VENTURES AFRICA – A Kenyan businessman who was forced to take on a job with Safaricom in order to prevent his nut exporting business from going under is now making more than $6 million per year in top-line revenues.
Yet the challenges do not stop there for Patrick Wainaina, who started Jungle Nuts ten years ago, with the illegal smuggling of nuts out of the country posing a serious problem for registered exporters.
Having started the business in 2002 with just $3000, Wainaina took on work with Safaricom in 2003 in order to prevent the company from going bust. Now Jungle Nuts is a serious success, generating huge revenues and beating off 200 rivals to win the number one spot in last year’s Top 100 Mid-Sized Companies survey conducted by the Business Daily newspaper and consultancy firm KPMG. It was the first agribusiness firm to win the coveted award. The company exports 100 per cent of its products, the main markets being the USA, EU, Japan and China, while also running its own foundation. Yet the Chinese link-up is far from being a totally positive one, with allegations of smuggling of nuts to China from Kenya, while lack of raw materials continues to hinder the industry.
“We work with about 10,000 farmers and we have a tremendous backward linkage,” said Wainaina. “Along with this, we have jungle foundation which identifies talented needy people in the society. We identify their economic gap and then support them to produce for themselves and their families.”
The Kenya Nut Packers Association (KnutPAK) estimates that Kenya exports 3,750 tonnes of nuts every year, and it is this demand, which remained relatively unhampered by the global economic downturn, that has allowed Wainaina to build his Thika-based business to its current level. Sourcing macadamia, cashew and pea nuts from small scale farmers in the Mt. Kenya region, Jungle Nuts manually cracks macadamias and semi-automatically cracks cashews. The company now employs 800 workers, 500 of them on a seasonal basis. The organisers of the Top 100 award said that the firm stood out in every aspect of assessment, including profits, revenue growth and return of investment.
Yet it was not always such. Wainaina, who worked for a Japanese company in the United States before pouring his life savings of $3000 into his new company in 2002. The business ran into serious early problems and he was forced into taking a job with Safaricom in order to keep Jungle Nuts, and himself, afloat. With the bank having refused to lend him money, Wainaina used his earnings from Safaricom to prop up his business.
“I went looking for money,” he said. “I approached banks but no credit was forthcoming. I struggled here and there and when ends refused to meet, I went back to job market. After four years, I quit.”
By this time he had turned things around and had created an enterprise that now boasts an annual turnover of more than $6 million. This growth has even defied the global financial crisis of 2008/09.
“Nuts have gained popularity in these markets because they are healthy snacks that carry no cholesterol – the raw fat that has been blamed for the rise in heart disease across the world,” he said.
Wainaina cannot, however, rest on his laurels, as problems still remain to be surmounted to allow Jungle Nuts to continue posting such impressive figures. Though demand for the nuts remains high, production has fallen due to lack of raw materials. Last season’s produce – 6000 tonnes – was the lowest for decades, and was attributed to crop neglect and drought. Processors announced that they might need to close down factories in future.
Cashew nut production has fallen by almost 50 percent in the last three years, according to the Ministry of Agriculture, and the cash crop income has declined from Sh290 million ($3.5 million) to Sh250 million ($3 milliom). The export of raw nuts was banned by the government in 2009, in order to encourage local production and value addition. Yet loopholes remain which have been exploited by cartels to smuggle raw nuts out of the country, primarily to China. Just last month, more than 5,000 bags of unprocessed macadamia nuts worth Sh20 million ($238,663) were intercepted at Mombasa, about to be loaded onto a ship for export to China.
“The smugglers use brokers to acquire nuts on their behalf and transport the consignment to stores in Thika and Nairobi which are later taken to various godowns for containerisation and then to Mombasa port,” said NutPAK’s consultant Charles Mungai.
Wainaina says the government is not doing enough to stop such actions, but is grateful for the ten-year tax break that his company is entitled to because of its export processing status. With the domestic market small and already well-saturated by his competitors, he sees exports as more advantageous. Yet he is determined to give back to his country in any way he can, hence his jungle foundation, and wants an end to the problems that are hindering the industry.
“Our vision is to see a Kenya that produces Kenyan, buys Kenyan and exports Kenyan,” he said. “The dumping going on from the east, especially China and India is quite alarming. We are importing eggs, oranges, wheelbarrows, spades, match boxes, you name it. But is it necessary? The Chinese are taking away our raw nuts, pyrethrum, scrap metal, and re-export it back. Who suffers at the end of the end of the day? Kenyans!”
“The jungle foundation in our small way is trying to alter the tide by empowering the potential needy in the society to produce their own and consume their own. It must start somewhere.”