Today’s Guest Harsh Kothari was born and grew up in Ethiopia. His family that originates from India has been in Ethiopia for over 100 years. The great grandfather of Harsh migrated to Ethiopia and engaged in a business in which he transferred to his posterity. Both Mayur Kothari and Harsh continue to be part of the family business. This way, they are a business family that has been settled in Ethiopia for more than 100 years.
Harsh studied in Ethiopia until the age of 16 and then went to the United Kingdom to finish his schooling. He studied international relations at University of the West of England, Bristol and received a Masters Degree in International Political Economy from University of Warwick in the UK. Even though he had the opportunity to get many jobs and settle down in the UK, Harsh returned to Ethiopia respecting the words of his family.
After returning to Ethiopia, Harsh went to Merkato and the factories to learn a bit about the business as such he had been born and brought up in this environment. He finally developed a passion for business and joined the family business.
The Ethiopian Herald made a short stay with Harsh Kothari, Chief Executive Officer of Mohan group of companies to learn more about business opportunities in Ethiopia and how he and his family deal with the challenges they faced since they engaged in the manufacturing sector. Have a nice read!
First of all, I would like to thank you for your willingness to make this interview possible. Would you tell us when did you start this shoe factory business in Ethiopia? What inspired you to be familiar and engaged in business?
Our family has been working in the polymer business for the last 30 years. We started manufacturing polymer compounds in Ethiopia around 2004. So, we make EVA compounds, PVC compounds, filler and color master batches, thermo plastic rubber and rubber compounds. So, these are different chemical compounds and polymer compounds that go into different applications. For example, PVC compounds could be used for cable coating. Hence, the coating that goes into the cables in which we use for electrification is our raw material. Our EVA, PVC compound are also going to foot wear, shoes, etc. We make filler and color master batches that go into packaging and household items and furniture.
We thought forward in integrating our raw materials into finished products. Thus, before we integrated our compound business with our footwear business in 2001, we started footwear manufacturers and we got to where we are today. Since 2014, we started producing our brands called Highlander shoes. And we make canvas shoes; leather shoes and high quality flip flops. So, I think we are known for our quality and service delivery to our customers.
How do you evaluate the overall performance of the company in terms of producing and supplying products that fit with the international market? Do you have some figures related to this?
We focus on import substitution and supplying mostly to the local market. This does not mean that we have not exported some products to the international market. We believe that there is more value in producing and assisting the local markets. Because, Ethiopia is an import dependent country even for a product like shoes. We are still importing shoes from abroad as there is no enough local capacity to fulfill the demand. Thus, we prioritized supplying the local demand and saving the dollars for the country.
Could you put the aforesaid facts supported with figures?
Of course, we have been growing every year. When we first started our footwear business, in our first year of production, we did only about 1,000 to 2,000 pairs of shoes a day, not much. Today, we have a capacity to produce about 40,000 pairs of foot wear a day. So, as a capacity, we have grown that much. But of course, what matters is not the performance in terms of money or tears or whatever. What matters is the value that we add to the market. We are increasing the number of employees that we hire, raising the number of pairs that we import substituting; we are also increasing the quantity, models and designs.
We are contributing that much to the fashion industry in Ethiopia. We have now started producing safety shoes and supply to other industries, construction sites, etc. So, that is again one element that has been imported quite a bit and now we have a capacity to import substitutes. So I think we are adding a lot of value to businesses around us. This is just the shoes.
We are also making compounds. Thus, right now, we have more than 200 industries that are dependent on our raw materials that we manufacture locally in Ethiopia. That is also very rewarding for other factories to get a local supplier of raw materials instead of importing it from Taiwan, China, India and Europe which is the case if they do not get our service locally. Now, they have that same raw material with the same quality, maybe even better quality that is tied to them locally. And I think the feeling that our customers have of being able to depend on us whenever they need to run their factories is a very rewarding feeling.
Could you tell us the challenges the company has been facing so far, how could you deal with it and be able to sustain in the business?
It’s a very good question. There are many different types of challenges any company would face. One of the challenges is how we keep serving the market better. Every time, we do some kind of an extension in our footwear project and realize that it is not enough. Our customers need more variety and types of products. They want new designs, fashions in the world as the global market changes fast. So, trying to keep up with the fashion industry and demanding to cope up with supplies to the market is a challenge in itself. Of course, there are the usual challenges that come with the country’s macroeconomic situation.
But, I think the imperative thing to focus on is how we manage it in satisfying our customers as the demand keeps on evolving Even in our raw material businesses, we have to customize each and every formula to the machinery of our customers and create a perfect chemical composition. There are a lot of challenges in achieving that. Thus, I think these are some of the challenges we deal with. I think, so far, we are managing to cope up with these challenges; we are managing to move forward despite the challenges that we face. We are very lucky to be in Ethiopia, where there is a market and all sorts of friendly support that we get from Ethiopians.
What will be the plan of your company in terms of expanding the supply of new products for the international market and increasing the foreign currency income?
I believe a dollar saved is a dollar earned. So, we will continue to save dollars for Ethiopia by import substituting and through satisfying the local demand as the demand is quite huge. There are still a lot of imports coming in. Once we satisfy this local demand, we definitely want to expand into the international markets, particularly in the African markets. We already have inquiries from other African countries. We have supplied a little bit to some of the African countries, but the priority would be given to our home ground.
It is a bit like football. In soccer, you should know your home ground well and be able to perform the best. Once you are really good in your home ground, you can move to other grounds and play tournaments, matches and other grounds based on the experience you have. Right now, we need to consolidate, learn more, get more experience and scale up in our home ground before we play a match in an international market. However, we will definitely be that in the near future – not far away as it is part and parcel of our vision and mission. And we do believe that Ethiopia will have a competitive edge after the African Continental Free Trade Agreement is ratified by the correct number of countries. Once it is in effect, we are confident to be competitive in the regional business scenario. We will be able to export our products more effectively.
For how many people the company can create jobs?
We have created approximately 600 permanent jobs and the figure does not include the temporary employment opportunities.
How do you explain the relations of your company with other stakeholders working in the area? Would you tell us the incentives given by the incumbent government?
The stakeholders are everybody. Our employees, the local communities where our factories are, we have six factories, and we’re building three more manufacturing units. So all the nine different sites, we have a local community. Thus, those local communities are also our stakeholders, banks, insurance companies and the government as well.
We are very fortunate that the people of Ethiopia have given us a lot of support, love, and respect as they have been very cooperative in helping us grow our businesses and our shared interests, as we have shared values with our stakeholders. For example, we work closely with our local communities for various types of CSR projects to address the various types of common challenges that we face. For example, in the Gelan area, we worked very closely with the local administration, as well as the local community in building a road network within the area, not just a route or factory, but the network itself.
With the inner side of the road, we have closely worked in the past with the Office for the hearing impaired. We also work very closely with all the local administrations that we are with, we work closely with the government in trying that the interests of supporting whatever our capacity is, that since we are a small company, so whatever our capacity can manage, we have supported, we do regular blood donation drivers. And we involve all our employees, so that even our entire team knows that we are a company that also includes our blood. And I think that’s a very strong message, a very strong symbol that we convey to the society around us.
We have also participated in the national initiatives which are “ Dine for Sheger” and “Dine for Ethiopia”, in order to build on development projects in Addis Ababa, and now also in Gorgora, Koisha and Wonchi. So, within our capacity, we have done whatever we can. So, we also have a very strong and cordial relationship with the other stakeholders like the banks, insurance, government agencies where you know, such as the Tax Office etc.
We coordinate, collaborate regularly, communicate with our state stakeholders, effectively; we have more than 200 different industrial customers. So, we closely collaborate with our customers so that we are able to provide them the services and products that they need. And I think we are a customer centric company where most of our time as a company goes in addressing the needs of our customers and other stakeholders.
What are the mechanisms that the company has applied to produce quality products that meet the international standard?
So, of course, machinery matters. We have the state of the art, infrastructure and machinery to make very good shoes. Some of the machines that we utilize are used by the leading global brands, including sports, shoe brands. We all know their names. Some of our athletes are endorsing these big brands, but we use some of the same kinds of machines and technology. We also use high quality compounds.
So, the high quality of chemical formulations that we have developed hold a lot of comfort, support the right kind of spacing in your shoe. And we have also focused on getting good quality local resources, particularly on leather shoes as it is certain leather is supposed to be one of the best types of leather in the world. So we use good quality Ethiopian leather in our leather shoes.
So we use all sorts of high end chemicals, raw materials, in order to make a good pair of shoes. And I know that my shoes are good, because I’m a user of my own shoe, I wear my own shoes. My family also uses our own shoes. So we know that the quality is good, because we do not experiment with our own health. And if we know that our shoes are good, then we know that it’s good for the market.
As an investor, what do you recommend to further develop the manufacturing sector in Ethiopia?
There needs to be more linkage between different industries in Ethiopia. One thing I have realized is sometimes the resource is available, there is local input. But there is no communication or linkage between different businesses. So some businesses end up importing the same thing when they could have bought it locally. So it’s very important to create linkages. We also believe that it is important to use local resources.
The different minerals that Ethiopia has cucumbers are rich in minerals. And these minerals are already being mined and being processed. But sometimes you just change a small part of the process, maybe add one small machine, and maybe add one small chemical. And then the process is perfect for use in other manufacturing sectors. And that only happens when the different industries meet each other, know each other, understand each other and the linkage is formed. And I think in the future, Ethiopia can become a self-sufficient economy where we don’t need to import much, and we don’t need to export much.
The economy will revolve within its own confines. I am not talking about autarky. But I’m talking more of a healthy way of internally regulating markets, internally getting raw materials, and then you have enough of an important export balance. So I think that’s achievable. I practically also feel we’re heading towards that. Because there have been many wrong tools that have been input substituted. There’ll be many machines that are now being developed locally. And that’s going to be an evolution.
I remember when we first started our shoe products; we had to import almost everything. Now, we know that we are missing out on raw material and making our own souls. The leather is available locally and some of the decoration strips are being made locally. There is a labeling company that supports the label locally before packaging has to be important. Now, the packaging is found locally. So, things are changing rapidly.
Thank you very much.
It’s my pleasure
BY GIRMACHEW GASHAW
The Ethiopian Herald 21 May 2022
