How entrepreneur turned dream into an industrial giant

Consumer goods manufacturer Kapa Oil Refineries, like many of Kenya’s industrial giants, is a business with humble beginnings.

Founded by three brothers as a retailer in 1968, Kapa is one of the spin-offs that survived the nearly three decades of entrepreneurial adventure that tried and produced nearly a dozen business ideas.

Kapa originally started as a salt-packaging venture that later went into mini baking before going big on consumer goods.

“We started off with Chapa Mandashi baking powder as our flagship product,” said the company’s chairman Mohanlal Karania.

Today, Kapa has grown into a multiple products manufacturer that produces edible oils, soaps and personal care products from its Mombasa Road factory on the outskirts of Nairobi.

The manufacturing plant sits on 70 acres located next to Nairobi’s Syokimau train station opposite the Jomo Kenyatta International Airport and employs 2,500 people both directly and indirectly.

Mr Karania, 83, would not disclose the firm’s turnover or capital base, but Kapa is one of the main players in Kenya’s fast moving consumer goods market, with well-known brands like Toss detergent, Kasuku cooking fat and Prestige margarine in its stable.

“In 1974, we went into oils packaging, sourced from imports, and four years later produced our own cooking oil, under the brand name Kapa,” said Mr Karania in an interview.

The businessman had left school at the age of 15 to join his father’s business, where he gained enough experience, alongside his brothers, to start his own venture 10 years later.

The name Kapa Oil Refineries is derived from Karania Packers and the firm has over the years grown into a household name that produces between 750 and 800 tonnes of products per day.

More recently, the company has diversified into the food market, having launched its Numi instant noodles product two years ago.

Kapa launched one of its most famous products, Kasuku cooking fat, in 1986 and soon went a step further to package it in plastic containers against the then industry norm of using aluminum tins.

The decision was informed by unreliable supply of the aluminum containers and the huge cost savings that plastic packaging promised.

Mr Karania now runs the company with his two sons and two nephews. His son Nitin Shah is the company’s CEO.

According to Mr Shah, the company’s expansion over the years has been funded organically, with minimal and conservative borrowing from financial institutions.

Kapa remains a family business, and any external investment has been limited to strategic investors with minority stakes.

“We have never entertained any buyout bids, and consideration for a public listing would perhaps only come 10 years from now,” said Mr Shah.

On expansion into new markets, Mr Shah says Kapa intends to grow its exports base using Kenya as the production hub, rather than open new factories in neighbouring countries.

Its products are currently exported to 18 African countries, including Guinea Bissau in West Africa and the Indian Ocean islands states of Madagascar and Comoros.

To ease transportation of its products, Kapa in 1995 built a three kilometre railway line extension that links its Mombasa Road factory to the Embakasi line at a cost of Sh40 million.

The plant has eight coal powered steam boilers to produce power for the machinery, which is estimated to save up to 50 per cent on fuel costs.

As with many manufacturers, Mr Shah says the company has weathered turbulent times especially in the era of foreign currency controls that affected its ability to import raw materials.

“The period between 1991 and 1992 was particularly tough for us due to huge foreign exchange fluctuations and the rigid import licence regime that only ended around 1994,” said Mr Shah.

Today, the company faces a completely different but equally crippling financial challenge in delayed payment of VAT refunds by the Kenya Revenue Authority.

For companies like Kapa that rely on ploughed back earnings to finance their expansion, delayed refunds limit the amount of working capital at their disposal.

While most of Kapa’s raw materials are sourced locally, the company still imports large amounts of palm oil from Malaysia and Indonesia.

Sunflower seed for the edible oils is sourced from the wider East African region whenever the Kenyan market fails to satisfy the demand.