling business. The company which represents Atlas Copco has big representation but we have sold over 5 times what they have sold in the last 2 years. Therefore we don’t really count them as competition any more. Regionally they are our biggest competitor and they have dominated the East African market for years and still dominate in Kenya and Uganda. Our focus is to do the same thing that we have done in Ethiopia and take over in terms of sales in those regions too.

With so many multinationals operating in Ethiopia particularly in the mining sector as well as in agriculture, do you see potential for your company to expand into other types of machinery and services?

We do see potential. However we really want to focus on the infrastructural projects. We don’t want to lose our focus and attention from that. The main growth especially in Ethiopia is with infrastructure. The mineral resources have not yet been found, they have not started exporting our resources. For now the only resource that is exported is our gold and they are going to start exporting potash. For now we have to focus on infrastructure, because when a country is growing the infrastructure grows as people need hospitals, roads, buildings, railroads etc. basic things that the country needs for development. Thus as you do these things you have to do a lot of rock crushing and so we want to focus on that for now before we start thinking about going into the mining industry. Of course Furukawa manufactures machinery that is applicable to the mining sector and so that will be something that we will look into in the future.

Can you tell us about Baraton Trade´s role in social responsibility here in Ethiopia?

As a company we don’t do many social activities but on a personal level I have started to help the needy. We support children with no parents with their education and fulfilling their basic necessities. Now we are helping university students, mainly girls who have no parents or help, to focus on their education. We pay all their basic necessities. We really want to focus on our employees, so that they can learn from my experience and go on to do what I have done and teach others to do the same. As I said, this country is a large country with a large population so one person can’t do it all. You have to have grassroots development by teaching others. I have focused on my employees and now most of my employees are now helping someone else, either in education or covering basic expenses etc. This is how I am helping my community on a small scale. Hopefully if our business continues to grow our activities in terms of social responsibility will also grow.

You have clearly been a great success. If you could give an inspirational message to the younger generation of Ethiopia what would it be?

I would say that for anyone to be successful you need to have a good work ethic, culture and personality. You need to focus on your job. Here in Ethiopia, a lot of us grow up in poor or middle class families. So we have ambition in us and we want to be somebody when we grow up. Success will happen if you focus, work hard and do good things for others. If you are successful in your business and you go out and do bad things or do harm to your community, your business will not grow. Business success and social responsibility go hand in hand. I would say that with a good work ethic, with good behaviour towards the community no matter what religion or culture you are, and with focus you will be successful and have lots of good opportunities.

What are the risks for investors thinking of coming to Ethiopia?

Right now the risk is from the technicalities about importing goods: the bureaucracy. The good thing is that we don’t have the corruption rates of other countries in Africa. You can do your business in the correct way here. There is still bureaucracy here and it is something that the government has to work on. If this can be solved soon then I think all the other factors are favourable for doing business in Ethiopia. The government is doing a lot of things to encourage foreign business investors. If you go to the Business Investment office, the way they handle things has improved a lot since when I started 6 years ago. They now have a one window operation which makes things much easier for new investors.  

Is there anything that you would like to add?

I would like to say a bit about how I became the man I am today. I grew up in a middle class family just like most Ethiopians; I was not born into a rich family but I did go to good schools. Education is very important, my father was able to send me to the best schools in the country because he believed in education. My father went to the American University of Beirut where he got his first university degree. Then he went to Boston University and got his Masters in Public Health and finally he came back to Ethiopia to get a Bachelor’s degree in Law. He has a lot of degrees, he spent his life educating himself and he really believed in education. He was one of the top students in the country 40 years ago. He invested in my education and so I was able to go to the best schools here and also abroad as I went to Kenya for my university education. Wherever I went, I went to schools where the other kids were from rich families so I felt like I always wanted to be better than those kids and their families. I had a lot of ambitions. I got the opportunity to go and work in the United States and there I really worked hard. I worked in the third largest Toyota dealership in the world and I was able to grow from a regular salesperson to the top salesperson in that dealership and then to be one of the top 50 salespersons in the world. I became the sales manager and then the general sales manager. I went up in the car retail industry and reached the highest level in America.

Of course education is very important, that is why I try to help others who are in need of education but on top of that you have to have a good culture; I believe religious culture is good, of any religion – Muslim, Christian, whatever it may be. When you are good to somebody, someone above will give you twice what you gave to that person. In my opinion this kind of mentality is very important for any business person. You have to have a good work ethic. I come to my office every morning at 7am and I am very famous for that. I come early in the morning to try to finish my work by noon so that in the afternoon I can go around and visit companies or do my private things. What you do in the morning is three times more efficient than what you do in the afternoon. I advise others to be the morning people. All my employees come early in the morning to get lots done before noon, to have the afternoon free for extra things. I think all these things can be very advantageous to your business. Of course you also have to find good niches for business, which is why we found the infrastructure sector here in Africa, which we need to be part of.

You can’t only focus on the business side of things, you also have to look at your personality and your social responsibility because all these things matter if you want to be successful in business.

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