Roy Transmotors: One of the Biggest Transportation Companies in East Africa

Interview with Mukhtar Omar, Executive Chairman of Roy Transmotors

What is your assessment of the transportation sector in Kenya?

Our company has been in existence for the past 39 years now and I have been privileged to be here for 37 years. I find that 2016 has been primed for the tranportation industry to take it to its greatest heights. Why do I say that? I will give you two major reasons. The first is on the Standard Gauge Railway (SGR) and the second is on the Port handling facilities and systems. Our government and the member states of the East African community continue to invest millions of dollars into the SGR every year since its inception sometimes in October 2013. Why is it that Kenya is investing into this? It is because there is regional need for the investment, and there is no doubt on the return on investment. Secondly, on our shipping ports, the government and the member states have in the recent past made effort to improve the Kenyan Port and its port handling facility by investing in good equipment, human resource systems and by creating several Container Freight Stations (CFSs) to help ease congestion at the port. There was a time when the Kenyan Port handling charges were considered to be more expensive as compared to those at Dar es Salaam port, (which is an alternative entry point for ships into the region). The Kenyan Government has set the rates at an affordable level and now we can see the results in flow of traffic which has significantly improved. We used to have problems with the cross-border movement as it would take an average of 5 to 7 days to clear a truck. Now we can do it in about 3 or 3.5 days. The East African community started discussing on this about 5 years ago. The quicker the wheels turn, the more cost effective it is for the importer and the more profitable it is for us. The government and the member states are also at the final stages of implementing the system where there is a single point tax collection. This will now apply in terms of import at the point of entry. All the member states will be collecting taxes and duties at the point of entry. Once that it is done, all that will be left is the registration of the good and processing of the registration documents as well as moving on in. This will enhance and encourage free trade. With the member states getting together it enables local manufacturers to open branches in those member states because now there are no access or logistical issues anymore. We also have Southern Sudan coming on board hence enlarging the area of trade in the industry. We are confident that there will be peace in this young country. Even in the times when there were problems our company would still transport aid relief. With organised security we managed to perform and deliver in our obligations. Now with peace on its way I am confident there will be much more work for us. Our link to Ethiopia and Moyale has been under construction for the last 3 to 5 years. The road works are coming to an end and the link is touching Moyale. Soon the link will be open. As far as the LAPSSET (Lamu Port Southern Sudan Ethiopia Transport) project is concerned, the whole region has come in to invest to get the project going. We are expecting a refinery in Lamu. We have the oil discovery in Turkana in Kenya. We have now discovered oil in Uganda. Very soon there will be cheap and economical fuel for the transporters in Kenya. Who does that affect? It affects the end user. The end user demands the best product at the best price. That is where we will shine because we will have a cheaper cost of transportation to get the products to the end user. That will be our new strong suite. The LAPSSET project will link directly to Ethiopia with a direct highway into the new corridor with another 600 kilometres linking it to the Southern Sudan. All these links we are talking about are not railway links. They are road links and roads need wheels. We as transporters are planning ahead and we are continuing to specialize in order to meet the new needs of the market. The funds that used to be centralized in Kenya are now being distributed to the local counties. Traditionally in Africa, we have small streets and small towns and small shops. We are now aligning our infrastructure to the western world. We are building large malls. They are all over the country and not just in big major cities like the capital Nairobi. With all these malls being built, there will be need for them to be stocked. Who will deliver this stock? It is the transporters. They have been benefiting from our logistical expertise. Real estate has been booming in Kenya. For the past 5 or 6 years property prices have more than doubled and in some areas even tripled. I remember when I was younger, there were only 2 cement companies in Kenya. Now, we have 6 cement companies with 2 more in the pipeline. This is just in Kenya. All these booming industries and new infrastructure being built will need materials. The opportunities are everywhere; the opportunities are endless.

How does the company present itself? How are you represented in the transport sector? What are your goals? What differentiates you from the others?

We will soon be launching a new web based program where we will be online from the loading point. We are looking ahead. We are at the front of the market. We have been ahead of the pack and we intend to stay there.

I will give you a brief introduction of who we are and where we came from. This company was incorporated in 1977 in a small town called Meru on the slopes of Mt Kenya. We started off as a small company and we served the local industries. In 1995 we moved from Meru to Nairobi and we started to compete at the national level. We have achieved what we wanted to achieve as far as national leadership is concerned. Now, we can benchmark ourselves with international companies because our company has been working with multinationals. We have worked with Shell Petroleum, Chevron Petroleum and currently we are working for Total Ltd. Multinationals demand a high class of service and we have achieved that. Fortunately, we were the first Transport Company to receive an ISO certification in Africa in 2003. I am proud to say that our ISO Certified status was renewed in January this year and we are now ISO 2000 version 2008. That proves that our professionalism is up to standard. Last year, we received international recognition as the best transporter from Total France. We also won several awards on safety from AKI (Association of Kenyan Insurers). Our insurance claim rates are the lowest in Kenya compared to other transporters in the industry. Our company’s mantra is “Safe, Secure and Swift”. We eat, drink and sleep safety. We believe in safety first while we provide secure services and we also want to be swift. We are corporate members of Safe Way Right Way which is a Total Ltd and World Bank initiative. Safeway Rightway was established with an aim of creating safer roads for travel in the northern corridor. Currently we are concentrating on the route from Mombasa to Malaba. We have contributed heavily to Safe Way Right Way and we expect to move further to creating rest stations where drivers can take a break from the tiresome hours on the road. We are in the process of talking to National Transport Safety Authority (NTSA) for us to have rescue stations. We will probably talk to the county government to help with accident victims. Safe Way Right Way has also made donations towards an ICU and also towards the only spinal injury unit in Kenya. As a transportation company, we have a functional training academy running on the premises here where we train our drivers on safety to ensure that we have the highest possible calibre of drivers on the roads. We have training programs for each driver as well as for our staff to ensure that we have the best human resources. It is the backbone of our business. We have extended the services of the training academy to local road users around us. Our emphasis on the training has been extended to the motorcycle riders (boda boda operators) who do passenger transport. Since it is a very affordable business to start, many riders don’t undergo the necessary training and it can be dangerous due to the many accidents. We have initiated a program in our academy where we give the riders a day’s training and safety jackets free of charge and that forms part of our corporate social responsibility. We also facilitate training in the schools on the level of road safety needed. As far as the area is concerned, directly or indirectly we support 2,000 people. We work with them. Coming back to where we stand as far as service delivery is concerned, what we deliver is unmatched because we have a 24-hour monitoring and tracking system. We have different account managers for different clients and we give them reports on the truck movement. We operate using a world class ERP system that we have been developing in house. Most of the time, the good software that works in the western world does not work here because of the different operating parameters. We started 20 years ago from a small works program. We moved on to Access Base and from there to SQL. Now we will be launching a new web based program where we will be online from the loading point. Easy access to the client. We are looking ahead. We are at the front of the market. We have been ahead of the pack and we intend to stay there. We stay ahead of the rest by thinking ahead, thinking forward and by giving quality service.

Tell us about your road expansion. Is your development to be the regional way? Companies are looking for someone of a regional importance to transport goods. What is your strategy concerning the developing road?

Our company has had a very steady growth. Our growth is always programmed because we have never wanted to grow to the level where we can lose our sense of quality. However, in the last 5 years I have doubled my fleet and I hope to triple my fleet in the next 5 years. Currently I operate approximately 500 trucks in both my companies. About 5 years ago I had less than 200 trucks. There is potential for us to have over 1000 trucks in the next 5 years. It’s easier for us now because we expect the links to be completed now that the new member states have come in actively. I have already planned that in the next month we will open an office in Uganda where we will be moving with a strategic partner. We are currently serving them in Kenya and they would like our services in Uganda. This means a lot of investment into Uganda as Roy Transmotors Uganda. So there are opportunities for growth out there. We now have the right pillars, the right management and the right human resources. This is a family business and there is good succession planning in place. I have my 3 daughters who are working with me in the business and there is no turning back.

So Uganda is the next step. What will come after that?

I don’t know what growth is required in Uganda. Once I have an office up and running over there, I will start knocking on doors and start specializing there, (just as we did in Kenya) because there is massive growth potential there as well. I am sure that within the next 5 years, I will be have my feet grounded in Uganda. That is the general vision. The region is opening up as I said earlier, once our Uganda office has been setup, the entire region will be “up for grabs”– it’s a matter of choosing which member state to step into next – I feel Ethiopia is very promising due to the LAPPSET Project and their general work morale – I am keen to take advantage of this.

How do you finance the business? Is it purely internal with the banks or do you appeal to the stock exchange? Do you have local or international investors?

We have financiers both local and international. We borrow money locally and internationally as well.

Are you looking for investors or financing?

If somebody comes forward with good ideas and a strategy partnership I am sure that my company will consider it. We are ready to accommodate further growth. It will just make the expansion happen quicker than it is happening now.

Do you think it would be a partner that is already in the business? Or could it be a finance partner who has nothing to do with operations?

Either – I don’t mind. It will be discussed when the opportunity arises. If there is a partner that is already in the business who can bring expertise we can make it work. Or it could be other types of investors who just want to make big returns on the big margins that Africa has to offer. There are people who invest in groups for that.

You mentioned a second company that you have. Tell us about Roy Parcel Services.

Roy Parcel Services was born out of Roy Transmotors Ltd. It was born to cater for people with small consignment needs. For example, one pharmaceutical company would have 10 tons of production of medicine. But these 10 tons will have to go to 20 or 30 different towns. It would be unaffordable for them to send these parcels on the big trucks and this is where we come in. They need someone who can get it to the end user. Roy Parcel Services is now the biggest parcel service provider in the region. We offer door to door delivery service. Why did we decide to do this? Because we want to meet all the needs of our customers so today if you need containers whether petroleum or perishables goods, we will be there. If you have hazardous cargo we will be there. If you need refrigerated trucks, come to us. We wanted to be a one stop shop. Our third company EENS Limited is now investing in warehousing. We want to start offering warehousing to our clients. We are doing pilot projects with Roy Parcel Services. The manufacturers let us manage the goods in the warehouse once it comes off the production line. We manage their stocks, their distribution and networks from stacking in the warehouse to delivery to the end user. The pilot project is working well and now we are investing into our own warehousing. We have built warehouses and we want to start our own complete warehousing solutions. In the past, if a client needed door to door cargo we would do the clearing and delivery to their doorstep. There is an opportunity for us in the next expansion program to partner with the shipping companies because today when goods are shipped in from abroad they are delivered to their destinations. They are not shipped to Mombasa. If they are importers from Uganda they would want the goods delivered to them in Uganda. The shipping line would then have to use the road transport services to have it delivered on their behalf.

Where would you like to see the company in 3 to 5 years’ time?

I expect it to have replicated what it has been doing over the years. We started locally and became a brand name. We were a brand name locally when we transported all the tea and all the coffees in and around Meru. We were like the railway link between Meru and Nairobi. We progressed and we grew. We have become a specialized and safe transporter. We continue to win safety awards. We have moved to the region. We are now transporting fuel to the Trans Mara mines in northern Tanzania. We are a brand name. In the next 5 years I expect Roy Transmotors Ltd to be a household name as far as logistics is concerned not just in Kenya but in the whole of East Africa.

What difficulties do transportation companies face here?

First, there are the challenges we have with petroleum transport. We have a lot of fuel attrition in transit and illegal fuel stations. Drivers collude with client employees and this gives rise to the contamination of fuel which is at the highest level. The government should put a bit more effort into ensuring that we eradicate this. Another challenge the industry faces is the finance cost. Interest rates in Kenya ranges anywhere from 18% to 25%. I know the government is trying to do better now. We also have very unsafe competition with some companies operating 40-year-old trucks for local business which is unsafe as well as creating unfair competition. This is a deliberate compromise and threatens the safety on our roads. At Roy Transmotors Ltd, safety on the roads is one of our Prime Mantras.