Chief Executive Officer (SIMON GROUP)

GENERAL

Tanzania has wide spectrum of possibilities in different industries and it has become attractive destination for investment. In your opinions, why would you say Tanzania is attractive destination for investment?

There are number of resources in Tanzania including abundant natural resources (oil and gas discoveries), tourism, agriculture, etc. Tanzania has the most fertile land in Africa; therefore it is the right decision for agriculture, tourism and mining, as well.
Again the political stability in the country is another major factor when it comes to outlining the drivers that make Tanzania the attractive destination for investment given that Tanzania is a peaceful country. Tanzania is a leading peaceful nation in Africa, therefore the international investors can be assured of the investment protection and security throughout the time they invest their properties in Tanzania.

H.E Jakaya Kikwete has had two wonderful terms and he has put Tanzania is the right truck to attain its vision 2025 and to make Tanzania a middle-income country. What are in your opinions are the President’s main achievements and what legacy is he leaving behind?

One of his big achievements during his ten years in the office is maintenance and strengthening of political stability in the country. Knowing Tanzania has moved from a single party system into multiparty system and it is during his regime when multiparty system has become stronger and competitive, but he has managed to maintain peace in the country. Talking of examples of other nations (in Africa and some of countries in Europe) which undergone the same process and the impact on political stability became questionable afterwards, whereby the peace in the specific countries was in trouble; but in Tanzania things are different as the peace has always been strengthened throughout the transaction period. Again, Tanzania has become attractive destination for investment, which is a great achievement as numbers of foreign investors are coming to invest in Tanzania. Stiff investments in tourism, mining and agriculture are good examples. H.E Jakaya Kikwete has also improved education system in the country, whereby the numbers of secondary schools have been built in an attempt to make sure that people are getting opportunities to acquire education and fighting against poverty.

Could you tell us a little bit about business environment in Tanzania? As Tanzanian businessman, how do you see business environment in the country (Tanzania)?

Business environment in Tanzania is conducive considering strong support from political environment (Government). Again the tradition and culture of the Tanzanians are positive and very kind unlike other African countries such as Democratic Republic of Congo (DRC), Burundi, and Nigeria etc. Therefore business environment in Tanzania is conducive and peaceful regarding financial market in Tanzania is also growing tremendously in the sense that it doesn’t affect the business environment in the country, despite there is still a lot to be done in the sector.

ORGANIZATION

SIMON Group is one of the largest groups-Its involvement in several industries such as real estate transportation, commodity, logistics, port services, constructions and agro industry. Could you tell us a little bit about the background of Simon Group?

Simon Group was established in 1996, trading in cotton industry, which involved supplying cotton materials from the Lake Zone where cotton is grown. In the same year Simon Group Limited was registered, by the time, the corporates unions were governing the trading activities in all regions i.e. Nyanza corporate union before private sector intervention in 1997.

Simon Group Limited was supplying cotton materials to corporate unions. After private sector’s intervention in cotton trading in 1997, which led to the decline of several corporate unions, Simon Group Limited diversified its operations and had started supplying cotton materials to the private sector. For example, in 1998 when OLAM international company came in the country to start cotton business and Simon Group Limited hosted and became the first local company to buy cotton materials from the farmers and supply them to the private sectors.

In 1999, Simon Group Limited established the Oil Mill by the time the corporate unions became weak as result of private sector intervention in cotton trading and, hence, they couldn’t compete with the private sector and some of the factories were put for rent to private sector. Thus, between 1999 and 2000 there were two factories owned by the company an oil mill and ginnery, which were rented from corporate unions, hence it involved the buying of seed cotton from the farmers and, after processing the cotton materials, were sold to OLAM. The two factories operated between 2000 and 2006 when another big and modern ginnery was constructed by Simon Group Limited, inaugurated in 2007 by H.E President Jakaya Kikwete, marking it the first ginnery owned by Simon Group Limited. In the same year, 2007, another factory was acquired in Mwanza, It was an oil mill from cotton seeds, which initially belonged to Nyanza corporate union. The main customers for the cotton and oil were coming from Kenya and Uganda so the products were being transported through the Port (Mwanza Port) to Kampala, Jinja and Kisumu respectively. However the head office of Simon Group Limited was in Mwanza and all the operations were carried from Mwanza.

In 2008 when the world had started experiencing the economic crisis, there were price fluctuations on commodities therefore, both, palm oil and cotton trading declined dramatically. Seeing that the importation for palm oil became cheaper, people imported cheaper palm oil into the local market. The local products couldn’t compete with the imports as result of the world economic crisis and, therefore, diversification of factories was put in place by Simon Group Limited.

The company had started doing International logistics by taking goods to the port and transporting them to the neighboring countries such as Rwanda, Burundi and DRC etc. The logistics business became more successful as result of political instability in neighboring countries, whereby, people were migrating and, hence, there were several refugees’ camps in the country (Tanzania), in Goma and Kigoma. Therefore, WFP and UNHCR based in Tanzania. Hence Simon Group Limited used to transport food materials from the port of Dar es Salaam to the camps, thus, the requirements of the transport were very huge and it was at the same time when, witnessing that the central rail way and TAZARA line -which were used to transport commodities from the port of Dar es Salaam to other neighboring countries- were dead, there was a sharp requirement for transport. The company saw the opportunity and engaged in international logistics dramatically and there was a need of buying new trucks (eleven brand new Scania trucks were bought) to facilitate quick transportation of materials inside and outside the country. Though, the cotton business wasn’t being abandoned by the company, it was diversified.

By the end of 2008 in November the company opened the office in Dar es Salaam (Kurasini area). Since then the company has been doing its operations from Dar es Salaam, despite the entire HQ was still in Mwanza. The first transport agreement came from WFP to transport maize and rice from the port of Dar es Salaam to Goma. Since then the company has been doing international logistics. In 2009, Tanzania experienced famine and hunger in some regions, therefore, the government had the food reserves in Dar es Salaam and mainly in southern highland regions i.e. Iringa, Mbeya, Ruvuma, Rukwa, where the major food reserves are located in the country. The task was to distribute food materials from the reserves to the specific regions experiencing famine and hunger for which the company had signed the contract agreement with the government to distribute maize and rice. It was that contract from the government that had opened a window for Simon Group Limited for further diversification of business. After accomplishing the distribution of maize and rice all over the country, the company had gained experience on the ways in which the business gets done (i.e. the place where the maize and rice are grown, at what price, how to transport them, how to store them).

In the same year 2009, the company had acquired wheat and maize mills (in Mikocheni area, Dar es Salaam) based on the experience gained during distribution of maize for the government in several regions. The company had been knowing where to get the raw materials for the maize mill and it flourished becoming number one in central and east Africa, with 20,000 tons storage facilities sitting on a two acres compound in Mikocheni area. Regarding the quality of the mill, in the same year another opportunity came across and, this time, it was Tanzania Breweries: the sub millers were shifting from the use of the cornstarch for brewing, cornstarch which were imported from Europe and it was very costly for them, so they shifted from the use of cornstarch to maize flour for brewing. Knowing the maize flour needs specific machines to manufacture, Tanzania Breweries were looking for suppliers (mills) that could supply and therefore they made contract with Simon Group Limited and started the business, which is a long contract for the company, and recently Serengeti Breweries came in for brewing. Again Simon Group and TBL signed a contract for the construction of a central warehouse facility for the entire TBL imports -i.e. there are breweries in Dar es Salaam, Arusha, Mbeya, Mwanza and Jinja, therefore, Simon Group is responsible for transporting the materials from the port of Dar es Salaam to these specific plants.

At the time, the company’s office in Dar es Salaam was initially in the premises of UDA, which is owned by the company (Simon Group Limited) today. UDA was owned by the State and DCC (Dar es Salaam City Council) and it was listed for privatization by the government. The government had failed to privatize the company for the last seven years, then, the body of UDA was assigned to look for strategic investors with interest to create partnership. The General Manager of UDA was satisfied after observing the operations and activities done by the Simon Group Limited and the two companies agreed on terms and conditions and Simon Group Limited acquired UDA. It was a big opportunity for the company to diversify its business. After the acquisition of UDA, some big local companies, i.e. Azam, Mohamed Enterprises etc., emerged to argue the transaction made and a lot of frictions emerged in Parliament as a result of the acquisition of UDA by Simon Group Ltd, claiming the total buyout to be inconvenient to actual property sold. Therefore, Simon Group Ltd was told to preview the payment evaluation and resume payment of UDA from which, in 2011, Simon Group paid the difference and acquired UDA completely. Later on in 2013 DCC decided to quit and sold the shares to Simon Group Ltd and therefore Simon Group Ltd owns 77% of the shares of UDA.

Initially UDA had seven buses operating in Dar es Salaam before Simon Group Ltd took over, today there are about 255 brand new buses operating in Dar es Salaam. The process of Bus Rapid Transit (BRT) construction in Dar es Salaam had started in the same year (2009) Simon Group had bought UDA. By the time government was holding talks with the World Bank for loans but it wasn’t public yet, lucky enough, when the construction of BRT became public in 2010, Simon Group came to realize that it has exclusive license to operate in Dar es Salaam in the sense that BRT construction doesn’t affect the operation of UDA. However, there are must be constructions of flyovers in some of the junctions in town to allow the operation of public transport. Since then, the company has been operating and several projects are being put in place. For example; the proposal has been sent to the World Bank asking for financial support in attempt to accomplish the remaining phases of BRT construction in Dar es Salaam.

PERSONAL

A More personal question: How Harvard Business Review readers are going to trust in entrepreneurship spirit. What have you learned throughout your carrier as entrepreneur?

I would like to inspire my fellow people to believe in themselves on whatever they are doing. Nothing comes easily, it takes some quiet so long time to achieve big things and there is must be stiff commitment and passion to achieve set of goals. I have passed through different circumstances to reach here where I am today and I am also targeting to achieve more and they should be impressed by me. It wasn’t that easy to move all the way from Mwanza to Dar es Salaam just looking for opportunities therefore nothing is impossible. My background starts far years back regarding I am coming from a poor family and I was living in small village but I struggled and managed to own precious properties such as nice house, expensive cars and other properties therefore my question is “Why not them”? This is what I can inspire my fellow people who are keen to do entrepreneurship.