Tuesday February 9 2016

Profit from the ‘Kaveera’ ban

By Paul Njuguna

When you do business outside the confines of the law, you will always experience a bad day in the office due to losses as a result of law enforcement. On the flip side, when you stay abreast of the legal changes within your industry, chances are that you will make the most with minimal interferences. Since the ban of the polythene shopping bags ‘kaveera’ back in 2009, shrewd industry players and new entrants into the packaging business have taken time to rethink their business processes and venture into using paper bags as a packaging alternative. The crème de la crème in the paper bag business are; the Paper Bag Royals, Mafuco Paper Bags and Crane Paper Bags. With National Environment Management Authority’s enforcement on the kaveera ban last year, these companies are bound to experience a boom. But just what would it take for you to enjoy a piece of this pie?

Incorporation and production
Top of the list of requirements would be ensuring that the entity has a legal status by incorporating it as a limited liability company or partnership. Next on the list would be to source for a workshop where the job will get done from. The paper bag business will fit a cottage setting and the high-end setting as well, depending on your resource base. As such, the onus will be upon you to either start up big or small. For a decent investment, roughly Shs6m will be sunk into incorporating the company, procurement of materials, necessary licensing with Kampala Capital City Authority (KCCA) and upfront rental charges for a warehouse, preferably out of town.

Scaling up
The capital investment involved here is on the lower side. The big question would therefore be, how do you scale up your operation? Key to note you would need to source out orders from big supermarkets, flour making companies and consider branding for big restaurants and coffee shops. On advertising, you could consider providing waste bins in Kampala and its outskirts in sections that KCCA has not provided them. Conducting corporate social responsibility activities such as a cleanup exercises in say, markets within Kampala would be a good plus towards your sales and marketing efforts.

Return on investment
With profitability estimates at 45 per cent net profit and projected revenue growth at 20 per cent annually, you should be in a position to recoup your investment within 30 months.

Paul Njuguna is a financial and cost accountant. Email:paul@paulnjuguna.com