Entrepreneurship Zone: 31 May 2023 :: Kenyan chemicals business targets growing construction, leather industries

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Entrepreneurship Zone: 31 May 2023 ::  Kenyan chemicals business targets
growing construction, leather industries

 




 


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Established in 2011 by Charles Okadia, Chemsols Limited in Kenya is a
manufacturer specialising in paints, inks, and adhesives. The company’s
factory is situated on the outskirts of Nairobi. Jeanette Clark spoke with
Okadia about the initial challenges of setting up a chemical manufacturing
business, navigating funding difficulties, and how his company stands to
profit from the burgeoning construction and leather industries in East
Africa.

In 2011, Charles Okadia was working for Coates Brothers, a chemical
manufacturing company in Kenya, as a business manager, when he decided that
it was time to start his own venture. Quitting wasn’t easy. First, the
prospect of relinquishing the security that comes with being a salaried
employee in a well-paying role was a challenging decision. Second, the
company was reluctant to let him go. “They were not happy,” he remembers.
“It took about six months before they allowed me to leave.”

During those last six months as an employee of Coates, Okadia got his ducks
in a row. He started the process of registering his business and looked for
premises for the operations. He was going to go with what he knew – chemical
manufacturing.

“There was a lot of construction happening in the country at the time and I
knew there was a gap in the market for high quality, locally produced paints
and adhesives.”


The pain of going solo


Okadia quickly encountered the challenges of starting a business. Right at
the beginning, he was the only employee of Chemsols Limited. “I always joke
with my staff about the culture shock of those first couple of months.
Working in a corporate environment I had tea brought to my office. Now I was
suddenly everything: the banker, the marketer, the driver, etc.”

He realised that he needed to be a jack of all trades and hands-on,
learning on the go so that he could also train newly appointed employees.

Okadia used his personal savings to get the ball rolling, but capital was
in short supply. For example, the company did not have enough money for
brand-new machinery; it had to make do with equipment that was being thrown
out by another local manufacturer, refurbishing and adapting it for its use.

For production to even start, the raw materials needed to be brought into
the country from China, Egypt and the Netherlands.

Okadia vividly recalls the day the first shipment arrived, only to find out
that there was insufficient money in the bank to cover the customs duties.
“I tried to negotiate a loan with my bank, payable within three months. The
manager refused.”

Demurrage charges began to accumulate at the port due to the prolonged use
of the container within the terminal beyond the complimentary time period,
putting Okadia in a tight spot. A friend recommended contacting a manager at
a different bank. In this instance, the manager was receptive, took the time
to understand Okadia’s background and expertise in the industry, and made a
decision based on this information. “I remember him saying: ‘Charles, I am
taking a risk, but you have to make sure that this money is repaid by the
end of the month.’”

The shipment was cleared. To pay the loan of approximately US$1,000 back on
time, Okadia targeted one specific customer and negotiated cash-on-delivery
payment terms.


The cashflow tightrope


In the first three years, Chemsols tried its best to bootstrap. “We would
negotiate with customers to pay us on time so that we would have the cash to
clear raw material imports for continued production. By the beginning of the
fourth year, it was clear we needed more finance if we wanted to grow,” says
Okadia.



A selection of Chemsols’ products.

 

The only solution was to mortgage a family property as collateral for a
further bank loan. “It wasn’t an easy conversation with the family, but it
helped stabilise the company. Between the bank, using personal savings and
persuading customers, we survived. It was a tough balancing act.”


Growing one customer at a time


Adding customers in those first three years meant Okadia pounded the
pavement, knocked on doors and perfected his sales pitch. “In the beginning
there was suspicion; the company was an unknown and customers rightly were
worried that we would not be able to provide the quality we were promising,”
he says.

He would invite customers to visit the factory to see for themselves. Over
time, Chemsols received referrals, which meant that confidence in its
products was growing.

With the extra funding secured through the mortgaging of the family
property, Okadia was able to hire additional employees, particularly for
marketing. This enabled him to extend both the product range and the
company’s customer base, which until then had been focused primarily in and
around Nairobi, to the wider Kenyan market. “We had to start with baby
steps. I did not want to overextend and lose customer trust because we
couldn’t deliver on orders.”


Capitalising on the expanding construction and leather industries


Initially, Chemsols focused solely on paints but has since broadened its
product range to encompass inks and adhesives. Additionally, within the
paint category, the company now produces thinners and wood lacquers.

The solvent- and water-based paint lines are experiencing notable growth,
according to Okadia. This can be attributed to a robust expansion in the
construction industry, stimulated by government initiatives to boost
affordable housing.

For its ink product line, Chemsols made a strategic decision to initially
specialise in flexographic printing ink. The company identified potential
growth in demand for this ink, which is used on flexible packaging
materials, such as the security tape required for parcel sealing. “We will
now consider expanding our ink range after we have established ourselves as
a serious player with flexographic printing ink.”

Chemsols additionally produces adhesives. Okadia observes a burgeoning
market, particularly for the adhesive used to bond a shoe’s upper part to
its sole. “The leather industry in Kenya and Uganda is growing and we see an
opportunity for growth,” he says

The company’s current production capacity in a day is 25 tonnes, up from
the one tonne it could manufacture in the first year. It has 30 full-time
employees.


First regional, then international


In the fourth year, Okadia began leveraging the regional contacts he had
accumulated during his previous career. Over time, he has managed to secure
customers in Tanzania, Rwanda, and Uganda. With a focus on adhesives for the
leather industry, Ethiopia is next on his expansion agenda. Ethiopia,
boasting the largest livestock population in Africa – around 53 million
cattle according to the Ethiopian Investment Commission – has a substantial
leather industry.

“After that, why not outside Africa?” Okadia posits. “The raw materials we
use already adhere to international standards, so I don’t see a problem
getting our product into those markets.”

To achieve this he is looking for business and investment partners to help
with the next step. “I would like the company to live beyond me. I am not
immortal and need to build a business that will remain stable for years,
even after my departure.”



Charles Okadia, founder of Chemsols

 

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