Quality Building Products and Construction Materials: Nabaki Afrika

Hamish Hamilton gives an overview of the construction sector in Tanzania and presents Nabaki Afrika, the country’s leading and most respected retailer and wholesaler of quality building products and construction materials.

Interview with Hamish Hamilton, Executive Chairman of Nabaki Afrika

Hamish Hamilton, Executive Chairman of Nabaki Afrika

Your company was founded in 1993. Can you describe some of the major changes you’ve witnessed in the construction sector since then?

When we first arrived in Tanzania, everything was sold out of containers. They used to call them container shops and it was limited. You could hardly buy anything. So because of my construction background both in South Africa and in America, it made sense to look at importing construction materials like gypsum ceilings and the basics into Tanzania, which we started doing all those years ago. We had lessons but it gained momentum from there and we started off in a tiny little 5 by 5 meter office, me, my wife and one driver with no storage space and 23 years later Nabaki Afrika has over 750 square meters of head office here and 120 personnel who work for us now. We have 4 branches and we’re busy opening another one in Dar es Salaam. We have another one in Arusha which is a big branch similar in size to our head office.

Dar es Salaam is your largest office.

Yes it’s the centre. That’s the capital. We call it HQ though it has just been renamed and is now called support office. Headquarters sounded very official and military.

The Tanzanian construction sector continues to be one of the most vibrant sectors in the overall economy. Where is the growth primarily being driven now?

We’ve got over 750 square meters of head office here and 120 personnel who work for us now. We have 4 branches and we’re busy opening another one in Dar es Salaam.

It is segmented. Traditionally, corruption played a huge part here. The President himself said that the construction sector was probably one of the most corrupt sectors in Tanzania and there was all sorts of funny business going on. To be honest we could never supply or receive government tenders. It was closed doors to us. So we focused more on the local and domestic market and the upper income bracket and slowly we gained momentum there. Now with the new regulations that have come in and the President vowing to stamp out corruption, we are getting enquiries regarding large civil works and we have picked up a lot of suppliers that are equally looking for very straight arrow partners and because we have walked that traditionally crooked path in a straight line we are finding that more and more people are coming to see us. So it’s been busy. I think the major growth is in infrastructure. A lot of the money that was intended for infrastructure never ended up there but now it is starting to. If you look at the taxes that have been collected this year alone and heads that have rolled, I think it’s a fantastic place to be. So infrastructure just in terms of civils, the roads and the airports are now fair game and the table is level now.

So this is a possible bonanza for you.

It could be. To be honest I thought we were flying but I found out we were just bumping down the runway. I do feel we can take off now.

The management of the construction sector falls under the Ministry of Infrastructure Development and that is seen by the government as an important link to both economic and social development. How would you rate the Ministry’s performance to date?

To date it has been very poor. It has been a closed shop. They would not ask us to tender for anything unless they were using our price to come in somewhere else. We had to pay for tenders. We had to lodge quite a lot of money and the terms and conditions were always a little bit shaky. I think all that has changed now and where we’ve grown slowly into the large construction sector is the demand. There are long lead times here. You can have lead times of up to three months. When you start a project or you have been given the go ahead on a project you’re expected to break ground immediately. By us carrying a large amount of stock we find that people can’t really go anywhere else because they need the product immediately. That’s not to say that we can charge whatever we want. We have always paid our full duties, VAT and taxes and because of that we found out that we are quite expensive. But now that the tables have turned we are not that expensive. It’s very interesting to see that. People are realising that they need to revisit that idea. We are in a very good place.

How permanent is the process of development? Are the combined sectors of infrastructure, transport and communications working in concert to really combat poverty reduction within Tanzania?

That’s a big question and I imagine more suited for a politician to answer. Obviously, each of those sectors is relevant and if you have a breakdown in one sector something doesn’t happen, which is what traditionally always happened. The money was always there but it went in the wrong direction so projects failed. There have been a lot of failed projects here and probably more so in Tanzania than anywhere else. Now all of that is changing, especially in terms of power. Tanzania is an incredibly rich country. People don’t realise how rich it is. You’re looking at nearly a million square kilometres of land. There’s about 1500 kilometres of untouched coastline. Tanzania has three quarters of Africa’s game and three of the largest lakes. They have estimated that it is in the top four mineral rich countries in the world and now they have found helium as well as the world’s largest area of graphite, though unfortunately it’s right next to a game reserve. There Tanzania has helium, tanzanite, rhenium as well as big gas deposits found down in the south. The potential has always been there. The mines will have to come in and do it properly now. The mines were just doing it like cowboys before. You’ll see a lot of correspondence with a very big mine up here but they’ve now had to pay taxes. It’s very interesting when you see the letters and you start visiting the mines and you see what they are doing in terms of what they do to the environment it’s quite scary. It’s good and bad. I love the fact that this county is very underdeveloped so the potential has always been there. If you look at the agriculture and the land, anything grows here. When we moved here we put up little sticks like our parents did with a packet of seeds to let it grow even that stick grew. It is incredible what can grow here and how fertile it is. It’s an incredible country. Only 4% of any type of arable land is under any type of commercial agriculture and yet 80% of the population are involved in farming. So you have these dichotomies that are very hard to link up but as you know Tanzanians are wonderful people and they are not stupid. I think what they have done is to become very entrepreneurial. If you drive at night you will see a 6 year old selling peanuts but if you look around you with open eyes you will see very little begging. If you beg here you need to be missing a limb or something. That’s accepted. If you had a 6 year old selling peanuts in the UK it would not be accepted but that’s the age they start here and they really strive to work hard. You don’t see people lying around here and it’s actually tapping into that genuine labour-force that has passion and bringing it out is the key.

Do you gauge that the government is seeking to increase the incentives of foreign investors here and that they continue to support joint ventures between foreign and local contracting firms?

I think the government is right. Obviously you have two sides to the coin here. One of the biggest challenges in the construction industry is a huge lack of skilled labour therefore we have to bring in skilled contractors at huge costs to do the work. A prime example is that when you build a dam you need this liner that goes underneath it. To get a skilled workman in costs 3000 dollars a day plus expenses and flights and this is only for a simple hand machine that you roll along a liner and it welds it together. So we have picked up the distribution for that machine but I don’t want to sell the machine as much as I want to sell the service. Now we have one of our engineers going to Switzerland and he will be trained on how to use the machine by a Swiss company called Leister Machinery. He will come back here and he will train up Mtaalam because it’s a very simple skill. If you could see how the men here can sow you would be surprised. You could walk down any street here and say that you need something made and have it ready the same day at a fraction of the cost. Tanzanians are real entrepreneurs and artisans and I think what the government really wants to do now is to maintain that local way. They are a bit paranoid about giving things away especially when you have a highly educated Kenya on your border, but having said that I kind of agree with their philosophy of rather having local skills. Every single person that we have trained and that works for us on our Mtaalam program started with nothing and was hired off the street. Last year at a BBQ we held for them I gave away two vehicles. They are branded so we get some advertising out of it but at the end of the day these are the guys that we give jobs to. Somebody will come into the shop and say they want to buy this liner and do we know anybody who can weld it. I don’t get involved in the installation and construction side of things because I believe there should be a local market for that. Many of these things are very simple.

The main opportunities for foreign companies and investors here seem to be in the infrastructure development such as roads, bridges, airports, electrical power generation, distribution, railways, ports and educational facilities. The majority of those have been dominated by foreign contractors but are the local contractors not capable of handling those major projects? How long do you think it will be before they can catch up and maybe begin to compete?

One of the problems is that investment into Tanzania has been done wrong. Investment here to date has been very selfish because when the ground is not even you will find that it attracts the wrong investors. Right now Tanzania is open to investors where the investment is mutually beneficial to both the country and the investor. You have to come here, look at the people, train the people and get them going. We did it. Our Mtaalam program has been running for 10 years now and we have trained over 200 people. We do it all for free and in fact we provide them with tools. Our suppliers support them and come and train them. It’s a fantastic opportunity and I would encourage other companies to do the same. Instead of only looking to your own self-interest rather look at how the country can benefit as well. And that is what’s going to change now. There will be investment from a mutually beneficent point of view.

We know that in recent years you have been expanding your footprint throughout the country looking for the smaller distributors in the smaller towns around the country such as Mwanza, Tanga and Moshi. We want to know what your main focuses and priorities are for this year and beyond.

I’m a product person with a passion. I’m not going to sell anything I don’t believe in. Right now I’m testing a new UV filter on my swimming pool because I’m not about to release it into the market until I have tested it. Tanzania is a huge country and we can’t just open branches everywhere. We don’t have the capital to do that. We are not a corporate company. We are a family business. We are not B&Q though believe me when I say, B&Q will come here and if not them it will be Build-it. I would have to be careful because a B&Q or a Build-it could devour me but I don’t think they would because we do things differently. Our product range is different and it’s very select. Doing things differently, believing in it and making it happen is important. So because of the country’s size we appoint sub-distributors and we assist them and we train them. They come in and meet with our accountant and see our accounts office. We take them to see how we do the training. We have opened little sub-distributors that have been trained by us and we have a rule that is when a sub-distribution is working we don’t interfere. But if it doesn’t work or it fails like in Arusha where the distributor ran out of money we take over and it has now been developed into a branch that is nearly as big as this place. It is a wonderful thing having all these satellite distributors and seeing all these people who have a natural entrepreneurial spirit, but this helps to harness that and change it into a formal business.

How receptive has the Tanzanian construction sector been to some of the newer products and particularly the green products that you have introduced to the local market?

Green is always difficult because it comes with a cost implication and it is mostly more expensive. For example, people rave about solar power and how much sunshine we have but people forget that solar needs batteries. You need to be able to store it and the batteries are expensive and only last for 5 years. So you have a battery that costs around 500 dollars and you have to get rid of it after 5 years so you start asking yourself that if you are limited by the size of the battery why not just stick to generators. We only take products that we believe in. As you drove in you would have seen solar heaters outside. Those solar heaters are really clever because they reheat in the mornings. They have a heat-sink inside and as you shower at 11 o’clock at night and you drain every single last bit of water by the time you have a shower in the morning that shower will be piping hot again. So getting innovations like that into Tanzania is great but then the key is to educate people because it is fine for me to believe in a product but you won’t get anyone else to buy it if they don’t understand and believe in it. That is how we sell. Our whole upstairs is like a school where we train suppliers, our team, our local sales team and we also open it up. We have a very big boardroom upstairs. We let the contractors’ registration board use it with no charge. We let them use all the facilities, the screens and projectors at no charge but we get exposure because they walk through my showroom to get there because most of our innovative products are normally by the doors. At the top of the building my wife has a NGO called Nipe Fagio, which means “give me the broom”. It is an NGO and her mission in life is to clean Dar es Salaam. That is a bigger mission than climbing Kilimanjaro and people have taken to this idea.

I do see a lot of people sweeping all the time even in Zanzibar.

They love sweeping. I think it’s a hobby and may even be cathartic.

Tell us more about Nabaki Afrika’s professional program Mtaalam and how it has been developing.

It’s been fantastic. We had a big meeting with them the other day and I think that is the easiest way to describe it. We decided to have a small BBQ for them. At the last minute 73 people arrived and we had only been expecting 20 or so. We had this BBQ for them and the food got cold because all they wanted to do was ask questions. They had question after question after question. We had 73 people who are all competitors sitting together and asking questions. You won’t find that in many places. They wanted to know how can they build this market and how can they develop it. It really touched my heart to see something that really works because it is good for them and these guys are making really good money. We pass on sales leads and if feedback is good they remain on our records, but as soon as they mess up they’re out of it and they know that. So if someone comes in and says they need a roof we will find out where they are situated and show them our roof portfolio and advise them to rather choose someone close to them but we don’t make the decision for them. We just give them the options. But if they do experience problems we have more influence to be able to contact Mtaalam and ask them to refine the list. Mtaalam is a bit of a strange word. We called it fundi and this is a classic example of not understanding the market. As a European or South African or Zimbabwean fundi means an expert. Here everybody is a fundi. So when we started the Fundi 2000 program it didn’t work because nobody wanted to be a fundi. It was only when we asked them what they wanted to be called that they said they want to be called professionals. We asked them what the Swahili was for professional and they said Mtaalam. That is where it comes from and it means a lot to them.

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