BY GIRMCHEW GASHAW
Today’s guest Kishen Raval is an Indian businessman / industrialist in East Africa. Raval, a father of two is born in Kenya. When he was a secondary school student, Kenyan schools were closed due to the post-election riots in 2007. Consequently, he was forced to leave the country to complete high school education and join university on time.
He went to Australia as it was the only country in the world providing completion of grade 12 within five months. He then completed the full year education in five months with a fast track course. Therefore, he joined Australia’s University of Melbourne and earned a first degree in finance and management. He then received a second degree in Exchange finance and investment from Netherlands Rotterdam School of Management.
He is now managing director of the Habesha Steel Mills PLC, a company established in 2007, manufactures different sizes of ribbed bars. The Ethiopian Herald had spent a few hours with him so as to understand investment experience of the company, challenges and the way forward. Have a nice read.
Would you tell us how and when did the company start the steel production business in Ethiopia? What inspired you to do so?
We started steel production in Ethiopia as of 2010. First and foremost, we had assessed the market and resource potential in the country in terms of steel production. As per our assessment, we found that Ethiopia is the second most populous nation in Africa after Nigeria, and still the fastest growing economy in the region. The people are very welcoming. There have also been good government policies and big investment projects in the country.
So, we believe that infrastructure was the backbone for any growth and Ethiopia is the right place for the manufacturing of steel bars. By and large, we found the aforementioned points as good factor for a potential investor to come and invest here.
In Africa, there is a low level of infrastructure. So, in a place where there is a good government and excellent democratic gesture, we believe infrastructure will be the priority. As we have seen since then, the country as well as the city has changed as there have been so many investments coming up. So, we invested in steel manufacturing considering that it is the driver for the economic growth for any country. We are right now producing reinforcement bars for the construction industry. Very soon, we will also be producing wire rod nails, angles, flats, Z’s and various kinds of Steels including steel tubes. We are going to expand the business within a very short period introducing it to the market.
How do you evaluate the overall performance of your company in terms of producing and supplying steels?
Over the years, we have increased our capacity almost in 10 folds. In the next few years, we will produce more than that. We are one of the largest producers here in Ethiopia and striving to keep the momentum.
Our market has been producing for only domestic consumers due to cost of production, raw material and some of the bureaucratic harms we faced here. This doesn’t allow us to produce steel to our level of capacity. Due to this reason, what we produce is not enough to export for neighboring countries. Hopefully, once the economy is improving, the production volumes of the company will also be mounting and hitting the vision of producing 90 to 95 per cent plus. At this point, we will be competitive to export steel to other countries as well.
You are facing challenges related to COVID and others. So how could you deal with this challenge and be able to succeed in the business?
COVID was a serious problem that the world faced as a whole. During COVID, our focus was more on the community and our employees. We believe that we were in a good position till COVID. Fortunately, thanks to God, we passed all the bottlenecks and stood in the position where we are today. During COVID, we focused on the community. We had given three meals a day to more than 500 people, for many months, as many of them didn’t have work.
Realizing the absence of oxygen in the struggle to save lives of the patients affected by COVID, we provide oxygen for all government hospitals. In those days, we created some better systems for the people and the company. I believe we have evolved through this and come out stronger on the other side.
What will be the plan of your company in terms of expanding the supply of steel for the international market and increasing foreign currency income?
As we are producing bars for local capacity, we are already saving a huge amount of foreign currency to the country. Hence, we try to strengthen the effort further as we can save up to 300 million USD foreign currencies by consuming local raw material and adding some value in it. Ethiopia is a country that has good factors of production abundant manpower and raw material, too. Accordingly, we are trying to convert local raw material to finished products.
I believe this is a great advantage for local industries as they are importing finished products. We are in expansion of steel right now. Given the current situation, we will be quadrupling our capacity in the next five years via increasing our product ranges.
Since the economy and industries in Ethiopia are still working at low utilization capacity, it will take some time for Ethiopia to be economically viable for the export of steel. I think the primary focus should be given to convert local material for local consumption. Then after, it is better to think about exporting goods after fulfilling the local demand. Without fulfilling the local demand, I don’t think it is viable to compete internationally yet.
How many jobs have been created for Ethiopian citizens? Do you have a plan to increase this number while the company starts to produce in its full capacity?
So, we have currently employed 3,000 employees and indirectly more than 15,000 people. By the end of 2030 when the expansion project reaches its completion, our company is targeted to place more than 10,000 employees within our group.
How do you explain the relationship that your company has built with stakeholders working in this area?
I believe we have established a wonderful relationship with our stakeholders i.e. the community, the local government since they perceive what we give back to the community as the company is growing. They recognize that we always take the community together with us. We give employment references to people from the community. We also have built more than 150 houses for displaced people. Apart from building schools for the local community, our company equips it with the right infrastructure. Over the last seven years, we have been educating 30 students in a private school in Dukem town of Oromia State.
We have assured them as long as all students are from poor family backgrounds where their parents cannot afford school fees. They don’t have the ability to buy books, bags and other stationary equipment necessary for schooling. We are increasing the number of students year to year choosing exceptional students who have excelled in school but are not able to pay the fees.
We have provided water for the community. So we are giving back a lot to the community and I believe this is the way business should happen. As a result of this, the community looks at all the things very positively.
In addition to this we have also built a park for the community in Dukem, this park is developed and managed by Habesha Steel Mills PLC as part of the Green economy drive by the Prime Minister Dr Abiy Ahmed. In this park, we have created many traditional coffee and kiosks which was handed over to the local youth who can develop this as a business opportunity to further support the community.
Is this how the company is discharging its social responsibility?
I believe so. It is a responsibility people should do out of their goodwill. It is not considered as a requirement pressured by the government right now. The government is open. The private sector can do as they want. I believe the private sector needs to step up its support and do a lot for the community as it is the right of the society to get back from the progress of the company. That way, if something went wrong in the company, it is the society that safeguards it. In the same fashion, when things are going well, the company should take care of the society.
Potential investors found the rest of the world has aspired to invest in Ethiopia. If one of these investors asked you about the investment opportunity what would be your response?
Unfortunately, Ethiopia has had some bad image in the last few years. However, I believe that this is changing now. The potential in Ethiopia is huge. And the government has made significant efforts to minimize the bureaucracy for new investors eyeing the investment potential of the country.
Even if the progress is good, there is still a lot of work that remains to be done. The businessman, investors who see the potential in the country will not be shaken by temporary situations. In the long term investors are looking at a 20 – 30 – 50 years’ timeline. Ethiopia will be in a very different place in this period. Therefore, I believe Ethiopia should not look for these investors who are not looking long term. And at the same time, we reduce the barriers to entry for newcomers.
Do you have investment in other parts of the world? How do you compare the investment activities of those countries with Ethiopia?
We have investments in Uganda and Kenya. We are also looking at a few other countries right now.
Kenya and Ethiopia are very different because both countries have different economic structure, culture and different strategy.
I think Kenya is much integrated with the global economy and has better linkage but Ethiopia has better resources and manpower. Ethiopia has a better GDP than Kenya however the per capita income of the country is low because the population is almost double.
And India and Ethiopia have many similarities to the culture of the people, the political structure of the countries, however Ethiopia has much to learn from India on economic policy & reforms and how to manage differences. What is important in Ethiopia is everybody should stand as they all are Ethiopian and work for mutual benefit to brighten the future.
What are the mechanisms that your company devised to produce quality steel products that meet the international standard?
You raised a very good point as it is a very critical parameter that we agreed upon at the startup of the project. We’ve done grade 60 productions. Since the day of inception, we have always focused on quality. We have used German technology so as to ensure the quality of the process. We have a license to apply German technology in Ethiopia. Therefore, we were also the first producers of grade 60 and 75 in the country. We believe quality is very important and we will be introducing a grade 100 in the market as well.
What do you recommend to further develop the steel manufacturing sector? Would you tell us about the hindrances, if any?
Of course, infrastructure for the industry is very important in terms of the quality of the power. Secondly, Ethiopians work force should have the right skill. A lot of students come up with degree but they do not have industry know how. Thus, universities and industries linkage should be strengthened so as to address the challenge observed. So, the students that are coming out of universities with undergraduate degree should learn the skills required in industry. A lot of them are coming with high caliber, designing but there is a gap in terms of changing the theoretical aspect to the real object.
Even if it is a country wide issue, foreign currency is one of the big problems so as to continue the production. This will not be a continuous challenge as the government has been taking policy measures so as to address it.
If you want to add more points please take a chance?
I believe there is a lot to be done in Ethiopia and the government is aware of this. It is now time for bureaucracies to facilitate investment opportunities. The economy should shift from state driven to private sector driven. There is a need to go quicker and the resources need to be made available for the private sector to fairly complete one another.
There is huge resource potential in Ethiopia. In order to unleash this potential, the private sector has to do its part. I think this was very important. The other point that I want to mention here is, the participation of the private sector within the economy should further be intensified with less government control.
Last time I heard that the government reduced the control in the cement sector. This is a very sound measure as it is geared to the private sector to engage in competition. Earlier, the previous government had impeded investment in the cement sector for foreigners. And this creates a problem that we observed today where there is huge shortage of cement and also one of the highest prices of cement on the continent which inhibits infrastructure growth.
So, certain interventions with a good intent are imperative. On the other hand, some other interventions may not bring positive outcomes at the end of the day, The door of investment should be open for the private sector to compete with one another on a fair basis. If this is so, the business competition will allow the economy to boost as the investor goes to the next trade opportunity. Finally, the private sector would be the driver of the economy.
Thank you very much.
Don’t mention it please.
The Ethiopian Herald 7 January 2023
