Special feature: ZAMBIA

Interview with Mr. Lux Subramaniam, CEO Trade Kings Ltd, Zambia

March 2018

QRegional integration and industrialization are one of Africa’s key priorities. Africa’s largest untapped market and its biggest opportunity for progress are right on its doorstep. For example, on 1 January 2016, the population of the EU was estimated at 510.1 million inhabitants. By 2015 Africa’s population was already more than twice that of Europe, at 1,186 million, but intra-African trade was only USD 170 billion worth (5% of intra-EU trade). How would you assess the region’s efforts to boost industrialization and intra-Africa trade?

This reply has been segmented in context with Zambia and then regionally.
Zambian Initiatives:
A few Government initiatives to boost industrialisation are articulated below:
➢ Creation of “Economic Zones” and “Industrial Parks”
➢ Tax incentives in the above specialised venues
➢ Special import tariff barriers to promote existing and infant industries
➢ Amendment of Public Procurement Act, which mandates that, all Government and Public Institutions buy locally produced goods.
➢ Recognising the body “Zambia Association of Manufacturers” (ZAM) as an Act in Parliament
➢ Mandate Zambia Bureau Of Standards (ZABS) to ensure locally produced goods meet international quality standards
➢ Establishment of a “One Stop Shop” for foreign investors to incorporate companies involved in manufacture, thereby reducing the multiplicity of licenses
➢ Empowering Zambia Development Agency (ZDA) to dole out additional bespoke tax incentives for new companies venturing into manufacturing
➢ Permitting and encouraging existing industries to open industrial parks for the promotion of industrialisation
➢ Empowering functionality based verticals like PACRA, ZDA, ZAM, Zambia Chamber of Commerce, ZAM, etc., to function autonomously
➢ Implementation of an “Industrial Policy Act”
➢ Promotion of mechanisation and industrialisation of the agro sector.

Besides the President of the Republic of Zambia has cast the road map, and coined it as “Vision 2030”. The thrust of this program is primarily industrialisation and improvement in infrastructure. Infrastructure here would include railway, roadway and power. The 7th National Development Plan is the bedrock for this vision. Furthermore this endeavour is to ensure that this vision is in alignment with the African Union Vision 2063. This would pave way to intra-Africa trade.

Regional Initiatives:
➢ Diversification and Value Addition Economically African countries have lagged behind in terms of diversifying their economies. The continent has concentrated on producing raw materials for trade. This has not helped in any way to support intra trade within the continent. Efforts are being made in setting up economic zones to encourage diversification and mass production of finished goods for the regional market.
➢ Peace and Security
Peace and security has been on the top agenda of the African Union. It is believed that without peace and security intra-trade in Africa is almost impossible. The African union has set up high level committees to ensure that peace and security exist in all Africa and contribute to intra – trade. The African Union has been championing consolidation of democracies and holding of peaceful elections to ensure peace and security on the continent.
➢ Capacity Building and Institutional Development
Under the auspices of the African Union, regional economic bodies have been spearheading capacity building and institutional development to foster intra trade. This is with a view to pave way for global trade negotiations.
➢ Infrastructure Development
In the African Union Vision 2063, the block intends to spend billions of dollars in infrastructure development to boost economic trade between African countries. It is understood that infrastructure is a cornerstone and a pillar in boosting intra – trade. The vision includes connecting all African capital cities by rail and the construction of new international airports and expansion and upgrading the existing ones. This effort will ensure easy flow of goods across the African continent.
➢ Regional Integration
Regional integration involves harmonization of trade policies in an effort to expand the market for goods produced. Africa has been working towards this through creation of regional blocks such COMESA, ECOWAS etc. The ultimate goal of creating such regional economic blocks is to harmonize trade policies and merge them into a larger African economic community.

QDuring President Lungu’s State of the Nation Address in March 2017, he called for a national transformation. Accordingly, the 7th National Development Plan 2017–2021 was approved in June. Zambia’s macroeconomic objectives include accelerating the diversification of the economy, particularly towards tourism, energy, mining, agriculture and agro processing. What is the diversification potential of Zambia’s economy?

This reply is referred in context with the Trade Kings Group Companies’ potential and inherent strengths. It could be used as a multiplier to other manufacturers in Zambia.

➢ Steel Industry:
The neighbouring countries of Zambia have an insatiable appetite for steel products which is catered by South Africa and majorly from China. Universal Mining and Chemical Industries Ltd (UMCIL) has a few plans underway to diversify its current product range to cater to these requirement. For instance market size of steel mill balls used in the neighbouring mining sector is about 120,000 MTs per annum. This is currently catered from China. UMCIL has an option of including this as a plan for diversification.
➢ Agro Industry:
Currently the country exports maize to its neighbours with marginal value addition. However the Group is currently examining a change of latitude on the prospects of diversifying in this arena as well. This would primarily be a backward integration proposition thereby targeting at elimination of imports.
➢ Diversification within the Mining Sector and value addition: In the mining sector Zambia has concentrated on producing raw copper for exports. The country is however making efforts to move away from copper dependence to other minerals such as iron, cobalt, emeralds, gold etc. The country is also working with mining companies to encourage their international customers sourcing Zambian raw materials, to set up industries locally, to enable production of finished goods within Zambia.

QThe Government is doing great efforts to enhance the ease of doing business and to improve Zambia’s investment climate, having being ranked among the top-10 best African countries for business and the 7th most Competitive African economy according to CNN. Commerce Minister Mwanakatwe mentioned her Ministry has an aggressive agenda to reform the business environment and ZDA also said Trade Kings Group was a home grown investment that the country is proud of and deserves not only congratulations but the full support that it deserves. How would you describe today’s investment and business environment?

The nation has witnessed an upsurge in copper prices which has changed the political landscape and also the economy in general. This has turned lucrative for foreign investors. Furthermore, the initiatives that the Government has taken (detailed in the reply to first question) adds credibility to the business environment. In short, the scenario is upbeat. However a lot needs to be done in the transport and logistics system and import tariff barriers to precipitate this acceleration to the next level thereby stay ahead of healthy competition.

QPresident Lungu said that a strong partnership is a necessity between Government and the Private sector. How smooth is the dialogue between the different stakeholders in Zambia?

Spoken in context with the Group, indeed the dialogue has been cordial. However it is pertinent to point out the fact that his Excellency, the current President is second of his kind to have sworn allegiance by attending the annual congregation of ZAM members this year. This is nearly after 5 decades and through the regime of several Presidents. A clear indicator of solidarity to the manufacturing arm of the nation. In this meeting, the President of ZAM listed out the woes of the manufacturers in the country. In his reply to the ZAM members, the President was affirmative that each of these issues would be handled professionally and ethically through the Ministry of Industry within a defined timeframe. This is in itself speaks volumes.

Q Trade Kings Limited began its operations in 1995 with a single product, Boom detergent paste and is now a diversified and vertically integrated conglomerate manufacturing different products. What milestones would you highlight in Trade Kings’ over two decades of activities?

The founder shareholders of the Group arose from humble beginnings with self-engineered entrepreneurial skills. Traditionally they were bakers and over a period established themselves in this vertical in the early 70s being their first milestone. Wheat was in short supply and it is them who propagated the “Innovative Out Grower Scheme”. Having tasted the success of the bakery venture, the founder shareholders decided to embark on a very different journey, which was detergent. The runaway success of the detergent led to home care products which was the next milestone. The Group since then has undergone a metamorphosis with diversification, concentrating, in the last 10-12 years. Having won the confidence of the masses with the detergent and home care brands, the Group made a foray into food products which was the turning point in its business outlook. The first to set foot into the Group was confectionary, which was a big milestone. Gradually the success of the confectionery, resulted in the introduction of biscuits and maize milk. The off shoot of maize milk led to the introduction of beverages. Initially it was carbonated soda drinks and from the maize milk evolved the milk shake. In the interim, the Group ventured into manufacturing adult and children breakfast cereals, snacks and soya nuggets. The underlying principle in this organic growth was centered around food and beverage. Each product diversification was indeed a milestone to the Group.

Q Commerce Minister Mwanakatwe told us about the need to position Zambia’s industry to become a key regional player, or you will be faced with high levels of imports into the country. Being Trade Kings Ltd. the largest FMCG manufacturer in Zambia and one of the major manufacturers in the region, and the Best Manufacturer in Zambia 2016, how would you assess the Government’s work towards industrialisation, value addition and making Zambia’s industries regionally competitive and what is the example you are setting?

At a recently held seminar by ZAM, his Excellency the President of Republic of Zambia categorically indicated that they are setting up ways and means of curbing illegal imports. Secondly, as a part of his electoral agenda on industrialisation, he had declared Kafue as the “Economic Zone” for the nation. UMCIL, one of the Group Companies, manufacturing high quality steel rebars, situated in Kafue, was what, mooted the Presidents clarion call of the “Economic Zone”. Trade Kings Group has acquired land in the multi facility economic zone (MFEZ) in Lusaka recently with a view to expand its operations laterally. A few backward integration projects are also on the anvil. A short, mid and a long term plan is being currently deliberated by the Board for the projects to be undertaken in MFEZ. It is pertinent to note that the Industry Minister, other doyens of the Industry Ministry, the ZAM members of Zambia and South Africa respectively gathered together to discuss balance of trade deficit to achieve optimum capacity utilization in both these countries.

Q Mr. James Songwe, Trade Kings Media Manager stated, “The future and opportunities for expansion have been greatly increased with President Edgar Chagwa Lungu’s vision and focus to develop the country’s industrial capacity. Trade Kings sees the statement from President Lungu as an opportunity for the Trade Kings Group to take its world class products to the whole of Africa and the world at large.” What are Trade Kings international footprint and aspirations?

Trade Kings Reply: Having set an indelible footprint in Zambia, Trade Kings has spread its tentacles across certain countries in Sub-Saharan Africa. The following are a few of its ventures:
In South Africa the existing confectionery manufacturing facility is being expanded and augmented by adding more innovation in this sector.
In Tanzania, the Group is promoting its existing brands by setting up a modern distribution network with its target to cater to the ever increasing appetite in entire East Africa. Operations commenced early in 2017.
With a view to develop the market terrain in DRC, a large warehousing operation has been set up recently, which has now begun gathering momentum in business.
In Zimbabwe, the state of art production facility of detergents is in the final stages of commissioning and the roll out of finished products is expected to penetrate the markets shortly. Meanwhile, the trading operations of the Group’s products has shown a consistent upward curve.
Kafue, Zambia has been projected and poised to be the engineering hub for the Sub-Saharan region.
The African Union Vision 2063 of railroad interconnectivity pan Africa’s steel requirement would be partially sustained by UMCIL, Zambia.

Q What is Trade Kings strategy moving forward?

The founder shareholders’ strategic planning resonates within the tenets listed below:
➢ Any expansion will primarily be organic.
➢ Expansion will be lateral or a backward integration enterprise.
➢ There will be no paradigm shift in basic finished product ranges.

Acquiring land in MFEZ, will open a new arena for the Group’s innovative projects. It certainly will be a remarkable turning point for the Group. These project are awaiting the founder shareholders’ in principle approval.

Q What is Trade Kings strategy moving forward?

The founder shareholders’ strategic planning resonates within the tenets listed below:
➢ Any expansion will primarily be organic.
➢ Expansion will be lateral or a backward integration enterprise.
➢ There will be no paradigm shift in basic finished product ranges.

Acquiring land in MFEZ, will open a new arena for the Group’s innovative projects. It certainly will be a remarkable turning point for the Group. These project are awaiting the founder shareholders’ in principle approval.

Q During the Buy Local campaign President Lungu stated, “As with everything that goes on around us, nothing makes us prouder than something that we can truly call “ours”. What would you say the label Trade Kings means for Zambians?

Trade Kings brands have become iconic and generic across a wide cross section of the Zambian masses. For instance, the Zambian people refer to detergent as boom. Furthermore the relentless pursuit in maintaining stringent quality standards consistently in the Group, has also created a very high level of confidence and a moral high ground across the populace. Furthermore there is a wide sense of patriotic rife running across the populace in supporting local brands and Trade Kings rules this pantheon. With these few factors, any product, be it an existing one or a new one is warmly accepted with open arms by the Zambian population. In short the brand equity the Group carries is colossus and overwhelming, defiantly colliding with the international titans of the industry.

Q Trade Kings is a committed company giving back to society thorough the Foundation, staying true to the mission of “Trade Kings Improving lives”. What would you say is the responsibility of renowned brands such as Trade Kings towards the communities and environment they engage with?

At the onset of 2017, the founder shareholders undertook a firm resolve in giving back to the society through corporate social responsibility (CSR) initiatives. Thus was born the Trade Kings Foundation. The prime credo of this Foundation was to focus on health, education, women and youth empowerment. As a testimony to its sincerity of its intentions, the first project completed was the “Mother and Child Care” centre rehabilitation, in University Teaching Hospital (UTH). The project outlay was around ZK 350,000. The spin off its success resulted in the next project which is ongoing at the Biet Cure Hospital, wherein a manufacturing facility to produce specially fitted shoes for clubbed feet, is being constructed. This project costing around ZK 400,000 is expected to be completed by the end of 2017. The third project has been identified to commence in 2018. Besides this, there is a deaf and dumb orphanage wherein the Group’s products are sent on a monthly basis. A 600 student strength school is also completely sponsored by the Foundation.

In short the gospel of giving back to communities has been taken seriously in harmony with the business complexities. This sermon is being publicised regularly in the media so that other corporate bodies would follow suit.

Q Zambia and the UK have long enjoyed healthy and mutually beneficial relations and bilateral relations are becoming stronger and better every year. Indeed, business links are constantly growing with encouragement from both parties to further explore business opportunities. UK Minister for Africa Rory Stewart said during his recent visit that Zambia has been an important friend and partner for the UK for many decades and that he is looking forward to working closer with Zambia. What is your overview on the relations of both nations and where would you like to see a stronger cooperation?

The political relationship between both the nations has been impeccably amicable. Given the strong economic background, its legendary robust reputation globally, its exposure to its multi ethnicity, United Kingdom stands out as a monolith in its own rights. In the Group’s view, stronger cooperation should revolve around:

➢ Upskill and reskill the Zambian workforce with the latest technology
➢ Provide seamless financial muscle for industrial and development projects
➢ Establish industries to promote growth, employment and increase the GDP.
➢ Encourage bilateral trade relationships on agro commodities

QMinister Stewart also stated, “Brexit should be our moment to rebuild and invest in these partnerships in Africa. Africa will be at the heart of the greatest challenges and opportunities of the next half-century. And I look forward to us working more closely together and learning ever more from each other.” What PPP, partnership and investment opportunities would you like to highlight to The Times affluent readership

As iterated earlier, the need of the hour is transportation network, power projects that are cheaper, efficient with the least the least carbon imprint. Furthermore, there is a serious appetite for economical mass transit systems in metropolises across the country.

QAs there is a huge competition amongst African countries to attract the much-needed FDI, what confidence message would you like to convey to the international community about Zambia?

His Excellency, the President in his electoral agenda declared that 1 million sustainable meaningful jobs would be created by 2021. The achievability of this ambitious motherhood statement was a manifestation of the following beacons:

➢ Industrialisation and mechanisation of the agro sector
➢ Movers and shakers of the global industry to establish value add products and services in Zambia
➢ Establish educational institutions to upskill and reskill the Zambian workforce and technical institutes to promote professional vocational training.
➢ Seamless flow of foreign exchange in and out of the country with no restrictions thereby wooing FDIs into the country
➢ Sovereign protection of foreign investments under the auspices of the Zambian Development Agency Act

Zambia is at its pinnacle of welcoming the international community to establish industrial ventures which add value, provide employment, packaged with the least bureaucracy, to the FDIs. Trade Kings Group has been a strong advocate to these cardinal principles thereby living up to its signature line “Improving Lives”.