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Marcopolis presents Kenya Report focused on topics such as investments, doing business, economy and regional integration, featuring interviews with Kenya's leaders. The sectors under review in this issue are agriculture, banking, energy, industry, telecom, IT, tourism, logistics and many more.
VideosFebruary 05, 2020
Ramco Group: A Leading Conglomerate of Companies Operating Within Kenya and East Africa
- Written by Sandra Francisco
- Published: February 05, 2020
Hasit Patel, COO of RAMCO Group, presents the Group. RAMCO is a conglomerate of over 50 companies operating within East Africa with a focus on 6 sectors: printing and packaging, hardware and building materials, manufacturing, office supplies, services and real estate. The Group started from humble beginnings as a hardware store in Nairobi (Kenya) in 1948 and has since expanded into Uganda, Tanzania and Rwanda, and now employs over 4,000 people with an annual turnover in excess of US$300 million.
"We categorize ourselves into six sectors. Printing and packaging is the first. The traditional family business and the one that my grandfather started is hardware and building materials. We do anything related to the office and stationary such as supplies and equipment, everything from a paper clip to a large server farm. We have a general manufacturing side which includes anything that we are good at selling in the hardware and building material side. We integrated backward and started cable manufacturing, tanks, pipes, etc. Then, we have the services side which is where travel and finance and those organizations sit. Also, the things that we are centralizing rather than keep as an overhead in a head office, we prefer to turn them into a P&L company that has to fight for business. If it is relevant and able to fight for that business, then it will be relevant in our organization. That is a growing sector on the services side. The last is the real estate. We own a lot of the real estate that we operate in. In some cases, the company that owns the real estate is not necessarily the company that is renting it, even though they are both our companies. We also have apartment blocks and a shopping mall. We are also busy trying to restructure that and looking at that in a very careful way because that ties into this whole family business issue. A family business would look at real estate as a long-term play. We see real estate being a disadvantage right now when it comes to the costing of the product. We as a family would rather strip the real estate of the family side of the business and let the organization pay rent and remain cost effective. But we will develop that real estate to make that organization a bit more competitive. That is an example of where we see in the future family businesses that may not think like this may find themselves in a bit of trouble. We understand why you would want real estate in your manufacturing business because of the security of it and because real estate grows value wise in this market. We are set to compete with organizations that do not have that mentality so we need to stay in that space. Having real estate is sometimes more of a disadvantage than renting because the rental model here is cheaper than the ownership model. Our Group has added strength in size. This is not so much in how many people we employ or the turnovers, but in that when we do a strategy like real estate, we have the ability and the finance to strip off assets because that has a huge cash flow implication. We are in a slightly turbulent environment when it comes to legislative processes. The plastic ban is a great example of a legislative directive that effectively wiped out 40 to 45% of one of our businesses’ turnover. There are not many businesses that can take that kind of a hit unless they are supported by other organizations. In our case, it was other organizations within the Group that could provide short term cash flow as well as the ability to shift the manufacturing model to a different segment altogether, either through acquisition or just bringing in new machinery. That ability for us to quickly restructure is one of our strengths. In that example, a lot of our competitors who are family owned businesses had to eventually shut down whereas we are still running. Then, there is whatever comes with larger groups such as better systems and the ability to own professionals that we can use to split the cost across multiple organizations. A single unit would never be able to afford some of those services or human resources. We also leverage off that. IT is a great example. We run IT systems that no one company would ever be able to afford. But we see the competitive advantages that some of these systems bring in. Because we are made up of so many organizations, an organization like Seidor would not look at us as a small client but a massive client even though each individual company may not be as big. It brings a lot of advantages to us. We often get visibility on new technologies and new directions that technology companies are taking their products so we can prep ourselves ahead of time for what is coming. Other smaller businesses do not have that advantage", says Hasit Patel.
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