Exclusive Interview with Mohammed Dewji of MeTL Group, A Leading Economic Force in Tanzania

Interview with Mohammed Dewji, Owner and President of MeTL Group

What challenges have occurred in the sector and country as a result of the coronavirus pandemic?

Logistically, the whole world has been going through a very difficult time. For Tanzania, or East Africa specifically, there are many villages and therefore, there are always ripple effects. Currently, we have container shortages around the world. The logistical chain has slowed down with countries that we buy raw materials from who have gone under lockdown where the availability of raw materials has been slow. That has hurt production in country. The country itself never went into a lockdown. But, there are other issues regarding other countries that are supplying into Tanzania and buying from us. Of course, consumption patterns have dropped, commodity prices have been very erratic, and this is not very good for our business. There has been a lot of turbulence over the last year.

What are the main challenges in your sector and doing business in Tanzania and the East African region?

The EAC trade bloc includes many countries: Tanzania, Kenya, Uganda, Rwanda, Burundi, and now Southern Sudan. It is an economic bloc with harmonized external tariffs which allows us to trade freely between each country. Of course, there is a challenge because there are specific rules of origin and there are a lot of gray areas. We wanted to unite politically and have one currency. So, we are still on that journey. You will see a specific country that produces, for example, enough rice, like Tanzania, while your neighboring countries are more dependent on imports of rice. So, that rice comes into Tanzania duty free and that has hurt the farmers in country. We have been talking about the Africa Free Zone but it is easier said than done. Holistically, the idea looks fantastic but we need to go into the nitty gritty of each and every country, the strengths and weaknesses, and make sure that in one way or the other, we are supporting farmers against World Trade Organization dumping, laws against countries that are giving subsidies, etc. Business and challenges go hand in hand. Challenges have always been there. But we try to solve them every time they come across.

Are you trying to create something similar to the EU in Africa? Is this feasible?

We are talking about a quarter of a billion people. It is a big market. Definitely, we need each and every country as a partner to be able to trade. There are countries that are far ahead in terms of manufacturing, in terms of economic activity, compared to other countries. So, those other countries had been given a cushion. For example, Kenya has the largest GDP economy in East Africa, and by far advanced in manufacturing, but Tanzania was not. So, we were given a five year buffer where goods from Tanzania could go into Kenya tax free. But then, goods from Kenya coming into Tanzania started off from 25% to 20%, 15%, 10%, and 5%, and then five years later, it all became 0%. The economic integration has worked very well, but we are always facing teething problems and we are trying to sort matters out. With Corona, obviously, our attention has been totally diverted from the East African community. We hope to get there one day, just like the European Union.

Are you looking for investors regionally or internationally outside of Africa?

There are many companies that are traded publicly and we have stock exchanges. We have incentives for foreigners to come in and invest through the formal channels. We have private equities that are willing to come in and put in equity. MeTL Group is a privately owned company. Currently, interest rates are very low. We like to take the debt route. If I have a business, for example, that makes $10 million a year and a company wants to come in and pay me 10 times price to earnings ratio they will pay me 100 million, and then when I look at the future cash flows I need another $10 million of capex to double the revenue and double the EBITDA. Suddenly, I will have a 20 PE ratio. For me, to be able to go and borrow, you look at labor rates. Depending on how many months labor you are looking at it is less than 1%. The Euro is negative now so you have a lot of cheap financing. Companies in Europe are becoming very competitive. They have ECA finance, which is export credit finance, they can give you long term finance, DFIDs. With companies like ours that have good credibility in the marketplace, we have been able to borrow very competitively. In terms of working capital, our company borrows at 1.5%. This is unheard of as a privately owned company. We are lucky to be able to tap into that and it is quite competitive. This sets us up to increase further revenues and grow our business.

What is your scope of business as a conglomerate? What are your competitive advantages?

We are the second largest employers in Tanzania after the government. Now, we have close to about 32,000 people. We want to reach 100,000 people in the next 10 years’ time. We are always looking for opportunities of businesses where we can increase.

MeTL started off as a trading house in the late 60s. We started off as a retail outlet that was run by my grandfather and my grandmother. Retail, in today’s terminology, is explained differently than the retail back then. When you talk about retail today, you talk about selling one kilo, two kilos. Back then, retail was you buy 500 grams and then you break it down and sell it in 10 grams. When my father joined the business, Mr. Gulamabbas Dewji, who is the Chairman of the Board of MeTL Group today, he created basically a trading house. During that period, the traders had a big advantage because Tanzania was a socialist country and it was opening up. There was not much manufacturing going on. Today, we are one of the largest trading houses in Sub Saharan Africa. We work with imports and exports and our variety of goods and commodities has increased tremendously. We work with sugar, rice, fertilizer, bubble gum, yeast, pasta, motorcycles, three wheelers, air conditioners. We represent LG, Bajaj, etc. We work with anything and everything that is not manufactured in Tanzania. We have a line of over 120 different types of products that we import and we sell across the country. We are also exporters. We export everything that is being produced in Tanzania, from cashew nuts to pigeon peas to yellow gram to green mung to gum arabica to beeswax to cocoa beans to sesame seeds to maize to tea to sisal – anything and everything. Not only in Tanzania, but regionally, when you talk about Malawi, Uganda, whatever that region produces, we export because it can create a hedge against the currency to earn foreign exchange. We are one of the largest trading houses in Tanzania. That has grown in the last 20 years. We initially were trading in mainly just soft commodities and now we trade into many other products, everything from used vehicles to brand new trucks, etc. When I came into the business, there was a huge policy shift. It was more about value addition, more manufacturing, and there was an added advantage because the tax rates had changed. When you were to bring in finished goods, you had to pay 25% tax. To bring in raw material, depending on what type of raw material, you had to pay 0%. If it was semi-finished, you had to pay 10%. If it was finished goods, you had to pay 25%. So, we went into a lot of manufacturing and the vision was very simple. Today, per capita income in Tanzania is almost $1,100 a year. We have become a middle income economy. Our GDP is close to about 60 billion. But when I got back from university, the per capita income was less than half that. And my thought was, in this market, these people have less than $500 a year, less than $40 in their pocket per month to spend. What is it that I can produce to tap into that purchasing power? The conclusion was very easy. It was fast moving consumer goods, the day to day spending that they need because there was no money for luxury. So, we went into edible oils, refining cooking fats, margarines, soaps. Businesses have transformed over years. In the beginning, we used to manufacture bar soaps and people would cut them into pieces, use them for utensils, use them for the body, use them for clothes. When the purchasing power increased, we introduced toilet soaps for the body, we introduced liquid soaps, we introduced detergents for the clothing industry. We went into the whole huge range of the soap manufacturing. We went into grain milling and wheat milling which is wheat flour. There are a lot of chapatis and a lot of bread consumption. The staple food in Tanzania is corn, which is maize. We are into the maize milling business. On the trading side, we trade maize regionally. Kenya runs short in specific times of the year. We have outlets in Uganda, Zambia, Malawi. We look at arbitrage opportunities of trading maize between all these countries. Maize is the staple food in Eastern and Central Africa, including the DRC, but we also sell maize to the World Food Program. We also mill maize into maize flour and sell it. We sell the bran to the feed mills and we export a lot outside the country, mainly to the Middle East. We are also into the carbonated soft drink business where we are competing (just like in the edible oils and cooking fats and margarine) with Unilever and Procter and Gamble.

Our competitive advantages are that we have been running very lean organizations where we know price sensitivity is of the utmost importance. As much as we realized that brand is equally important, we also know that the prices are very important. On the edible oil side and the soap side and the detergent side, we are market share leaders. If you were to look at our competitors of Unilever and Procter and Gamble, we marginalize them because they have no manufacturing activities and they are importing via Kenya or other countries. Now, they are only catering to the high segment markets, which is very small. Their market share is less than 3% in the country. They get premiums for their products, but the volumes are very small compared to ours. This is how we have been able to compete. Also, we have been very intelligent in terms of the type of machinery that we use. We do not like to spend a lot of high capex on very expensive machinery because we realize that our realizations are very low. So, we try to use technology that is good and can do the job, can create a quality product, but can be very competitive in terms of pricing and return of our money. In the carbonated drinks, we use PET, we are into SDP, LDP, water, juices, etc. We compete with colas. We have now consolidated our brand into one because my younger brother, Hassan Dewji, who is the Director of Sales, at one point in time about 10 years ago, he came to me and came up with a huge marketing budget. We had multiple brands, close to 85 brands. I told him I did not have this kind of money to spend because every brand will need to be placed, need to be advertised, etc. I thought, why don’t we consolidate the brand into one and make a brand extension? Of course, it has advantages and disadvantages but as long as you are producing a good quality product, people remember that brand. I told him to come up with a brand that is not longer than four words. It does not have to mean anything because many brands of ours always had some type of meaning. For example, we had a brand called Taifa, which means “the nation”. Masasi means “clean”. Poa means “good”. Adidas or Nike or big brands, they do not necessarily have to mean anything, but it has to be short and it has to be easily pronounceable. Finally, after one year, he agreed on the Mo brand and now we have Mo everything. Though, there were brands that were very strong like the edible oil brand, Safi. So, all we did was stick “Mo” on top of it and connected the brand to Mo for those that were strong. For those that were new, such as when we got into matchbox manufacturing, we put out Mo Matches. When we got into spaghetti it was Mo Spaghetti. That gave us an advantage. We are very big into carbonated soft drinks. We had Mo Cola, of course. In Kiswahili, “orange” is chunghwa and we have, Portello, our malt drink, and beer drink. We have the capacity to produce over 1.2 billion bottles a year. But within the next two to three years, we will double that. We are giving a run for their money to Coke and Pepsi. We are not in glass bottles, but PET bottles. Our idea is to further go green. We already have a recycling plant. Currently, we are producing flakes that we export. We want to convert those flakes into PET and then mix it with virgin material to make it at least 60% to 70% recyclable bottles. We have collection points all over. So, we are working towards that more environmentally friendly product. We are also into textiles. We are one of the largest textile mills in eastern Sub Saharan Africa. We have mills in Mozambique and in Tanzania and we are fully integrated. We are ginning, we are spinning into yarn, we are weaving, we are processing, we are dying, we are printing, we are knitting, we are garmenting. Textile requires huge capital. Textile mills are huge. It provides a lot of employment. Of course, we have to compete with China and India. Our power is quite competitive. Our power costs are about nine cents. You need four things to survive in the textile sector. First, you need to have the raw material itself. Tanzania is the fifth largest cotton producer. Second, you have to have competitive power. If you look at China and India, they are also nine cents a unit to ten cents a unit. You need to have competitive and quality manpower. Tanzania has competitive manpower, but of course we need a lot more training towards productivity compared to China. That is why you see China becoming a little bit too expensive and a lot of textiles moving into Bangladesh and from Bangladesh to Vietnam. Mauritius has moved out of the textile business because manpower costs are very high. Finally, you need a fiscal policy that is in place that protects manufacturing. In Africa, it is very sad. You see a lot of gin cotton or raw materials that have been exported. The Chinese and the Indians come and buy cotton from here, and then they go and spin it and weave it and process it, and they bring it back to our countries and they pay taxes and then they are more competitive than us, which does not make sense. So, we have scaled this up a lot. We have the capacity to produce over 100 million meters of cloth which is about 100,000 kilometers. The world circumference is 48,000 kilometers. So, you can potentially wrap the world twice around with clothing that is Tanzanian. Today in Tanzania, we are only buying about 18% to 20% of Tanzanian cotton. Now imagine if we really scale up the manufacturing of textiles and we do not export gin cotton and manufacture. In short, we have 40 different types of industries including sisal yarn industries, the sisal bag industry, etc. We are going to go into other industries like polypropylene PP bags, corrugated box factories, etc. The manufacturing is a second side of MeTL which is quite huge. We are proud of it because it employs a lot of people. The third large side is agriculture. MeTL is one of the largest land owners in Tanzania. We have close to about 60,000 hectares of land. Not many people know what sisal is, but many people know what jute is from Bangladesh and India. Sisal is where you extract fiber out of the plant through decortication, then you get this fiber that was used for the ropes and twine industry in shipping. But later on, it had multiple uses. It is biodegradable, very environmentally friendly. It is used in elevator cords and today used a lot in the building industry. It is exported everywhere around the world. Brazil produces it. China produces it. But our fiber is the long fiber which you can then spin again. I am fully integrated into yarn which we export to Europe where they weave it into beautiful, expensive carpets. The lower grade fibers we use in sisal bags. Tanzania got into trouble many years ago when we were exporting in jute bags. There was contamination and no retention of aroma for coffee. So, it is now mandatory for all coffee to be exported in sisal bags. I happen to be a monopoly but, of course, the government makes sure that there is price control. It is a difficult business in the sense that it is not like when you plant corn and then you harvest after six months. You plant sisal and you do not harvest for three years. So, you need to have long term money. I have DFIDs, banks from Europe that finance me long term. We did a huge project three or four years ago and by 2022 I am proud to say that MeTL will be the largest single owner, the largest producer of sisal in the world. Currently, we are number three or number two, but we will be the number one. This is fantastic because it shows the confidence that we have in the country and in Tanzania to be a long term outlook. After three years, then you start harvesting and the second challenge is that you cannot plant. If you have 10,000 hectares you cannot plant the 10,000 hectares and then harvest together, because then it all dies together because it is a 10 year cycle. So, you have to keep on planting and planting and planting every year to continue to increase the production. We have many tea plantations and we deal with over 50,000 out growers. We buy tea, we process tea, we manufacture tea, we are going to go into tea processing for local tea consumption. This is under Mo Tea also. We are currently converting our tea farms or tea gardens into organic tea. Tea is also another business where we bought these tea plantations through receivership, through banks, etc. If you look at tea, you plant tea, and then you can harvest it for 100 years. But these tea trees are almost in their 50s and 60s, so productivity levels drop. Now, we are converting them into organic and we are planting brand new 1,000 hectares of tea. The advantage of the big companies like Unilever is that they have a very strong brand worldwide, and they can go into packaging and get better value; whereas, we sell through brokers or through the Mombasa Auction or sell directly to consumers who further value add and take away that added margin. We are also going into macadamia. We feel that there is a shortfall of macadamia and we have good land to be able to grow that. But the backbone of MeTL is the marketing and the distribution. We own hundreds of outlets countrywide, we have warehousing, we have ICT infrastructure, most importantly, we have 3,000 vehicles. So, the advantage is that whatever we produce, we sell within Dar es Salaam through route sales, through van sales. We have wholesale customers, some of who we deliver to. Looking logistically, Tanzania is a huge country with almost 950 million square kilometers of land. Point A to Point B can be 1,600 or 1,700 kilometers. We distribute our products everywhere. Our branches also act as buying agents. They buy maize, pigeon peas, yellow gram. When the farmer comes in, whatever he wants to sell we buy and we give him the money and then with the money, he buys the goods that we produce which are the fast moving consumer goods. We have a saying that every day you wake up in the morning, the tea that you drink or the sugar that you use or the bicycle that you ride or the clothing that you wear or the oil and the soap, MeTL touches people’s lives on a daily basis. So, the distribution is a very strong part of the business. Then, of course, we are into the real estate business, financial advisory, petroleum, insurance, etc.

What is the unique selling point of MeTL?

First and foremost, profitability is important, but we are also very much impact investors. Not many African multinationals have invested specifically on the agri side or the textile side where we believe employment is very important. We are the second largest employers in Tanzania after the government. Now, we have close to about 32,000 people. We want to reach 100,000 people in the next 10 years’ time. We are always looking for opportunities of businesses where we can increase. We are looking at sugar plantations where we can actually backward integrate and grow cane and manufacture. We are looking at other industries such as polypropylene, corrugated box, recycling businesses. We are also looking at regional expansion because we are present in many countries, but we want to go into manufacturing. Now, if you look at Tanzania, it is very strategic. It has a port, but it has about eight countries around it and many of those countries are landlocked. We are looking at opportunities everywhere from Kenya, Uganda, Rwanda, Burundi, the eastern DRC. DRC is like two countries. You have the huge rainforest in between and on the eastern side there are about 35 million people so it is a country of its own. The Lubumbashi side and the Bukavu side are where a lot of mining happens. Logistically, we do a lot of trade with vehicles, trucks, cargoes, etc. We are looking at Mozambique as well as Madagascar very strongly. It has been a bit delayed. I took a trip just before Corona hit and I met many heads of states in many countries and they were very welcoming and had good policies. Africa has realized that the only way that we move forward is if we facilitate, we create a good environment, we employ people, we invest, we pay taxes, and that is the friendship that there is between businesses and governments.

How were you able to juggle both running a huge conglomerate and the politics side?

I retired from politics in 2015. I do not want to go into politics ever again in my life. It happened by default because I was born in a very small town, born at home with a midwife and the husband was a doctor and he thought that I was the second child and everything would go well. They did not have ultrasounds at that time and I had the umbilical cord wrapped around my neck. It was almost 18 hours of labor for my mom and the hospitals were a couple of hours away, the roads were bad, and they thought that somebody was going to die. Finally, they thought maybe they needed to do a Cesarian. With God’s grace, I was born in a small town in central Tanzania called Singita. This is where my grandfather is buried and my family tree is buried. This is where we are from. What prompted me to go into politics was when I got back from university, I realized it was a peri urban town meaning you go seven, eight kilometers outside the city and you find villages. It has a population of a couple 100,000 people where 100,000 stay in the town and about 100,000 stay in the periphery. I saw a lot of poverty. There was an issue of accessibility of water and healthcare and education. There was specifically an incident where I saw an old man scooping yellow water and putting it into his bucket. I asked him why he was doing that and he said this is the water they were drinking. At that time, the Member of Parliament then was the Minister of Water. When I went back, he told me to come to his house because obviously he realized that I did not believe what he was saying. So, I went there and I saw young children drinking yellow water in used PET bottles. I went back home and told my dad and my mom I need to go back and I need to run for office. So, the whole idea was more philanthropic than anything else. I was an MP for 10 years, 2005 to 2015. I was a bad MP in the sense that my attendance in the Parliament was very weak. I thought that I was quite conflicted in terms of policies so I never stood up to make many contributions. When I went for re-elections, my opposition kept on saying he just never says anything. Whenever I said anything, I always spoke about my constituency specifically – water, education, healthcare, and nothing else. It was a good 10 years. We did a huge development. I was not waiting much for government funds. With God’s grace, we took accessibility of water from 20% to 84%. We started with one or two secondary schools and we ended up having 23 secondary schools. Before the government came up with the system of free education, I already was sponsoring almost the whole constituency with free education. In health care, we have fought malaria. We did an amazing job for 10 years. In 2015, I stepped out of Parliament. I never did any business with the government while I was in politics. Now, we have the Foundation. We have the Mo Scholars Program where we are helping with scholarships for universities. We have the Mo Entrepreneurs Program where we are helping young entrepreneurs. We are looking at educating orphans. So, we are looking at many other areas how we can support the community as a whole. But as far as politics is concerned, for me, I had a good experience. The only regret that I have is that when I was an MP, I would feel and see poverty every day that I was in my constituency. When you are sitting in a high rise building wearing suits in an air conditioned room and focusing on business, you lose sight of empathy, which is very saddening. I majored in finance and international business at Georgetown, but I also minored in theology. Georgetown is a Jesuit university and I also went to a Christian prep school. So, I am a big believer in God. Of course, my religion keeps me grounded. I am a Muslim and I have to do good because this is a temporary world and we are all going to be accountable for what we do. This is what is driving me now, to make sure that I just give back to the community as much as I can. I am looking forward to handing over my position in the next however many years, but soon so that I can step down and just do philanthropy and focus more. I have joined the Giving Pledge which was initiated by Bill Gates and Warren Buffett. It is not about just giving money. From an entrepreneurial point of view, a business point of view, you have to have a bang for every buck you spend. What is the maximum that you are getting out when you look at it from a business point of view? Similarly, money resources are limited. So, for every dollar that you spend, how much can I do? How many lives can I touch? And then, of course, you can see things that you can scale up. I am trying to always be a better person, a better human being. I feel even indebted. Not many people have heard about when I was kidnapped. Tanzania is generally a poor country. We are middle income. Our family had migrated from India in the late 1800s. Where have you seen in the world where you have poor people that pray for a wealthy guy who was kidnapped? When I got out, my wife had kept all these newspapers. Usually, when something happens you are on the front page, and the second day, you are on the second page, and by the fifth day, the game is over. But, people prayed for me. So, I am indebted. I am indebted to the continent. I am indebted to Tanzania. It gives me more strength to help them even more and do whatever I can. I am just so humbled. Whenever I pray, I always pray for the people that prayed for me and it reminds me that I have a new life and that I need to look at things differently than I used to before.

Do you have a final message about Tanzania?

There is a lot of negative press around our beautiful country, Tanzania. I just want to put things into perspective. I believe that there is huge investment opportunity in Tanzania. In the last five years, specifically, even through Corona, we were one of the fastest growing economies in the world. We took a gamble in that there was no lockdown. Many countries went into negative growth but Tanzania has done very well. If you look at macroeconomics, we did get hurt in the tourism sector. But the fuel prices were low so that compensated for the amount of dollars we needed to use to import fuel. Gold prices were up. Tanzania is one of the top five exporters of gold. Over the last five years, Tanzania’s currency has only devalued less than 1% against the US dollar. Inflation is about 3% to 3.5%. Our late President Magufuli has been very strong in terms of zero tolerance on corruption. This is good for our country and for Africa in general because he has changed the rules of the book. Gone are those days where people would just come and get a free ride. I just want to give confidence to people to come and invest. We are very open for investment and I welcome them on behalf of Tanzania.

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