Building a Successful Ugandan Food Processing Company – Conversation With Meg Jaquay, CEO of Jakana Foods.

Meg Hilbert Jaquay began her career in Silicon Valley, worked on three continents. Now, she is focused on internationalising the flavours thatUgandan farmers have to offer.

 

Meg Hilbert Jaquay is the General Manager of Jakana Foods located in Kampala, Uganda and the Vice President of the American Chamber of Commerce Uganda Board. After studying Manufacturing Engineering at Boston University, she completed a Master’s in Business Administration from San Jose State University, following which she began her career in the Silicon Valley. She has worked in Asia, Europe, and now Africa specifically Uganda, where she runs Jakana Foods, one of the pioneer companies in processing of organic dried fruits in Uganda. With a growing export base in America, today, she is focused on internationalizing the flavours that Ugandan farmers have to offer.

She spoke to Joel Basoga, Editor in Chief of Cue Africa and discussed a wide range of issues. These included, doing business in Uganda as an investor, exporting food produce, the incorporation of technology in agriculture and lastly, she weighed in on the sustainability of Initial Public offerings (IPOs) for food processing businesses and the challenge of capital for businesses.

This interview, which was condensed and edited for clarity, was conducted in Kampala Uganda.


Can you tell us about Jakana foods?

 We primarily make dried fruit, both organic certified as well as conventional. We are primarily an exporter although we do have a strong following here (Uganda) because of our unique flavour profile.  We also do all-natural juice and pulp for the small market here as well as export.  We employ 10 people and when necessary an additional 15 casual workers.

How has your interaction been with regulation especially phytosanitary regulations that affect food export companies?

We sell in bulk to someone else who then packages and sells to a final consumer in their own package. Those local regulations are managed by that receiver. In addition, the Ministry of Agriculture has a requirement which stipulates that anyone who is exporting must to trace back where they bought their product. This makes sense, because in the event of a recall, one needs to find the source of contamination.

Entrepreneurs have to do business differently in order to be competitive in the world market. At present, Uganda struggles to be competitive, because a lot of business is done unregulated. If we want to compete, we have to step up to the plate and embrace the current growth opportunity that regulation proffers.

Figure 1 The Jakana Processing Plant at Kawempe, Kampala, Uganda. Photo Coutesy: Shaban Kitimbo

Further, what about regulation locally? Does it support business? How do you find the regulatory business environment in Uganda?

I think there has been somewhat a turnaround in the last few years in respect to that.  For example, the Uganda National Bureau of Standards (UNBS) has trained a series of ambassadors to reach out to more companies to ensure that they are strongly considering these regulations as it would be in the company’s best interest to abide by the regulation set out. This is important because even to cross the border to Kenya and Rwanda you cannot do it without UNBS.  Therefore, it is in the interest of businesses that UNBS performs its role.

The Kampala Capital City Authority (KCCA) has had a change of heart. Previously they would show up with Police, this was intimidating rather than supportive. I feel that they are now supportive, they must have realised that it is not in their interest to close businesses as it would be counterproductive to the ultimate aim trying to be achieved. Rather, they need to focus on the undocumented businesses that operate under the radar and make it more difficult for those who actually want to operate legitimately, and abide by the regulations.

What drew you to Uganda?

Jakana Foods was set up by a Ugandan American in 1994, long before me, by Dan Jakana. He lived in Texas where he learnt food processing.  After 35 years of doing business in the USA, He saw a gap in the market for banana juice, especially for those who lived in the city (Kampala). It was a cultural drink only prepared in the villages, once it reached Kampala in jerrycans, twenty-four hours later, it was already fermented. He was the first person to pasteurise and vacuum pack banana juice in Kampala.

Although Jakana Foods began locally, over 80% of our produce is now exported.  This began, in 2014, when an American came into Uganda looking for organic certified dried fruit in Uganda. Since he discovered Americans working here, he decided to team up with us, so we became organic certified and started to supply to his businesses in the USA. We focus on banana, pineapple, mango and jackfruit.

How do you minimise and maintain the variations between the product you receive from farmers?

That is a good question and it has come up especially with mangos. We have partnered with Kenya to create a flavour profile for East Africa, for the export market. This is so that we can compete against the flavoured profiles of West Africa and South East Asia, which are different.  For instance, when we are looking at mangoes, we need a certain sweetness level, which is defined by BRIX, and also fibrous content.

We definitely try to tailor what we are doing to a certain set of variety, it cannot always be the same exact fruit, because we have no commercial operations. We have to rely on small holder farmers, so, in natural food products, I always write on the label, “natural variations may occur.”

Figure 2: Some of the dried fruit produced at Jakana. Photo Courtesy: Shaban Kitimbo.

Have you always had a steady supply from the small holder farmers? Has land fragmentation and ownership affected your supply?

 We originally   targeted 120 growers for our organic certified fruit programme. They were clustered in groups based on their regions.  It makes it a lot easier when you work with associations or cooperatives since their main purpose is to market a larger volume for a potential buyer like us.

But, yes, it is difficult because of land ownership and fragmentation. Do we always have steady supply? No.  Do we always have a consistent price point that we know we can buy at? No.  We cannot contract very easily with small holder farmers since there is too much competition for fresh fruit in the Uganda market.

We have had a huge shortage of fruit except maybe for the last two weeks, there might have been a surplus of pineapple, but that is just two weeks out of a whole year. A business like ours with a processor cannot rely on two weeks of a surplus. Entrepreneurs need to find a way to make agriculture more attractive so that the youth will stay engaged in it.  For instance, by using technology: the government opening up the use of drones in agriculture, and through applications that farmers can easily use to understand the market opportunities. Although there seems to be some of that technology, it is rather complex – whether it be irrigation technology or aquaponics.

Why don’t we have buildings in Kampala to grow food as they do in New York. So that a young person can utilise technology to find new ways to grow food.  The new generation of Ugandans, may not necessarily eat the traditional food. We need to find creative ways to present to food to the new Ugandan generation, in a healthy way.

How seamless or challenging was setting up in Uganda? What are some of the challenges you have faced and had to overcome in the Ugandan market?

 One of the challenges we still face here in Uganda is foreign investment. We need to have the mix of foreign and local investment. Now, foreign investors are required to have 100,000 USD invested into a business in order to get their license.  That requirement is reasonable, however, to keep people like me in the market (especially with my knowledge) the company needs to invest another 100,000 USD in order to renew my investors license, that’s a little bit more challenging. If it stays that way, I think we could see a reduction in foreign investment.

Some of the Policies need to be reviewed. They instituted a policy last year where any foreign investment must include 20% Ugandan ownership. This could be problematic for some foreign investors. As it is going to limit it to the top tier, who can afford. If an American comes in with 100,000 USD, would you have the 20,000 dollars to get that 20% stake to become a Ugandan partner? Who will be those Ugandan Partners? It might be left only to the top tier people. Why was such a limiting policy created? How is an investor expected to find a trustworthy partner? While this could be done gradually, it should not be required on day one. Especially since somebody cannot come in initially and do an initial public offering which would require finding 20% worth of shareholders, that’s not how businesses start.

So, what could be the best way to start a business in Uganda? Advice to upcoming entrepreneurs.

Starting up a business in Uganda is no different from anywhere else. Ultimately, you have to come up with a great idea, that someone is going to pay money for. There is a great book I read a few years ago, “Nail It, Then Scale It by Nathan Furr and Paul Ahlstrom,”.  It urges one to come up with a concept, then nail it through an iterative set of failures and successes. The book is based on Silicon Valley, California, but that concept should apply to anyone.  So, in a nutshell, look for a gap in the market, as far as a product is concerned do not try to copy, figure out who is going to pay you money for it. Get those references, testimonials and start to build the business, organically. Especially if you are starting with very little to invest, the easiest way to invest here is through land and growing something. You can grow anything here in 90 days.  Grow something that all your neighbours will buy from you and be unique.

This new generation has to look at unique foods, we have a growing population, what will this new generation need? Look at things that might protect the environment more. Reduce on the number of plastics that are being offered and offer your product in a new and creative way. I have started concepts, but all I did was see that there is a gap. If you don’t find a gap in the market, you are not fulfilling a need. Always solve somebody’s problem, if you are not solving a problem then, its not a sustainable product.

Financing is one of the key issues for business. It informs decisions of expansion, but access to Uganda credit is not internationally competitive? How has Jakana maintained its financial status? Unprecedented interest rates, profit margins would have to be incredibly high to repay loans.

We have sold shares privately to larger investors. Those investors then become part of the directorship and decision-making process, so we get a more varied skill set.

We also received a grant a few years ago to help with our extension through farmer trainings which go to the bottom line of what we do. Farmer extension is a very expensive and costly exercise for a company to take on especially for organic products because it is not being done by the Ministry of Agriculture. Even though Uganda has the 2nd largest number of organic certified farmers in the world, Ministry of Agriculture does not protect that sector, it does not train it, or try to grow it. It has to be done privately.

Figure 3: Banana Fruit Juice produced at Jakana Foods. Photo Courtesy: Shaban Kitimbo

Any comments on interest rates? While some banks have justified them as a need to cover their overhead costs.  What is your take on the unprecedented interest rates in the financial services industry in Uganda?

While I am not an economist, I find it fascinating that you can have an 18% savings rate.  That means that one can take their savings   into a bank (not doing anything) and make 18% more of that deposit. That is likely more money than most business in Uganda make.  Why are banks incentivising people with such high savings rate, higher than what people can make running a business? I do not know of many people in Uganda who make 18% profit from their businesses. Such a high rate is potentially problematic, as it may mean that we are not creating jobs for the millions of youths that have no jobs. It is a strange dichotomy of what is going on in the financial services sector.

Our Founder, Dan Jakana once took out a loan at a 28% interest rate but all the money he made from making and selling the product went back to repaying the loan. He said he wouldn’t do it again as a business owner.

No start-up company should be indebted to a bank. It can be indebted to family or friend but, not a bank. It would take you a long time to repay the loan. You should only get a loan through a guaranteed contract or business not in speculation, because that’s how business go under.

I have even heard of some ‘sharks’ who lend at a rate of 1% a week. Which is 52% a year. This is not sustainable. Financing can be better, it has to be through letters of credit through sales. There has to be some sort of guarantee of business. Also, banks are very selective to who can qualify to access their financing.

There are credible reasons for companies listing on the stock exchange. More importantly it is a creative way of raising capital, is it something that Jakana might consider?

I once spoke to a colleague, about Jakana Foods going public, at that time, we were not ready, and I still do not think we are ready. We are not ready for regulations and, that’s true for most companies in Uganda. Some of them do not even have good books to begin with. They are small, so imagine putting all the regulations against that.

Entrepreneurs aren’t looking at putting their business on the stock exchange, they are concerned about the amount of money they can bring in for themselves. The culture of partnerships is not quite there yet.  I use the word ‘co-opetition’. I might be competing with other dried fruit vendors in this Uganda market, but when I need extra supply because I do not have it, I go to them and they sell it to me. They have no problem selling it to me, because we can team up on larger deals that can then open us up into better market opportunities. But that co-opetition at all levels of Ugandan businesses does not exist. So, I think the concept of them having shareholders, who have a vote, may not yet, sit well with the general society.

Although going public allows the majority to buy stock, I do not see a privately owned dry fruit business in Ntinda, going public any time soon. They would rather bring in foreign investors than have to tie themselves to a stock exchange.

So, would you say going public is not viable for a food processing company?

I have been hearing about this for years, but, I don’t see new up-tech for it.  I do not hear about a lot of IPOs going on. That means there is not a good market for it yet. Although that does not mean that it cannot happen in the future, but just that it is not solving a problem yet, namely for enough companies to come on board.

The food industry (especially all-natural food) is tied to small holder farmers, where there is so much volatility and climate unpredictability. How would that tie together with an IPO? How does a public company rely on something, that is so impacted by climate and volatility? That is challenging.

Jakana foods, what should we expect to see over the next years?

We shall focus more on packaging solutions for the food industry. We want it to be a part of a growing brand recognition for quality Ugandan products, because we are constantly left out of the mix in world markets. People do not know that things that taste great come from Uganda.  We want to export more to the USA, hopefully have a USA brand. We would like to grow our commercial farm on a larger scale, in order to control our costs and supply.

Uganda is the most entrepreneurial country. She also has one of the youngest growing population. What opportunities exist in Uganda? Advice to persons considering setting up in Uganda?

Set it up legitimately. Don’t be an undocumented business. Nowadays, businesses like us have to work with other documented business.  As my business grows, my tax liability becomes stricter which invites more scrutiny. So, I need more receipts. I encourage people that if they are starting a business, start it legitimately, pay taxes. That way, we shall also be incentivised to deal with you.

For entrepreneurs, start small, find a gap, solve a problem and find someone pay you for solving that problem. Get customer feedback and find brand ambassadors who love your product and will speak about it. Focus on that.

Figure 4: Some of the machinery at the plant. Photo Courtesy: Shaban Kitimbo.

editorinchief@cueafrica.net

@joelbasoga