A Good African Story: Good African coffee goes to European shelves

Part 3 of 3: In the last part of the series on A Good African Story, Andrew Rugasira talks about his struggle to enter the European markets.

Between 2003 and 2008 I met with over two dozen financial institutions in Uganda and several outside the country in an effort to raise capital. There seemed to be a real disconnect between the excitement about the Good African Coffee model and my ability to close on the fundraising. Different financiers had different reasons for declining to support us.

For some, it was that I was an ‘unknown quantity’ – what I was proposing sounded interesting but not fully assuring. For others, the model was just too complex. Controlling the whole coffee value chain, from the garden to the retail shelves, seemed like a stretch. It hadn’t been done before, so how could I be sure that I would succeed now? Kampala is a small town, and banks talk to one another about potential clients. As I racked up rejection after rejection, it became clear that chatter was fossilising into an opinion – I was not worth the risk.

I had something of a breakthrough in 2005 when, through Crane Bank, I was able to access the Ugandan Central Bank’s Export Credit Guarantee Scheme (ECGS). Crane Bank is a locally owned bank belonging to Sudhir Ruparelia, a Ugandan Asian tycoon with a diverse business portfolio. He is also one of the wealthiest, most hardnosed businessmen I know. He has established his empire through a combination of business acumen and street smarts.

The ECGS facility was created by the Central Bank to promote exports by providing guarantees for loans to enable exporters to fulfil their orders. The only problem was that it was a very short-term facility – a maximum of 180 days. It was designed for and utilised by traders and other commodity exporters who were able to complete their transactions within six-month cycles.

Good African Coffee was a seriously long-term business in need of long-term and affordable capital. But at that time, we were not able to raise any capital and I was getting desperate. The UK launch was fast approaching and I didn’t have the funds to keep up with the frequent travel and the necessary set-up costs. I had to develop the brand design and promotional strategy and this was very expensive. Outsourcing the roasting of our coffees in the UK, combined with the local field operational expenses, all levied a heavy burden on our cash flow.

I set about trying to access the ECGS facility first by writing to the Central Bank to seek their approval that we would be eligible. Between the end of 2004 and early 2005, I held meetings with the bank’s officer in charge of development, Mrs Naomi Nasasira. Although she was sympathetic and supportive, the available options didn’t look hopeful. When this didn’t go anywhere, I decided to change strategy and wrote to the governor of the Central Bank directly. This was risky because it could mean the door being firmly closed in front of me; but I thought that it might force a way out of my predicament.

Mutebile’s advice
The governor, Emmanuel Mutebile, is a well-respected economist and has been credited with being one of the key architects of Uganda’s economic recovery. He is also a man known for a level of candour that can take some getting used to. Even though I knew him as a friend of the family, it did not stop him from being very forthright with me. After he got my first application letter, he immediately wrote back saying that the ECGS was not the facility I needed as it was short term and I should consider alternative, longer-term products and should speak to the lending institutions directly.

I responded, saying that the problem was that long-term products required large securities, which I didn’t have, and that the attractiveness of the ECGS was that the need for collateral was diminished by the guarantee the Central Bank provided. He wouldn’t budge. We exchanged two more letters before I decided to call him, in desperation, at his office. In a sympathetic but candid way he said there really was nothing more he could do. And there the conversation ended.

Three weeks later, I decided to seek an audience with him at his home in Kololo, one of the plush suburbs of Kampala, to plead my case outside the bank environment, where I knew his schedule was tight. That evening, as I climbed the steep drive to the top of ‘Summit view’, the name given to the hilltop location with a magnificent view of the city, I wondered if he would even see me. The guard at the gate told me to wait outside as he called the house to get clearance for me to enter. As I waited, I began to rehearse the apology I would need to start with before presenting my case. Then I heard a loud click as the gate latch unlocked. I was ushered into the house and down a flight of stairs to the living room. I was told by one of the governor’s staff that he wasn’t yet home but that they had contacted him and he had asked that I wait as he was heading back. I took that as a positive sign.

Given the layout of the building on the side of hill, with the parking on the top floor, I didn’t hear the governor come in. As he came down the staircase, our eyes met and we exchanged greetings. I quickly apologised for intruding on him at home, explaining that I was desperate to speak with him. He seemed relaxed and in a good mood. I began by recounting the journey from Kasese to our launch in South Africa and how we were on the verge of getting onto the UK retail shelves. I shared my frustrations with the inability to raise capital and acknowledged that whilst the ECGS was a short-term facility, it would give us the critical momentum to launch the coffee and then enable us to seek alternative refinancing.

Not getting the capital now would be disastrous, and we stood to lose much more in terms of the development infrastructure we had put in place in Kasese as well as all our hard work in creating the brand. He listened and then said, ‘But this facility will cause you problems soon. It really is meant for exporters with contracts and not for you. Can you really turn it around within six months?’

Sudhir a blessing
Without flinching, I replied: ‘Yes’. But in my heart I knew that I was making a high-stakes gamble. He was silent for a moment then said: ‘Look, I don’t want to be the one in your way. Find a local bank willing to support your application and let them submit it and let’s see what can be done.’ As I unclasped my hands, I noticed how moist my palms had become; I hadn’t realised the level of tension I was under during the discussion.

The next day, I went to Crane Bank to formally present our proposal and also hint at the Central Bank’s tacit support for the project. For the next six weeks, we worked to put together the necessary paperwork and documents for the ECGS; I signed the last batch of documents on my way to the airport as I rushed to catch a flight to London.

Three days before the UK launch, Crane Bank released $200,000, which was a portion of the facility approved under the ECGS, and the balance of $500,000 was used to refinance a loan I already had with the bank. Even with this facility we still found that the working capital was insufficient. But because I was desperate to get the launch into the UK market underway, and there was so much credibility on the line, I ignored the future consequences of the facility expiring in 180 days. All I was focused on was launching in the UK. With the released funds we immediately made payments for the branding designs, materials, the launch event, and other operational costs in Kampala and Kasese. No sooner had the funds come in, they were swallowed up.

From early 2006 to the middle of 2008, I was under tremendous pressure from Crane Bank to repay the loan or refinance it from another bank. In all, I must have received close to two dozen letters from the bank or their lawyers. Initially these letters asked me to urgently regularise the account by paying outstanding interest on the loan: in time they became letters demanding that I repay the whole loan.