Leading steel manufacturer in Tanzania talks about business and economy

Interview with Gagan Gupta, Chairman of Kamal Steel Group

Tanzania’s real GDP growth is forecast to average about 6.3 percent between 2016 and 2020. This is a very brisk growth trend and it obviously reflects the relatively robust domestic demand in the consumption sector. How is this buoyant macroeconomic backdrop helping to benefit Kamal Steel?

Tanzania is now on the world map. After the exploration of the hydrocarbon sector from all over the world, there is much attraction and interest in investing here, which will play a very big role towards the growth and development of the GDP in Tanzania. Kamal Steel will see a direct advantage from any investment that comes to the country because we produce the steel which is the basic core material for infrastructure, construction, or even the LNG. There are also benefits from policies with the World Bank, how to consume the local product, as well as how local industry can benefit from foreign investment. Kamal Steel will therefore directly benefit from that GDP growth and continue to participate in the rapid growth of Tanzania.

Kamal Steel or Kamal Group registered its flagship company, Kamal Steels Limited, here in 2004 and today has become the largest Hi-Tensile Steel and Re-bars producer in East Africa. Can you provide a brief history and the context of your corporate journey in Tanzania?

We went into business in 2004 and it was not a planned journey. I had come here to Dar es Salaam just on holiday as a tourist. It was my first trip to Africa. Then, as a businessman, I became interested in steel because we are involved with steel in India. I went to some individuals who were dealing with steel here in Tanzania and asked what they were doing and what the prices were like. I spotted a large gap between the raw material and the finished product.

You spotted an opportunity?

Yes. My first concern was the cost of the importing. The raw material is already here, but people are still importing. I did not know anyone in business in Tanzania because I was just a tourist. I did not have any relatives here. Immediately, though, I found the right person. Unfortunately, he passed away five years ago. His name was Mr. Salgar, and he was the CEO of the Safal Group with Chandaria, which is a Kenya based group. They are a very large group in Africa. I had the chance to meet him and told him that this business was very interesting to me. I asked him what I could do here and what challenges there were. He told me that there was very good business to be had here and that if I wanted to pursue this, Tanzania had good policies and would support me.

He also warned that there are challenges of course and you have to fight. I said I was ready to fight these challenges. Then he offered me some land he had to sell. I asked him where it was and it was actually right next to his land. So on that first day, I agreed to buy the land for my factory and they are still my neighbors today. I then sent my team from India to install the factory, machines and orders. That was the starting point in 2004. We started production in March 2005. It was very quick. I made my decision without any feasibility study or consultancy. It was a good decision at the time. Now, Kamal is active in different sectors. We are producing gas and our oil refinery is ready to produce around 30,000 tons per year from the oil. We are producing 80,000 tons of steel. Our production line is ready to produce another 50,000 tons. Within the next six months, we will have produced almost 130,000 tons. However due to the power challenges, my project is delayed by another year, but we are now putting together another 300,000 ton steel mill. Before 2020, we want to produce more than a half million tons in this country. Demand is growing. New infrastructure being built all the time and they need domestic steel as an imort substitute. 

What is the total market demand here?

The Tanzanian market has a demand more than a half million tons and year and the East African market combined is more than one million tons combined.
We want to grow slowly. We want to meet the demand of the country slowly. We have different operations and different challenges in the various sectors we operate in, so we have to concentrate on them piecemeal.

Kamal Steel presents an inspiring example of the benefits that can result from a South-South engagement of an Indian company coming to another undeveloped or not yet fully developed economy.

The market is always beneficial for us because it is a newly growing market and India is already quite developed in the steel sector. The relationship between India and Tanzania has been very strong for a long time. We have always received support from both the Indian and Tanzanian governments.

As an Indian investor, you gauged and identified the opportunities which were presented by a fruitful and growing market here, and then pursued these opportunities to the benefit of both yourself as an investor and the country that is reaping the benefits of this investment.

Correct.

Steel production is set to reflect the trajectory of the overall construction sector here. Obviously the bridges and high-rises have added to Tanzania’s man-made landscape. In August 2014, Kamal Steel inaugurated the new 200 million dollar addition to its Chang’ombe Plant in Dar es Salaam providing you with an additional 80 million tons annual capacity. How will this new plant form a part of your overall strategy?

Our Chang’ombe factory is fully developed. That is why we have developed our new steel mill facility about 32 kilometers away along the Bagamoyo Road in the 300 acre industrial park. We have already given land to investors from Dubai, China and India and we are keeping almost 60 acres of land for ourselves for future projects. The investors have their own prospects on planning so they can establish their own industry. We are promoting similar industry here to create more employment, which is of course a basic need here in Tanzania. The unemployment rate, especially among youth, is very high so we need to provide them with employment. Kamal employs more than 300 employees in steel. In addition to our other factories, we directly employ more than 400 people today.

Kamal employs more than 300 employees in steel. In addition to our other factories, we directly employ more than 400 people today.

Since you first came to Tanzania in 2004, Kamal Group has successfully branched into several other industries ranging from mining, industrial, medical gases, and other construction related industries. What are some other promising subsectors you see Kamal expanding into?

In Tanzania, the major challenge is power. Without power no industry can run. The power must be constant and reliable. Most industries need 24 hour power to perform without issues arising, from cement factories to glass factories to steel factories. We cannot have a disturbance in the power. One breakdown can create big losses. That is a very important and challenging factor in Tanzania. In 2013, we developed our industrial park and that was quite a challenge for us. We talked with the government and told them we needed this power and they told me to see this challenge as an opportunity. I met with the people of TANESCO who also appreciated the opportunity this challenge posed, and we decided to build a 225-megawatt power project and establish an industrial park. We have done a lot of work already with documenting, gas supply agreements and negotiations, locations of the gas, as well as an extensive environmental impact assessment. We are now in the final stages.

Because of the size of the power project in Tanzania as a whole, we decided to sell back some of the power to TANESCO, which we will then buy back. So my production facilities will have continuous, good quality power. This is all because an investor from Dubai bought the land for the Siemens Plant, another investor bought the land for a medicine factory, and we also have automobile investors from India showing keen interest to start industry over here.

Because our background is in the industrial sector in India, it was easy for us to convince the investors because we already have a success story in Tanzania.
I am promoting the industry here, but I cannot do it all. I am promoting Tanzania as an investment destination. I am the Chairman of the Indian Business Forum and we are also a part of the Industrial Association in India. We have held a lot of meetings and seminars in India, Singapore, China, and Dubai to attract more investors to come here and invest in Tanzania. It is  one of the best destinations for investment and we are proof of that.

So you have personally been banging the drum for Tanzania?

It helps with the GDP growth. If these people come and construct buildings or houses or factories tomorrow, they will need steel. Therefore it is mutual growth for everyone, and we as Kamal Steel benefit directly from that trend. That is why we are promoting Tanzania. We are getting investors from the United States because they believe in us as businessmen. We are not bothered by inviting competition. Let the investment come. That is more important than worries about competition.

The company has also launched its own private Export Processing Zone or EPZ. More generally, the government has placed a specific policy priority to focus on industrialization and boosting manufacturing productivity and so forth, obviously in a bid to attract investment into all of those sectors. The government also intends to expand and establish several more Special Economic Zones. Do you hope these will open the door to investors who will potentially make similar contributions to the private sectors in Tanzania?

I am always thinking about how to promote the country and bring in more industry. We organize a lot of seminars and we particularly talk on the ground level. TIC people and investors want to visit your industry because if people see, then they can do much better. I have followed our Excellency, the Honorable President Doctor John Magufuli, since the elections last October. From the first day, his focus was on industrialization and bringing in more industry. If the President is talking about industrialization and understands the core points, that is very good news for the investor. He supports all industrializations and he understands that only industrialization can bring change and create employment.

When the Indian Prime Minister was here, he talked about how to bring more industrial investment from India, because India is also an industrial country. Kamal Steel is lucky in that we are already here. It is a very good opportunity for us. In 2010, we developed the first industrial park . The whole country had no specified industrial area. I decided to develop the industrial park for heavy industries and we had to travel 32 kilometers from the city center. My dream has come true because my President wants the same thing that we have already implemented.

Do you have Tanzanian citizenship?

Not in law. I am an Indian passport holder. But my younger brother, Sameer, is a Tanzanian now. So our interest is here. We are here for the long term.

Regionally, you have a dealer network which already encompasses many countries in the area, such as Zambia, Burundi, Congo, Kenya, Malawi, and so on. Do you intend to continue to deepen your footprint across the African continent at large?

No. My work style is different. We are making a footprint in Zambia, Rwanda, Burundi and neighboring countries also, but I want to fulfil the demand of Tanzania first and foremost. My full focus is on Tanzania and identifying where there are weaknesses, in the power sectors, the steel sector. Expanding our business is a different issue. Tanzania is a very big market. You can put a footprint anywhere and open an office. I do not want that. I want to focus on one place and make it strong so I can be part of the growth of Tanzania. We are participating in terms of the revenue and taxes and we are doing good work in the country.

How much satisfaction do you take personally in being a member of the Tanzanian business community and being able now to actively contribute towards its overall social economic development?

There are challenges. Yet it is also true that if there is a challenge, then there is a profit to be made. We have to face the challenges. My father always told the story of industrialization in India in the 1960s and 70s which were a very difficult time. He taught me to not be worried about challenges, but to fight them. In my personal view of Tanzania, I never feel away from home, here. I never feel scared. People are very humble and very supportive.

They are extremely respectful. I am from India and this is my first-choice destination. So I have a great respect for this country and this country has also given me a lot in terms of my growth and my respect. We are also doing whatever we can do on a social level and through social corporate responsibility. We have adopted two schools. For many years we have fed 1,600 children every day. We are giving lunch every day to these children so they will come to school and study. The parents are also happy.

By 2020, we want to feed at least 10,000 children. We can adopt more schools because food and education are both related.

For now we are focusing on steel and power. We have the refinery already established and other projects are in progress. We are working very hard in the agriculture sector. We are focusing on different sectors to find what can benefit the country, the weaknesses, and where we can make a bridge between India and Tanzania. India is also importing a lot of crops and everyday staple foods from Tanzania. We are talking with the government and different organizations in India to make a better bridge so that Tanzanian farmers can benefit from good regulations and fair prices in the future and really benefit from the market. They need this. The Indian Business Forum is inviting the big farmers and introducing them straight to the Indian buyers so they can export directly and get a good price, which will then allow them to grow more.

As I am here in Tanzania, it is my duty to pass on that opportunity to the Tanzanian people.