In 1999, Ng’ang’a Wanjohi founded Kaskazi, a massive and aggressive last mile distribution of products on behalf of fast-moving consumer goods companies and for a very long time, his team used bicycles. He employed a team of young people who went to the mass market and sold off the grid, collected cash and took it back to the shop owner.
Today, Kaskazi is a brand name, engaged in the distribution of products. He has since up-scaled to motorbikes and so a rider can visit close to 30 outlets in one market in a day. That would translate to 3000 outlets if you had 100 riders.
“I have relationships with wholesalers across the country so if you have a product, I can go to a wholesaler that you did not even know existed and tell him ‘I have got this particular product, this is the size, this is the price, this are our margins. I would like you to buy this quantity and I will guarantee you that I will sell it out for you’. He will buy it and I will hire somebody and take him to that particular wholesale shop, wherever it is in the country,” Wanjohi explains.
Wanjohi did a research on retail shops in the whole country, established their number and location and put the data on a server. He has a wealth of information of retailing business in every county and once he enters a distribution deal, say with BAT to cover Busia County, he will know what number of riders is required. He presently distributes for Kenya Breweries, Cadbury Kenya and Multichoice’s set top boxes for GOtv, to mention a few. It is labour intensive.
The major challenge for Wanjohi was that while his core business is service, he had to invest heavily in what he calls the tools of trade – bicycles and motorbikes. Even after acquiring them, tying down a lot of cash, the other headache was how to dispose of them once they have served their purpose. Besides, riders tended to be reckless with the tools of trade. It became a big problem as the business grew.
“Our nature is not to invest in assets that are not directly related to the business and we are not comfortable owning our tool of trade, which is the bicycle or motorbike. When you own something, it is misused,” Wanjohi says. To beat it, he developed a formula in which he bought the bikes and sold to the riders for a stretched payment. “When that motorcycle belongs to the rider, he takes better care of it, that is what we came to learn with our bicycles,” he says.
The nature of Kaskazi’s distribution is modelled such that he pitches for business opportunities in companies. Once he wins a distribution deal, he develops it into a project. He facilitates it by buying motorbikes and contracting people to push through the project, which may last for a year or two. Once it is done, he has to dispose of the bikes since a new project will have to begin with a new set of motorbikes.
“Our biggest challenge was in capital cost, which was not in our focus. We did our first project where we bought a certain number of motorbikes, and then we started growing. We did another project where we had to buy again, it reached a certain point where we asked ourselves, how many motorbikes are we going to buy,” says Wanjohi.
Late last year, Wanjohi landed a job whose massive need for motorbikes he could not sustain, and that is how he thought of leasing. A friend recommended Vaell and, just like that, his capital and disposal of the tool of trade problems were fixed. And because he now had unlimited access to motorbikes to push his projects, he has expanded his distribution empire with many more clients coming on board.
Wanjohi has leased more than three hundred motorbikes, becoming the first business to enter into a contract of such magnitude in Vaell’s motorbike sector.
“He’s proved himself and so we want to take him along with us. We’ve already introduced him in Uganda, we now want to take him to Tanzania and every other of our markets in the region,” Says Paul Njeru, regional managing director, Vaell.
After doing the legal agreements, Wanjohi says, Vaell delivers the motorbikes. They are fabricated at Kaskazi’s premises along Ngong Road to customise them for the distribution. They, for instance, add the carriers.
Rather than take the bikes back to Vaell at the end of the lease, Wanjohi, who confesses to believing in empowering the youth, facilitates the acquisition of the bikes by his riders.
“When we are doing our negotiations with Vaell, we ask them the residual value of the motorbike, (the price of the motorbike at the expiry of the lease). We then apply the same principle; we tell the rider, ‘this motorbike is yours, it is going to cost you this much if you will pay over this period of time’. So what he does is he manages it like it is his. At the period of the lease Vaell does the insurance, we incur both the maintenance and fuelling costs and the rider takes it away at the end of the lease.”
When Wanjohi wanted to acquire his first fleet of motorbikes, he went to a commercial bank flashing his contract of a distribution deal. They demanded for security to which he responded with an LPO but that didn’t help.
“They told me to give them an asset that is 100% because the value of the loan must be 70% of the asset. I was completely helpless,” he decries.
Leasing, Wanjohi advises, is the easiest way to scale up one’s business. “If I had known about Vaell earlier, I would be leasing even the computers I use (whose useful life time is two years), and even the seats we use – they start wobbling after two years. Leasing improves the cash flow in the business.
“Why would I invest in a motorbike when I can use that money to buy software that can run my business better? It takes my cash away from the core things in my enterprise. I am in the business of distribution. I give a service. I want to invest in a better and more efficient service.”
