How Paul Ndung’u amassed wealth and power in a decade

Reports that Life Care Medics, a company associated with businessman Paul Ndung’u, was one of the firms that the Ministry of Health contracted to supply food supplements and rations for HIV/Aids patients, have once again thrust the billionaire and his vast business empire into the limelight.

The reclusive businessman, who is a shareholder and a non-executive director of Life Care Medics, says he is now investing in private companies with the potential to capture the regional market as part of his plan to diversify from the Nairobi Securities Exchange (NSE) where he made his fortune.

“I have invested in eight private companies. I’m currently evaluating others,” Mr Ndung’u said in a rare interview at his private office on Nairobi’s Gigiri Road.

The list of private companies he has founded, acquired or bought into includes a sports betting firm and G-North & Son, an agriculture and hospitality equipment distributor he bought from the Philip Ndegwa family.

Whether by design or sheer luck, Mr Ndung’u’s fortunes have enabled him to cultivate a circle of powerful and high-profile friends, including the family of retired president Mwai Kibaki and the current President Uhuru Kenyatta.

Asked whether such connections have helped him win contracts or grow his business, he responds with an emphatic “No.”

“I’m a businessman. I’m not a politician. It is sad when a legitimate business is caught up in a political circus,” he said in reference to Life Care Medics, which was paid Sh201 million as part of the controversial Sh5 billion spending by the Ministry of Health.

“I can only speak for Life Care. We delivered as per the contract and went out of our way as a private company to detail the taxes we paid.”

Mr Ndung’u speaks crisply of his success in business, insisting his fortunes are the result of using his skills as a finance professional to make good investment decisions.

Increased investment in private firms are meant to absorb and grow cash generated from his portfolio of stocks and foreign exchange bureaus.

Mr Ndung’u reckons that his earlier working life prepared him for opportunities he would later seize as he transformed into a businessman and investor.

His first job was at Uchumi Supermarkets as an accounting clerk in 1991, a position he held for two years before joining Pioneer Assurance, then trading as Pioneer General Assurance.

It was at Pioneer, where he held the dual roles of chief accountant and investment officer, that he honed his skills as a stock picker.

Kenya’s move to fully liberalise its foreign exchange market in 1994 prompted Mr Ndung’u to venture out the next year, starting off as the owner of a startup forex bureau along Nairobi’s Kimathi Street.

“I had visited Uganda, which had liberalised its foreign exchange market and saw that forex bureaus were making large margins of up to 15 per cent on trades,” Mr Ndung’u said.

Riding on the success of that first forex bureau, he opened a chain of them in Nairobi — including the Village Market-based Taipan, which gave him the nickname “Mr Taipan”.

Mr Ndung’u is proud of the fact that his forex bureaus have given banks a run for their money, driving down margins to about three per cent on trades.

His biggest trades and which would elevate him to the billionaires’ club, however, came in the early 2000s.

Mr Ndung’u had been buying and selling shares, booking profits from the transactions at a time when there was no limit on daily share price movements at the NSE.

A rule was later introduced capping daily price loss or gain at 10 per cent except when there is a material announcement.

Sometime in 2002, however, Mr Ndung’u decided to bet big on Kenya Power shares, which were trading at about Sh1 apiece.

“I thought that was an undervaluation of the company and I bought a huge chunk,” he said.

He initially bought one million shares of the power distributor and sold them a year later at Sh6 a share in a price rally that rode on increased investor confidence following the rise to power of former president Kibaki.

Mr Ndung’u combined proceeds of the sale with bank loans to make an even larger leveraged bet on Kenya Airways, buying 16 million shares of the carrier at a price of about Sh6 in 2003.

As it happened, the airline’s share price also skyrocketed and Mr Ndung’u started exiting in 2005 in the middle of a rally that would see the stock hit highs of Sh120 in 2006.

“From the start of my investment in Kenya Power to my exit at Kenya Airways I had grown my portfolio to Sh2.1 billion,” he said, explaining the power of leverage in the stock market.

While Mr Ndung’u acknowledges that the leverage would have wiped him out if the market had gone against him, he argues that borrowing can boost stock market returns if used judiciously after an insightful research.

But not all his stock market investments generated outsized returns. Mr Ndung’u faced the prospect of a major loss at motor dealer CMC Holdings where boardroom wars, fraud and improper accounting sparked a crisis that nearly brought down the company.

He, alongside other investors, got a reprieve when they were bought out by Dubai-based Al-Futtaim for Sh7.5 billion in 2014. Mr Ndung’u and his business partner, Joel Kibe, were retained as non-executive directors of CMC, a deal he says was done to preserve the motor dealer’s institutional memory.

Mr Ndung’u has since cast his investment net beyond Kenyan borders, tracking stocks and investment opportunities in local and global financial markets looking for mispriced securities and currencies.

Mr Ndung’u has, however, scaled down his portfolio of marketable securities in recent years, a move that has seen him opt to buy and start private firms.

His NSE portfolio once peaked at Sh4 billion in the 2000s, allowing him to move the markets and putting him in the list of top 10 shareholders in a number of listed firms.

“Once it was known that I was buying particular stock even brokers would start buying,” he said.

He is currently a significant investor in Kenya Re, KenGen, Home Afrika, Crown Paints, Olympia Capital and Uchumi Supermarkets. His investment in loss-making and struggling firms such as Uchumi and Olympia has left the market wondering what his game plan is.

Mr Ndung’u has a simple answer. “If things are really bad they can only get better,” he said, revealing his contrarian investing philosophy.

He claims that this out-of-the-box thinking is what has seen him get early into new markets that have proved lucrative.

In 2001, as Kenya’s telecommunications market was being liberalised, he teamed up with Mr Kibe to form Mobicom, a dealer that rode the wave of Safaricom’s success for a decade.