All too often, most of the literature on doing business in Africa is by non Africans mainly from the Western world whose lenses are colored by their institutional and cultural prejudices and biases. Or it is by bureaucrats from international development organisations who have never done business and therefore give a lot of theory but little insight into practical experience. This makes it difficult to gain real understanding of how businesses on the continent actually work – both the opportunities that abound and the structural and organisational constraints they face.
For over 50 years since most of Africa got independence, our continent’s leaders have consistently decried our reliance on export of raw materials and importation of manufactured goods. A country’s earnings depend on its position in the international division of labour. Rugasira says that one needs approximately five to seven grams of ground coffee to brew one cup.
An average cup of coffee goes for three dollars. This means a kilogram of ground coffee would produce 200 cups or a value of US$600. Yet a kilogram of raw green coffee beans is bought for three US dollars – hence the farmer gets less than 0.5 percent of the price of the coffee he/she produces.
The lesson from this is simple but powerful. The highest value is located where the highest skill and technology is employed in the production chain. Being relegated to an exporter of raw coffee beans means low export earnings and high import bills hence the chronic trade deficits and balance of payment problems.
It also means remaining mired in low income and therefore poverty. This has powerful consequences on a nation’s international standing and its domestic politics. To overcome this Africa needs to move up the value chain. President Yoweri Museveni has spoken consistently of this.
A Good Africa Story is about Rugasira’s company and now international coffee brand, Good African Coffee and his struggle to get a value added product from Africa – roasted instant coffee – into global markets. It is also the story of the domestic and international constraints of doing so. Domestically, you have the problems of infrastructure which are obvious.
Rugasira says it costs about US$1,500 dollars to move a 40-foot container of goods from Dubai to Mombasa but about US$4,200 from Mombasa to Kampala. This cost is high partly because of absence of a railway or better roads.
However, the more complex domestic challenge is access to capital. First, there is irony that there is no policy for government to support those seeking to enter global markets for industrial goods. This is tragic for a country obviously desperate to do that. Second, the banking sector in Uganda, which is dominated by commercial banks, is geared towards short time financing for trade rather than long term financing for transformative investments.
So those seeking to export value-added products have to go elsewhere. But where? Uganda has poorly developed or nonexistent venture capital or equity funds. The few that exist, Rugasira notes, are only interested in large-scale infrastructural projects, not in small to medium scale businesses trying break into international markets. So there is a disconnect between political rhetoric and the actual policy making process.
On the international scale, the odds are even higher. They begin with the basic issue: to trade, you have to travel. The first barrier to trade is the entry visa to a western country. It is easier for a nurse looking for a job, Rugasira says (and I would add for a government official or a head of an NGO from Africa carrying a begging bowl) to get an entry visa into the UK than a businessman trying to establish a trade or investment opportunity there. And yet the UK government prides itself as the most generous western country in helping reduce poverty in Africa.
But there is more: even if you get a visa, you still have to sell a product. The manufacturer has to meet rigorous standards of product quality, design and packaging before it is accepted to enter Western markets. Once this is achieved, the second huddle is to get space in supermarkets. Here Rugasira travels to South Africa, the UK and USA numerous times, engaging in protracted negotiations that eat deep into his little capital.
By the time acceptance of his product is achieved, he has spent most of his capital on travel and accommodation. Yet having a product in a supermarket does not automatically bring you buyers. People buy products they know – through usage or marketing and advertising. And that too costs lots of money.
Yet the book is not just a story of constant struggle and frustration. It is also remarkably a story of Rugasira’s indefatigable ability to navigate these myriad obstacles and finally prevail. The visas are acquired, the standards for product quality and packaging are met, the space in supermarkets – after seemingly insurmountable odds – is given and publicity is achieved through the help of friends in the mass media and church organisations.
By this time Rugasira’s finances are diminished. He has everything but not the cash to get the product in its required quantities to the supermarkets. The book ends, sadly, when this constant cash-flow crisis has not been resolved and when the government that says the most about value added exports has only contributed a paltry US$ 800,000 – not enough to even begin a serious kindergarten, leave alone launch an African brand in UK and US markets.
A Good African Story is a book that combines intellectual depth with practical hands-on business experience. It is a must-read for those interested in the challenge to creating wealth through private entrepreneurial innovation and talent in Africa.