M7 Is Being Messed Up – Madhvani
By Ben Byarabaha
Uganda’s richest family, The Madhvani Group has said President Yoweri Museveni is being messed up by Trade and Industry minister, Amelia Kyambadde.
In an exclusive interview with this newspaper, the group’s Managing Director, Mayur Madhvani and his co-director Kamlesh Madhvani said sugar production in the country is being frustrated by Kyamdadde.
Madhvani Group operates Kakira sugar as its flagship brand, on top of other lucrative companies in and outside the country. Kakira produces more than 50% of Uganda’s market share.
The factory has seen its production capacity drop from the installed capacity of 7,500 tonnes per day to 5,000 tonnes, a decline they attribute to ‘lack of effective law on sugar zoning’
Madhavani slammed the new sugar bill and warned that if the governors of this country don’t come up with effective economic and tax reforms, the country is doomed.
“We were sick but now we are in intensive care,” Mayur warned.
He said the sugar bill has been with ministry for the last six years but nothing is forthcoming. Mayur said they had proposed zones for sugar industry in the bill but all was ignored.
“This is international practice. You can’t do away with zones otherwise the industry will collapse. Look at what’s happening in Kenya; they failed to zone and have realized late,” he said.
The 71-year-old Sugar tycoon told Red Pepper last week that Museveni has a clear vision for this country but he is being ‘messed up by the likes of Amelia Kyambadde.’
“H.E has clearly said he believes in zoning, he has asked them (sugar companies) to move. He believes they shouldn’t have been given licenses. . but no action is taken. We have been saying this for many years. He must be frustrated… he is being confused,” Mayur said.
He said under international practice, Sugar factories are supposed to be in a radius of 25km but “a corrupt and liberalized system has licensed companies in a radius of 8km.
“It’s sad. We are losing a national treasure. The competition for cane will kill everything; companies need to nurture their own cane, not poaching,” Mayur cried out.
Kakira sugar claims some provisions in the proposed law were not in their favour and threatened to fight the Bill once it is tabled before Parliament without their input.
They said they don’t do not agree with the provision of establishing a sugar board whose intention is to monitor, and coordinate all activities of the sugar industry.
“The board will instead take long to make decisions. Why can’t be just a department?,” he said.
Cabinet recently approved the Sugar Bill that seeks to provide a regulatory framework for the sub-sector.
The Bill spells out clear conditions for registration and licensing of sugar producers, and intends to ensure greater quality and high production standards.
While presenting the Bill before Cabinet, Trade Minister Amelia Kyambadde said if passed into law, the new Bill will solve the outstanding problems that are facing the sugar industry.
The proposed National Sugar Act 2015 is to replace the outdated Sugar Control Act of 1938 and its effectiveness has been overtaken by events in the existing set up of the sugar sub sector.
Red Pepper’s Ben Byarabaha interviewed Majur Madhvani and Kamresh Madhvani and they talked about a wide range of issues affecting the country. Below are excerpts
QTN: You talked about listing on the stock market. How far have you gone?
Madhvani: This is our wish, we have been longing for a time when Ugandans can be part of Kakira Sugar Works. However, we have been distracted by government. We have been disturbed by zoning, plans have been there to have Ugandans, not institutions having shares.
QTN: So are you proceeding?
Madhvani: Once we stablilise and sugar companies are relocated, many Ugandans would want to associate themselves with Kakira and now it’s more interesting since we are going into bi-fuel. We already produce electricity. I think any Ugandan can invest because it will be very lucrative.
QTN: Looking at the predicament you’re going through, do you feel you have been let down by government?
Madhvani: On zoning, yes, definitely yes and very badly.
QTN: But you’re always with the President! What can’t u tell you tell him?
Madhavani: H.E has clearly said he believes in zoning, he has asked them to move. He believes they shouldn’t have been given licenses. . He asked them to move. Fortunately, he is a man of vision and says the right thing but no one takes action we have been saying this for many years. He must be frustrated …being confused.
QTN: Have you briefed him about your predicament; your frustrations at Amelia‘s ministry?
Madhvani: To me, the president is the head of state; we should be engaging ministries, they should be engaging us and arresting problems. But it seems there is a big gap from what the head of state feels and understands because he knows the whole big picture of Uganda and you have ministers not bothered. And I don’t think am the only one facing this in the private sector. We have a lot of problems and we are not able able to see some kind of action we need. We have issues to do with sugar, a lot of construction going on by the Chinese and various foreign contractors. They should be using Ugandan steel, Cement. This does not need StateHouse. It should be done by ministries. It’s sad!
QTN: Why do you think it’s not being done?
Madhvani: I don’t know. You should ask someone else.
QTN: Do you think the economy is being run in a proper manner?
Madhvani: Partly run well. Bank of Uganda has played a huge role in stabilizing the shilling, stabilizing policies at macro-economic level. There are some areas that need to be discussed. Industries need to be encouraged. If you’re a Ugandan and you want to start a factory, you can’t get money. If you’re getting 20% loans to do business, my advice is you’re better off depositing at 22% and keep quiet. Interest should go down. I think there should be more pro-tax policies to local industries, we should be more…… I mean…you hear what’s going on throughout the world; I think you have seen what’s going on in USA; President elect Donald Trump saying ‘we should have more for America.’ Government needs to reduce taxes, have more incentives; you know if you tax people too much, you won’t have a productive country.
QTN: So the problem is taxation…
Madhvani: It’s a very important part, I have just told you Ugandan taxes on sugar are the highest in the region. We sell a Kg of sugar at Shs3500 and the price of a bag is Shs117,000. Shs5000 on each bag goes to government in exercise duty, then you have VAT at 18%, also going to government. So nearly 22% of sugar price goes to government, that’s almost quarter of the sugar price which goes to government, not Kakira.
QTN: With the current taxation policy, what is the company’s next step?
Madhvani: I think there is need to address issues; there is a need to address many sectors, which need to be helped. Look at the confectionary industry; Uganda has the highest tax on sweets. As the result, we are importing sweets from Kenya because the structures there are more favourable for production. We have steel. We should be be favaoured, we should be using local steel, not steel from overseas. What is happening, we are building dams and roads. But why are we using steel from China? Cement from overseas? Surprisingly, it’s the Ugandan taxpayer to pay back these loans. There is no free lunch!
QTN: You mean Ugandans are not benefiting?
Madhvani: Yes, I think His Excellence is addressing this… we have to credit him. He is addressing this very strongly. He is insisting on local content. In Kenya, they have already done that. President Uhuru Kenyatta recently decreed that all infrastructure projects must have a Kenyan component to a tune of 40%. In Uganda we are talking. I think the president needs to be firm on this.
QTN: Could this be the reason why the dollar is hitting the shilling?
Madhvani: There are many reasons. If you see the dollar run-ins in the economy, we need to develop our coffee, tea and sugar business. For example if you run down sugar factories and you start importing sugar, it’s terrible. We need to develop all those exporting industries. Tourism is a big thing but government needs to do more. People need to know Uganda is a beautiful country to visit. Kenya spends a lot more on tourism. If you look at our tourism budget from the Ministry of Finance, it’s very small, you can cry.
QTN: So you’re now venturing into tourism?
Madhvani: Tourism is the fastest growing industry in the world. We are very bullish; when people discover, they find they have discovered something special. I think we have been very unlucky. If you go overseas and tell people ‘I am from Uganda’ they think you belong to Idi Amin; is it safe? But time will come when people will realize. I am very hopeful about young Ugandans; youngsters will change perception. This will be the next big thing, the next generation, even in our tourism projects, we are looking at youngsters travelling, not necessarily foreigners because we have a population here. These young Ugandans are the ones going to be our success.
QTN: What will happen if the current circus in the ministry of trade over sugar is not handled?
Madhvani: If the government doesn’t act quickly and zones the sugar industries; For example you give Kakira, Lugazi their zones and other industries, we will be back to our thing. Government needs to act fast, not to drag the feet. We were sick but now in intensive care, we better act quickly, don’t be too late and wait for everything to collapse. See what’s happening in Kenya.
QTN: If no action is taken?
Madhvani: We will see problems; food insecurity and price of sugar will go up.
QTN: Possible closure?
Madhvani: Yeah, definitely. The Sugar industry employs very many people, around a quarter of a million; Kakira employs around 100,000, Kinyara 60000-70,000, Lugaziaround 40,000. That’s what happened in Kenya; you fail to zone, industries close.
QTN: Reports indicate these industries have forced you to increase the price of Cane?
Madhvani: No… when the price of cane goes up, sugar also shoots up. I don’t believe in trying to destroy people by doing these thrown-ins. If you have two security dogs, and you hold them together, they will fight and die. Why can’t you keep them apart and they keep protecting you. Keep manufacturers apart, they will produce, keep them apart but don’t put them together. Don’t put them in the same area but now we have Mayuge Sugar, Gm Sugar, 7star sugar, Luzinda sugar and some of these ….Kaliro sugar is out, Kamuli not too close. But other are just 8Km, 20km and 15km close! What happened?
QTN: Several land acquisitions you have embarked on have been shrouded in controversy. Why?
Madhvani: We are very keen to put up a huge factory in Amuru, South of Zoka forest. We selected this place after looking at the whole of Uganda; this place is very fertile and the factory can cause minimum displacement of people. I think there has been misrepresentation about what we intend to do but we have reached along way, we hope the political leadership will move fast, so that we can start to develop the area as soon as the survey is complete. We need to have big factories; small factories are a liability. Amuru would have been bigger than Kakira three times and Kakira is the largest in the region. However, we are the largest producers of electricity using sugar-cane throughout Africa.
QTN: But I saw production in your powerhouse at 32MGWTTS
Madhavni: Yeah capital is being wasted; we developed the cane but people are snatching it at night. If Mayuge and GM close today, we shoot up; zoning is the problem.
QTN: What has been the secret to your success?
Madhvani: Hard work and passion; desire for this industry to come up. But our main success is our employees, 65% of the group’s success is owed to our employees; our team, they work with us, we share, they move with us. We select good people and enable them to be better. In that, we also get better because they are better. That’s the success of every business; Human capital must be better. May be its different for people who use robots.
In Uganda, when you start a business, you think about girlfriends, wives and cars. You don’t think about a one Musoke seated in the next door. It’s that Musoke, not your wife who will lead you to the next million dollar. We need to change that; Ugandans need to change the way they do things.
QTN: But this is a family business and it’s a success story?
Madhvani: True it’s a family business; i am a shareholder and I have other shareholders, soon I will have more shareholders. We run this in a different way, if you’re an employee, you can also be a shareholder. I am the Managing Director.They elect me annually at the general meeting. If I miss behave and profits go down, they will definitely dismiss me. You will find another Mayur, another Simon Mayur here.
QTN: You returned from exile and found everything in ruins! How did you start up?
Madhvani: Hard work and passion I told you. We found everything destroyed. It was just sadness.
QTN: Did you get funding?
Madhvani: Yes we got a lot of support and funding from World Bank, African Development bank but I think above all Ugandans. The reception we got from people was tremendous; people wanting business to start. You talk about exile; how many Ugandans died? We have suffered enough in Uganda. This generation, new generation, you don’t know life without sugar because you take it for granted; that’s how it should be. I hope we can move forward faster, but with these funny polices on sugar, we are losing more. It’s very sad. I’m not saying it because of Kakira, I’m saying it because of the sugar industry. People must wake up, people must start doing things, otherwise you will lose that is of national pride.
QTN: What’s your net worth?
Madhvani: I don’t know; I’m not worth anything!
QTN: Aren’t you the richest man in Uganda?
Madhvani: I have no money …laughs. Ask Kamresh Madhvani.
QTN: You’re a very rich man. How can you have two kids only yet poor Ugandans manufacture kids night in, nigh out?
Madhvani: Kids are very expensive Ben! Very expensive my son.
QTN: But you’re rich?
Madhvani: I planned my life. I don’t want to run to somebody for school fees…hahahaha..Kids expensive.
QTN: Kakira is valued at more than Shs500bn. How come you haven’t been listed by Forbes Magazine?
Madhvani:…hahah..the Madhvanis keep low. That’s we… okay.
QTN: How do you balance family and business?
Madhvani: hard question, we have to make time for family. Its tough, we have to be in office by 7:00am upto 8:00pm. It’s tough, but I to spare some time for family.
ENTER KAMLESH MADHVANI
Kamlesh Madhvani also a director in Madhvani Group
QTN: Tells about the Sugar bill. Did you make an input?
Madhvani: We have had six years of discussion with government. We thought the government was listening to us but everything we proposed in the bill has been thrown out. We deserve to have an input because we hold the biggest market share in Uganda. We believe the head of state understands our predicament but we have been let down. H.E understands, but for whatever reason, people in the ministry have frustrated us.
QTN: You believe HE is being defied at the ministry and keeping quiet about it?
Madhvani: We think so.. Youneed to ask them. We know what the president wants, we know his stand. There is a disconnect between him and the implementers.
QTN: Have you tried to talk to the minister herself?
Madhvani: Yes, several times but it seems she has lost sympathy for us. I don’t know why?
QTN: What’s her motive?
Madhvani: I don’t know! But I think her plan was…. have more sugar factories, get more sugar. This is nonsense. You have to look at other countries how they do it big time; India, Mauritius, Brazil etc. You must zone or crash. Yes you can have more factories but in their zones, we have no problem with that. The country is large. We have a lot of fertile soils; Busoga is not the best place for sugar. We struggled. Our forefathers struggled a lot, begged for land from government and helped many farmers but our cane is being eaten.
QTN: How much have you invested in Kakira?
Madhvani: We have invested more than $200m in the last few years, expanding the infrastructure that has been there since 1927.
QTN: Final word; say something about Sugar prices
We need clear polices on sugar or else the industry will crash. On sugar prices, we sell our sugar at Shs3500. Traders’ realistic margin is Shs1,100. We have enough stock; there is no reason why sugar prices should go up. I think its speculation and artificial demand towards Christmas and New Year.