Tononoka Group: The Hardware Shop That Turned Into One of the Leading Steel Manufacturers in Kenya

Interview with Dharmesh Savla, Group CEO of Tononoka Group

Can you give the background to the business?

The Tononoka Group started in the mid-1980s, and we started with very humble beginnings as a hardware shop. We then gradually moved on to manufacturing and from there we invested in a plant now known as rolling mills. We recently acquired shareholding in a metal fabrication company, David Engineering, so we have been growing steadily for the last 36 years. Presently, we are one of the leading steel manufacturers in Kenya, and in fact, in the region of East Africa.

What is your competitive advantage?

The competitive advantage that we have is due to our focus on customer care, quality products and services, efficiencies in deliveries, after sales support and value-added services, as well as a customer centric theme. We have invested in technology as well with some state-of-the-art equipment that is helping us to achieve what the customer requires. Quality is one of the main focuses that we have.

What is the scope of the business?

Our products are mostly steel products. We have fast-moving items like rebar, which is used in all forms of construction. We have tubes, pipes, blades, and galvanized steel products. We make road guardrails and we also stock sectional steel materials such as high beams, angles, channels, and flat bars. How we make it more customer centric is by adding value-added services like cut to length and cut and bend services for rebar and testing facilities for galvanizing. If you have any steel item that you want to protect by galvanizing it, we offer that as a service.

How do you see the steel industry in Kenya, and East Africa?

The steel industry is quite vibrant in Kenya and East Africa. We are focused primarily on the Kenyan market, but we also look at the South African market. Especially as East Africa is an economic zone, we do consider the whole region and we see a lot of growth in the years to come in the steel industry and we are very positive about that. We are continually investing in more and more equipment to start manufacturing as much as possible within the region, rather than having to depend on imported steel products. I think that will help the market and will help the people of Kenya and East Africa to get better quality and better priced products compared to depending on importation.

What is the company’s position on sustainability and reusable construction materials?

Generally, reusable materials would be whereby we can recycle the steel and manufacture other steel products from that material. As such, we have our own recycling plant where we collect scrap metal and melt it down to make new steel products. It is a clean up exercise at the same time as bringing about more effective technology to offer consumers products that are affordable. When a building that was constructed 20 or 30 years ago is brought down, rather than just having all the material that was used in its construction go to the dump yard, we take it, recycle it and make a new product out of it.

What kinds of projects are you currently doing?

We are working on several projects right now, including a major dam nearby where we are supplying the steel for construction. We are contributing to the expansion of the lab set which has many mini projects going on within one larger project. You have the roads, buildings, dams, power, a lot of different things happening within that one mega project. We have several projects outside the country also where we are supplying to. One of the leading projects is an airport in Rwanda, the Bugesera International Airport, and we are one of the suppliers of steel products. In fact, some of the steel can only be manufactured by two or three companies within the whole region with Tononoka being one of them. We are supplying to various other projects such as the Dahab Tower in Somalia where the government is trying to construct affordable housing for their residents in Mogadishu. Those are some of the projects that are currently ongoing. In the future I am sure there will be a lot of projects happening. In the past, we have been appointed to supply to the SGR (railway) project, which was a flagship project for Kenya a few years ago. And we were one of the suppliers for the recently completed Mombasa-Nairobi Expressway, another flagship project for Kenya. We have supplied for various electrical projects in Kenya, Tanzania, Rwanda and Burundi, so that has been our strength. We have always been focused on quality. Any time there is a major project going on, Tononoka is one of the names that is picked up first and is at the top of everyone’s mast.

What are some of your success stories?

There have been a lot of success stories at Tononoka. Before I joined the group and since then the most recent success story was when we upgraded our manufacturing facility for rebars, the hot rolling mill. We were on a semi-automatic mill up to about 2019 and at that time we decided that we needed to upgrade our manufacturing process and we installed a new fully automated hot rolling mill with state-of-the-art equipment and electronics. The beauty of all of this, despite the automation and modernization, is that we were able to achieve all of it without having to lay off any people, without having to reduce our workforce. In fact, the opposite. We ended up increasing our workforce and having them do a better job than what they were doing before. From the day we switched on that machine, it has performed fantastically. We are very, very happy. We managed to achieve 100% capacity very quickly despite having a very large, new facility. Unfortunately, at that point we were entering into the pandemic so that optimum capacity did not last very long, but we are very optimistic that now that we are out of the pandemic, we should be able to get back to that sort of manufacturing. There are a lot of other success stories that would take me a long time to enumerate, but another one is coming from a humble beginning as a hardware shop to becoming the leading steel manufacturer in the region. That in itself is a very big success story. We have recently launched a loyalty rewards program where again we have surpassed our expectations by having multiple partners approach us saying that they want to be a part of this, including the likes of Java House, which is a local restaurant chain. Various other corporations are interested in joining up with us in this initiative.

Can you explain more about your loyalty program?

The idea behind it was twofold; one was to make the Tononoka brand known to the whole country, to each and every person that requires steel. Basically, if you need steel, then the first name people should think of is Tononoka. The second pillar was to do this in a manner in which we would not be looking outside for financing in terms of meeting the extra working capital requirements to cater to a larger market. We want to finance it ourselves, so it was easily achieved by using this loyalty program whereby a reward is given back to the clients with the catch being that they have to pay up front. So, it is cash on delivery, but you get to take something back from that cash, something additional rather than just your product. And help us to market the product through word of mouth that we got this much cash back because we went with Tononoka. That was the idea behind it and initially it was just a cash back situation, but we have managed to take it to a whole different level whereby we are able to not only do cash back for clients but tell them that we have partnered with businesses like Hotpoint (appliance chain) and Java House, or paint manufacturers, cement manufacturers and they can go to any of those places where they will get an additional discount. Not only do they get something back from Tononoka, but if they decide to use what they are getting back at any of the other locations, they get back even more. They save on other items and especially in construction. If you are looking at steel, you will also need cement, paint, furniture to furnish your home. You will need a fridge, or TV, air conditioner and things like that, and at the point when you have completed building your house, you probably have run out of all the savings or money you had. At that point Tononoka says you have this cash back and you can use it to buy those things, so you are sorted. Customers really appreciate that and the partners we have on board are more than happy to do that because they are also getting a customer that they would initially have to spend money to get, without lifting a finger.

What is your vision for the company in the medium-term?

We want to achieve the capacities, or sales targets and manufacturing targets, that we had established pre-pandemic and were not able to reach at the time. We want to achieve those goals first, and for the slightly longer-term, we want to look at diversifying into other product lines that currently we are not manufacturing locally but are depending on importation and make them locally manufactured steel products. That includes beams, angles, channels and construction materials that are currently being manufactured on a very low scale in the region. Most consumers think the imported products are better than locally manufactured ones, which used to be the scenario in the past for steel products. But we are very proud to say the locally manufactured products are far superior compared to some of the imported ones and we want to bring about that same change in all the other steel products as well. We want to bring about that change in people’s perception where they realize that what is manufactured locally is equal, if not better, than what is being imported.

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