Friday, July 10, 2015
The story of a company’s impressive growth in the Kenyan forestry, sawmilling and machine trading sectors is one characterised by adaptation and constant reinvention – a relevant theme for anyone looking to invest in emerging markets. Pictured above is a 19 year old operator who shared with us how her job working in the sawmill has given her incredible possibilities for a better quality of life in rural Kenya.
One of Kenya’s prime timber production areas, the famous Great Rift Valley, is home to Biashara* Master Sawmills, which was formed in 1978 when the company’s founder, Joseph Mwangi Kanyongo, began transporting logs to nearby sawmills with his Land Rover. At the beginning, he could only manage to harvest 10m3 per day from commercial forests, but in spite of his humble beginnings, he soon identified that by starting different business divisions that served the timber sector, he could control costs and quality better and unlock opportunities that remained beyond the reach of competitors.
Dated and labour-intensive sawmills are still common throughout Africa.
In the early ‘80s, the company began cutting and selling lumber directly to the market and by 1990, they opened their own door manufacturing plant. Through this process, Joseph became convinced that modern equipment held the key to improved performance for his growing business units. In 1993, he began another branch of the company, reconditioning and reselling used woodworking equipment. This allowed him to get access to additional machinery that could help him increase production and efficiencies.
In 1994, Biashara opened its own sawmill in Njoro, consolidating control of its own sawn timber production.
Modest harvesting beginnings
Biashara now harvests up to 600 m³ of cypress and pine daily utilising chainsaw teams for felling and delimbing, and transporting the logs with a John Deere and two Caterpiller skidders to the logging roads, where they are loaded onto Biashara’s logging trucks. The harvesting improvements have increased productivity and slashed costs of their sawn product compared to their local competitors.
Adding value to raw product
Local manufacturing is vital for Africa’s economic development. The inability of local industries to add value to raw products is widely seen as part of the reason for Africa’s slow economic development.
Biashara’s entry into the manufacturing sector in 1990 provided for a number of benefits. It made a modest but very important contribution to Kenya’s economy by manufacturing locally and making the region less dependent on imports. It boosted Biashara’s income as it could now increase the value of the raw material for sale.
Recently, Biashara has also opened a block board manufacturing plant. The sawmill waste is now used to manufacture block board and the new profits are helping grow the business further, while local suppliers and manufacturers can now source from inside Kenya to boost economic activity, and create more jobs.
Biashara’s first sawmills were frustratingly dated and highly inefficient. High maintenance, energy, and blade costs characterised their first sawmill experiences in the ‘80s and ‘90s. Getting service for such machines in Africa was always a constant headache. This situation is not uncommon throughout Africa, as modern equipment is usually difficult to source at good prices, and even more difficult to find quality service from the manufacturer. As many existing companies in their area relied on manual labour or dated equipment for processing timber, Biashara’s determination to invest in modern, more cost effective machinery has been rewarding.
Then, lasting from 2007 to 2012, Kenya imposed a country-wide logging ban, making it nigh impossible for sawmill companies to compete that did not have efficient processing equipment and a diverse mix of business units.
The solution was apparent – businesses had to produce as efficiently as possible with a limited quantity of logs. Key to achieve this was to invest in affordable sawmilling equipment that could deliver the output and quality that the market demanded, spend less on blade maintenance, cut down on labour costs, waste less electricity and use every inch of the log that was available.
Joseph’s sons, Daniel Mwangi and Francis Macharia decided at that point to invest in thin kerf sawmilling technology. Their initial purchase of Wood- Mizer LT15 and LT40 hydraulic mills resulted in higher outputs, improved log optimisation, and finer surface quality while energy consumption, labour requirements and blade maintenance costs fell steeply.
Encouraged by their initial success with the thin-kerf sawmilling approach, Biashara then added a full Wood-Mizer ‘Smart Log Processing’ line and a WM3500 industrial log breakdown sawmill, rounding out their sawmilling arsenal. With Wood-Mizer’s blade maintenance equipment installed as well, Biashara was also able to drive down costs by managing all blade issues in-house.
Machinery Sales Expand
As a part of Biashara’s constant theme of adaptation, and as a result of their own successes with thin-kerf sawmilling equipment, in 2012 Biashara became an authorised Wood-Mizer dealer for Kenya. This development was seen as an obvious step to further their business opportunities in the timber and machine sales sectors. As they were already buying, reconditioning, and selling woodworking machinery, and offered spare parts and service support to their customer base, adding Wood-Mizer sales to the mix was a natural progression.
Emerging Markets – Adaptation and reinvention
Emerging markets like Africa presents many opportunities but also significant risk. The key to unlocking these opportunities as Biashara has shown is to understand those risks and implement measures that mitigate these risks.
A diversified business approach that spreads risks, buoys up straggler divisions and provides critical mass to drive future expansion, plays an important part in Biashara’s continued growth.
So too the critical importance of investing in appropriate technology that strengthens competitiveness without repeating the mistakes of the past to improve the continent’s productivity.
This would include competitively priced technology that allows for improved productivity and product quality with consistent after sale service embedding the capacity to produce consistently and reliably over time even further.
*Biashara is the Swahili for ‘business’.
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