Bidco to invest $200 million by 2017
11 April 2014, 08:12
Nairobi - Bidco, one of Kenya's leading manufacturers of consumer goods, will invest about $200 million by 2017 in new product categories to meet growing demand, the head of the company said.
Managing Director Vimal Shah told the Reuters Africa Investment Summit on Thursday that the group expects its annual revenue from Kenya to grow by four times in that period from the present $250 million thanks to the investments.
Family-owned Bidco gets another $250 million in annual revenue from its operations in other African nations. It has factories in neighbouring Uganda, Tanzania and Rwanda, from where it exports to 14 other African markets.
Shah said the group would invest in new production lines and factories and diversify into food and hygiene products like toothpaste, moving its present focus on edible oils and soap.
He attributed the investment plan to growing demand for consumer goods, which is projected to rise further on the back of population growth.
"It is demand-led. It is a consumption story," he said on Thursday.
Bidco could sell its shares to the public in ten years after it has taken advantage of the available growth opportunities, Shah said.
Kenya's population of about 40 million people is expected to rise to 60 million by 2030, accompanied by increased urbanisation, Shah said.
He likened the demographics in Kenya and other African markets to a pyramid which is expected to grow from the bottom towards its middle.
"That middle bulge is going to be the consumer," he said.
Bidco, which makes Kimbo vegetable fat, various margarines and soaps, will add staples like wheat, rice and sugar to its product range through the investments, which is being funded mainly through bank debt.
The growth plan may, however, be curbed by a lack of suitable land to cultivate raw materials.
"Land availability is a big problem in Kenya," Shah said.
In neighbouring Uganda, Bidco has only managed to plant 10,000 hectares of palm oil out of an initial target of 26,000 hectares due to lack of land.
The plantation supplies less than 15 percent of the firm's requirement for palm oil in its Ugandan operation, frustrating its efforts to substitute imports of palm oil from Indonesia.
Undeterred, the company is casting its eye over other crops used in production, offering small-scale farmers in Kenya purchase contracts.
"We are ramping up our agricultural activities in east Africa... We are looking at sunflower and Soya beans on a massive scale," Shah said.
He said the risks on the continent, like rampant youth unemployment, could be turned into an opportunity by African governments through training of young people and exporting labour to the rest of the world.
"We have got to turn it around. Rather than (saying it is) a challenge we have to say this is an opportunity," he said.
Perceptions about the continent better known in the past for wars famine and coups are changing in tandem with faster rates of economic expansion and Shah said foreign investors looking for good returns should not wait too long to get in.
"Africa is not a bubble. Africa is happening, it is a reality... The opportunity in uncertainty is massive," he said.