Following a statement by Uganda’s Minister of Finance, Planning and Economic Development on September 30th, Hon Matia Kasaija in which he advised Ugandans to keep off cryptocurrencies, the Blockchain Association of Uganda has urged the Government of Uganda to wake up to, instead of shunning the opportunities presented by blockchain technology and crypto assets.
Hon. Kasaija said that the government of Uganda neither regulates nor recognises any crypto-currency as legal tender in Uganda. He also said that his government has not licensed any organization in Uganda to sell crypto-currencies or to facilitate the trade in cryptocurrencies and therefore advised Ugandans to tread carefully because of the many risks inherent with crypto currencies.
“The Blockchain Association of Uganda has taken note of the public statement on cryptocurrencies by the Ministry of Finance. We believe the statement is an important step in the direction of creating a progressive policy framework for crypto assets in Uganda,” read the statement, mailed to CEO East Africa Magazine, by Kwame Rugunda, Kwame has a accountthe Chairman, Blockchain Association of Uganda.
The Blockchain Association of Uganda is an umbrella body of technology, legal, academic and industry experts working with blockchain technology and its applications like cryptocurrencies, who are committed to setting correct industry standards, to ensure that Uganda is not left behind, but can take a lead role in yet another global technology wave.
Kwame is also the Chief Executive Officer, CryptoSavannah and President of the Kampala Chapter of Government Blockchain Association.
“We thank the Ministry of Finance for mainstreaming this conversation, and look forward to further dialogue, with the aim of sharing industry expertise to ensure that Uganda can redeem the opportunity at hand, and urgently put in place well considered policy frameworks for blockchain technology and crypto assets, while in turn, correctly mitigating the due risk,” said Kwame.
He also dismissed insinuations by the minister that the anonymous nature of crypto currencies made them a favourite mode for criminal transactions such as money laundering, sale of prohibited goods and services, and fraudulent ventures such as Ponzi and pyramid schemes.
“This is one of the key misconceptions about cryptocurrencies. Money laundering with cash outpaces money laundering crypto by 800:1, and so although cash is still king, even in laundering, we do not ban cash. Ponzi schemes have been in existence since the early 1920’ when a man called Charles Ponzi, performed the first scheme, this was long before crypto. Ponzi schemes are a result of criminal minds that prey on the ill-informed for fraudulent gain. The tools may change but the intent is the same. When Ponzi schemes use cash, we do not fault the cash, we fault the schemers. The same way we deal with Ponzi schemes who use cash, is the same way we should deal with Ponzi schemes who use crypto; we equip the public with information,” said Kwame.
Here below is the full response to Ministry of Finance’s statement;
|FINANCE MINISTER’S STATEMENT||INDUSTRY VIEWS OF BLOCKCHAIN ASSOCIATION|
|The government of Uganda has noted the emergence of the practice of using, holding and trading crypto-currencies in Uganda.|| • This is correct. The use, trade and holding of|
cryptocurrencies is actively taking place in Uganda,
as it is in many other countries around the world.
• Governments world over have taken keen interest in
crypto assets, and are putting in place appropriate
policy frameworks to both foster for innovation with
crypto assets, while in turn mitigating due risks.
|Crypto-currencies are digital assets that are designed to effect electronic payments without the participation of a central authority or intermediary such as a Central Bank or licensed financial institution.||It is correct that cryptocurrencies do not have a|
central mode of governance. This should however not
be misconstrued to imply that they aren’t governed.
• Governance of crypto assets is decentralized, which
means that it is not done by a central authority, but
rather by all parties involved in a transaction, which
makes transactions secure, trusted and transparent.
• Cryptocurrencies are built using a distributed ledger
technology (DLT) called blockchain, where by the
function of trust, which has traditionally been held by
central authorities, is distributed and decentralized,
rather than being centralized.
• The function of trust, and the rules of governance are
embedded through code, and this code enforces the
governance to all transacting parties.
|Crypto-currencies may therefore be used to effect anonymous electronic payments or bought and held for speculative purposes in the expectation that their value will rise at a future time, where upon they could be sold for a profit||• It is not correct that cryptocurrencies effect|
• Cryptocurrencies are pseudonymous, and not
anonymous, which is a big distinction. This means
that cryptocurrency transactions have an identity
that represents the true identity just like a phone
number or National ID represents a full name.
• Furthermore, all major cryptocurrency exchanges
perform high bank grade KYC (Know Your Customer)
and AML (Anti-Money Laundering) restrictions on
• Speculation on the other hand is a core trait of a
market, we speculate with shares/stocks, land,
commodities, metals and forex. This is normal for
any healthy market, and is one of the features which
any trader would optimize in order to make profit.
|Hundreds of crypto-currencies have been designed and launched around the world, and the most|
well-known examples include Bitcoin and Ethereum. Such crypto-currencies are not issued or regulated by a government or central bank.
|• There are over 1,000 cryptocurrencies today. These|
cryptocurrencies can be issued by: (i) individuals, or
(ii) organizations (as have been issued by JPMorgan
Bank and Facebook), or even (iii) governments.
• Several governments and central banks around the
world are today issuing what are knowns as CBDCs
(Central Bank Digital Currencies). The central banks
of Sweden and China have been active on this, and
more recently the Central Bank of Rwanda issued a
statement indicating interest in a CBDC. The Central
Bank of Kenya also received a recommendation to
issue a national digital currency, in the report of the
National Taskforce on Blockchain and Artificial
Intelligence, set up by President Uhuru Kenyatta.
• Regarding regulation, cryptocurrencies are regulated
in all the major markets e.g. US, EU, Asia, while other
countries are studying them to come up with their
|The government of Uganda does not recognize any crypto-currency as legal tender in Uganda.||• Yes, this is correct. A crypto currency would only be|
considered legal tender if issued by the Central Bank.
• However, because of the opportunity that these
cryptocurrencies present for central banks, many
central banks around the world are today keenly
looking into issuing their own crypto currencies, as
detailed in response to (3) above.
|The government of Uganda has not licensed any organization in Uganda to sell crypto-currencies or to facilitate the trade in cryptocurrencies and so these|
organizations are not regulated by the Government or any of its agencies.
|• This is true, because licensing will assume there is|
regulation (which there isn’t).
• The reason why these organizations are not regulated
is because Uganda does not yet have regulation in
place for crypto assets.
• Capital Markets Authority has issued draft regulations
for crypto assets, and various consultative sessions
have been ongoing in government, including Bank of
Uganda, on regulations of crypto assets.
• No regulation however does not mean it is illegal.
Mobile money operated for a long time before it was
regulated, and it was not illegal. This is the story of
innovation anywhere in the world; Innovation leads
and regulation follows.
|As such, unlike other owners of financial assets who are protected by Government regulation, holders of crypto-currencies in Uganda do not enjoy any|
consumer protection should they lose the value assigned to their holdings of crypto-currencies, or
should organization facilitating the use, holding or trading of crypto-currencies fail for whatever reason to deliver the services or value they have promised.
|• Customer protection is adhered to by all major|
cryptocurrency exchanges around the world, and
they have clear detailed mechanisms of protecting
their customers, including funds’ safety programs to
protect their client’s holdings.
• This is also a requirement that should feature in
Uganda’s regulation when it is put in place.
• It is however worth noting that governments do not
and cannot protect holders of assets against the
devaluation of the asset’s value. e.g. If the value of
gold fell today, Uganda government or any other
government would not protect anyone from losing
• Finally, many governments have commissioned
studies into adoption and use of cryptocurrencies in
their countries in order to better understand the
ecosystem and benefits so as to create inclusive
• Some of these include Malawi and South Africa,
Uganda should not be left behind.
|Most crypto-currencies such as Bitcoin and Ethereum are not backed by assets or government guarantees, therefore holders of these crypto-currencies are fully exposed to the risk of loss or diminishing value as the issuers are not obliged to exchange them for legal currency or other value.||• This is an expectation of a fiat currency, (ordinary|
money). Any cryptocurrency that is designed to
replace a fiat currency, such as a Central Bank Digital
Currency (CBDC) will by default have these features.
• Cryptocurrencies are however uniquely designed for
specific use cases, some of them are designed for
trading, others for building software applications,
and others for bank settlements, and they can be
tailored to suit the interest of different parties.
• There are also cryptocurrencies that are ideal for
carrying out transactions. These are backed by
assets, or are tethered to fiat currencies, and are
known as stable coins; there are many of them in
use around the world, and they derive their value
from the underlying asset to which they are pegged,
whether gold, commodities, or a fiat currency.
|Crypto-currencies tend to change value rapidly over time. While holders of crypto-currencies may make profits when their value rises, they will be exposed to losses when their value falls||• Different cryptocurrencies are tailored to suit|
different purposes, and hence exhibit different
• Yes, in the short term, some cryptocurrencies are
volatile given the infancy of their economic model
however taking bitcoin as an example, over its 10-
year history, it has gained significant value in its
lifetime making it a good store of value.
• Secondly, the principle of making profits while rising
and losses while falling is what EVERY market does.
Stock markets, metal markets, commodity markets,
forex markets…participants in all these markets lose
money when the underlying assets devalue. The key
thing here is to gain information before
participating. This is the same advice given whether
in stocks trading, forex trading or crypto trading.
|The nature of crypto-currencies make them attractive for use in criminal transactions such as money laundering, sale of prohibited goods and services, and fraudulent venture such as Ponzi and pyramid schemes||• This is one of the key misconceptions about|
• Money laundering with cash outpaces money
laundering crypto by 800:1, and so although cash is
still king, even in laundering, we do not ban cash.
• Ponzi schemes have been in existence since the early
1920’ when a man called Charles Ponzi, performed
the first scheme, this was long before crypto.
• Ponzi schemes are a result of criminal minds that
prey on the ill-informed for fraudulent gain. The
tools may change but the intent is the same. When
ponzi schemes use cash, we do not fault the cash,
we fault the schemers. The same way we deal with
ponzi schemes who use cash, is the same way we
should deal with ponzi schemes who use crypto, we
equip the public with information.
dfcu reportedly wants UGX47bn BoU refund, for Sudhir properties it acquired for a UGX10bn interest-free debt
Tax payers are set to lose over UGX37bn, should a claim by dfcu Bank related to the contested sale of Crane Bank be honoured by the Central Bank.
According to confidential correspondence seen by this website between dfcu Bank and BoU, dfcu Bank has decided to exercise a clause in the Crane Bank buying agreement that said, if the central bank, failed to hand over to dfcu, vacant and freehold possession of 48 properties that previously housed Crane Bank branches with 24 months, dfcu bank had the right to return the leasehold titles to BoU and claim compensation.
However a challenge has arisen within BoU circles, because, whereas the sale agreement said that on return of the properties, dfcu bank would be compensated a portion of the purchase price equivalent to the net book value of the properties, included in Note2.3.11 of the PWC Assets and Compilation as at 20th October 2016- estimated at about UGX47 bn, dfcu had acquired the said properties for only UGX10 bn.
Compensating them UGX47bn, would therefore make dfcu bank UGX37 bn richer- yet they have been occupying the properties for nearly 3 years without paying rent.
It shall be recalled that according to the Public Accounts Committee on Commissions, State Authorities and State Enterprises (PAC – COSASE) reported that bank of Uganda had not valued Crane Bank’s assets and liabilities as required by law and corporate governance and as such the purchase price of UGX200bn- payable over 30 months at no interest rate was unreasonable.
According to the MPs, BoU instead relied on a purported valuation by dfcu Bank who was “an interested party and eventual purchaser” of Crane Bank’s assets and liabilities.
The Auditor General in his report to parliament had earlier opined that not only was the UGX200bn unjustified, but the fact that dfcu Bank was allowed to pay over 30 months without any interest, had caused tax payers a loss of UGX39 bn in lost interest.
Dfcu Bank to quit all Ruparelia Group properties by January 24th 2020
Two weeks ago, we reported that dfcu had started an internal procurement process to relocate its branches that are operating in the said Crane Bank branches.
A confidential request for proposals document titled: “Consultancy Services for relocation of selected dfcu Bank branches – 2019”, issued to selected architectural firms, that CEO East Africa Magazine has seen, said that dfcu was looking for an architectural consultant to”setup new premises, relocate the existing premises, decommission the vacated premises and support vacant handover of the vacated premises to the respective property owners.”
When contacted for comment, dfcu bank at the time declined to comment, but days later said the branch relocations were within their business plans to realign their digital ambitions.
But a 12th September 2019 letter by dfcu Bank’s Managing Director, Mr. Mathias Katamba and a one Agnes Mayanja, a Chief Risk Officer to the Governor and Executive Director BoU, confirms that indeed dfcu bank board has after several postponements, has moved to rescind the offer to acquire the 48 properties and is in advanced stages of vacating and returning them to BoU as per the agreement.
“Following court’s dismissal of HCCS No 493 of 2017 on 26th August 2019, it is unclear how long it will take BoU to recover the reversion from MIL. This state of affairs creates uncertainty for the bank which is prejudicial to its business interests. In line with its strategic interests and risk management framework, the board has resolved that it is in the best interest of the bank to exercise the option to rescind the purchase of the MIL Properties,” wrote the dfcu senior executives.
“The bank hereby rescinds the purchase of the MIL properties pursuant to close 8.7 of the Agreement,” dfcu added.
In Civil Suit No. 493 of 2017, BoU and Crane Bank (in receivership) had sued Sudhir Ruparelia and Meera Investments seeking to recover up to UGX397 bn and the 48 properties.
In his ruling, Hon Justice David Wangutusi, said BoU “did not have jurisdiction to file HCCS No. 493 of 2017” and that the orders sought against Meera are “barred in law, rendering” BoU with no “cause of Action” against Meera.
Regarding the 48 properties, Hon Justice David Wangutusi said that “any orders awarding delivery of freehold title to the Plaintiff/ Respondent (Crane Bank (in receivership)) would be illegal and barred in law,” since Crane bank “cannot hold freehold and any pleadings seeking court orders to that effect amount to no cause of action.”
The Bank has filed a notice of appeal, an application for stay of execution and Memorandum of Appeal. The hearing of the application for stay of execution has been fixed for November 27, 2019.
In their letter, dfcu’s Katamba and Mayanja said that accordingly, in line with clause 8.8 of the Agreement, it would immediately return to BoU the certificates of title for the MIL properties duly re-transferred into the name of Crane Bank Limited- a process that would be completed by 24th January 2020.
According to insider sources at BoU, rather than be paid in cash, which might cause more furore given that the Central Bank is cash-strapped, dfcu is exploring options of having the UGX47 bn, deducted from the balance remaining on the purchase price of Crane Bank.
As at June 30, 2019, dfcu Bank had paid UGX140 bn and the outstanding receivable amounted to UGX60bn- according to the Auditor General’s letter accompanying BoU’s annual report for 2018/19 ended June 2019. The amount due from dfcu Bank Limited is interest free and dfcu is supposed to make full payments by the end of January 2020.
This theory is supported by the last paragraph of dfcu’s letter to BoU which reads: “The bank acknowledges that the rescission process and the payment associated therewith may entail certain other modalities; we therefore consider a meeting to agree these modalities and the associated timelines important.”
Now that dfcu has elected to return the properties to BoU, the fate of several other court cases amounting to UGX35bn in claims, launched by the Ruparelia Group against dfcu Bank as the successor in title to Crane Bank (in receivership) is also unclear.
We reached out to dfcu’s Managing Director, Mathias Katamba and the Executive Director, William Ssekabembe for a comment, but both had not replied to our inquiry on Whatsapp. In fact Ssekabembe saw the inquiry but left it unanswered.
UBL’s Busola Doregos wins 2019 Chief Finance Officer of the Year award
Uganda Breweries Limited’s Finance and Strategy Manager, Busola Doregos, is the 2019 Chief Finance Officer of the Year!
Judges, chose her over Coca Cola’s Ivan Bombom and Centenary Bank’s Godfrey Byekwaso, the other two finalists in what has now become probably the most prestigious individual meritorious award in Uganda’s finance managers’ profession.
Byekwaso, however won the Strategy Execution Award for his role in spearheading the automation and the reconciliation processes of Centenary Bank.
In the only double win of the night, Busola, also tied up with Moses Kargbo of Tugende; a boda-boda microfinancing social enterprise for the Finance Transformation Award.
Busola, also the first female CFO of the year, now walks the footsteps of Alvin Mbugua (then CFO but now Managing Director Uganda Breweries Limited) the winner of the very first 2017 CFO of the Year Award and Sam Mwogeza the Stanbic Bank CFO who won the 2018 accolade.
Busola holds a Bachelor of Science (Accounting) degree from the University of Lagos and an MBA from the University of Kent. She is a Chartered Accountant.
Between 2007 and 2014, she held various roles within Diageo in the UK and in Nigeria. In June 2014 she got appointed as the Business Supply Manager at Guinness Nigeria and rose to the position of Financial Controller in April 2016. In May 2018 she Joined Uganda Breweries Limited- a subsidiary of EABL, itself a subsidiary of Diageo as Finance & Strategy Director.
To win, judges were looking for finance managers that have exhibited excellence in the seven vital quotients or skills of an accountant i.e. intelligence, creativity, digital knowledge, emotional intelligence, experience, vision, and technical and ethical skills.
The 2019 CFO Awards were organised by ACCA Uganda and Deloitte Uganda and sponsored by Stanbic Bank and Uganda Breweries Limited.
Full List of Winners
- CFO Of the Year: Busola Doregos, Finance & Strategy Manager, Uganda Breweries Ltd.
- Strategy Execution Award: Godfrey Byekwaso, General Manager, Finance; Centenary Bank
- Not For Profit Awards: Martha Sebunya, Finance Manager, Mengo Hospital
- Young CFO of The Year Award: Brian Collins Amanyire, CFO, Bank of Africa
- Finance Transformation Award: Busola Doregos, Finance & Strategy Manager, Uganda and Breweries Ltd and Moses Kargbo, Finance Manager, Tugende.
- SME Sector Award: Maxwell Odera, Finance Manager, Fiduga Uganda
- Public Sector Award: Joshua Karamagi, CFO, Uganda Electricity Generation Company Ltd (UEGCL)
Two years after Sadolin-Plascon paint wars; Plascon emerges nearly unharmed as the new Sadolin struggles to get a grip on the market
Kansai Plascon’s USD$126 mn (UGX452.5 bn) of the former Sadolin Paints (Uganda) Limited, Sadolin Paints (Tanzania) Limited and Sadolin Paints (EA) Ltd of Kenya was perhaps one East Africa’s biggest acquisitions in 2017. Even bigger, especially in Uganda, was the fight between Akzo Nobel the owners of the Sadolin brand and Kansai Plascon the new operators of the infrastructure and distribution network, left after Akzo Nobel had taken away its Sadolin name.
Two years, after the introduction of Plascon paints to replace the Sadolin brand and the re-launch of Sadolin into the market, CEO East Africa’s Muhereza Kyamutetera looks back at the contested takeover and who is winning the share of wallet war.
For over 23 years, Sadolin Paints Uganda had been the exclusive manufacturer and distributor of paint under the Sadolin trademark by virtue of a trademark licence with Akzo Nobel Coatings International B.V. the Dutch owners of the Sadolin brand.
The contract was renewed on the 1st of May 2015 till December 2019. Under the agreement, Akzo Nobel was entitled to royalty fees equivalent to 2% of net sales.
However, according to documents seen by CEO East Africa Magazine, around 2016, Akzo Nobel hinted that it planned to increase royalty fees to 5% after 2019 and also rebrand from Sadolin to Dulux- their largest global brand that already had good presence in South Africa.
Sadolin Uganda and their shareholders, who had a franchise to run Kenya, Tanzania, Rwanda, Burundi, South Sudan, Ethiopia, Eastern Democratic Republic of Congo, Somalia and Djibouti were not happy about the rumblings by Akzo Nobel.
There were also other complaints like- Akzo Nobel failing to meet their end of the bargain in especially marketing support.
Then an opportunity came if form of Kansai Plascon- the out-of-Japan paint manufacturer and one of the global top 10 giants- just like Akzo Nobel. Kansai Plascon, as they are largely known- had been in South Africa for some time and was kin on expanding northwards.
To Kansai Plascon, a partnership with Sadolin Uganda owners, who also had operations in Kenya under Sadolin Paints East Africa Limited (SPEAL) and Sadolin (Tanzania) Ltd with ongoing export business to Rwanda, Burundi, South Sudan, Ethiopia, Eastern Democratic Republic of Congo, Somalia and Djibouti was God-sent.
A deal was struck for Kansai Plascon East Africa Proprietary Limited (KPEA) to acquire 100% of Shalvik Investments Limited- registered in Guernsey that owned 85% of Sadolin Paints (Uganda) Limited and 80% of Sadolin Paints (Tanzania) Limited respectively. Along with acquisition of other minority shareholders KPEA, on 1st August 2017, secured 92.5% of Plascon Uganda and 90% of Sadolin Paints (Tanzania) Ltd. The two were immediately renamed Kansai Plascon Uganda Ltd and Kansai Plascon Tanzania Ltd (Respectively).
KPEA also acquired 85% of Sadolin Paints (EA) Ltd and renamed it Kansai Plascon (Kenya) Ltd. The company in its 2017 report said it hoped to acquire all the remaining shares so as to acquire a 100% controlling stake in the Group.
According to their 2018 Annual Report, Kansai Plascon agreed to pay USD40.8 mn for the three companies’ current assets, USD46m for non-current assets like plants, vehicles and buildings as well as USD83.1 mn as goodwill. Less theliabilities and cash acquired, the final price came to USD$126 mn (UGX452.5 bn).
All payments were made in cash!
The specific amounts for the Uganda acquisition is not mentioned in the report, but according to the East Africa Venture Capital Association (EAVCA) and KPMG Private Equity Sector Survey of East Africa for the period 2017 to 2018, the Ugandan operation being the biggest of the three- was cashed out for an irresistible USD88 mn (UGX316 bn).
But Akzo Nobel had gotten wind of the deal in its infancy stages and had moved to on 31st January, 2017 to serve Sadolin a 12 months’ notice to terminate the contract. However on getting knowledge that KansaiPlascon had completed the takeover deal with Sadolin and that they were in advanced stages of ditching Sadolin branded paints even before the expiry of the notice period and were to launch their own Plascon paints brand, Akzo on 2nd June 2017- served Sadolin a 15 day notice to terminate the Trademark Licence Agreement.
Meantime, Akzo Nobel had hatched a master stroke up their sleeves- they were planning, following the termination to use their production facilities in South Africa and Zambia- which operate under the Dulux brand to manufacture and reintroduce into Uganda, Sadolin paint. Their bet, was hedged on the fact that Sadolin as a brand certainly had higher awareness and trust levels, that they would, working with some staff poached from the former Sadolin Uganda, use to penetrate the very same distribution networks that Sadolin Uganda had cultivated and hopefully crowd out Plascon who would no doubt need a little bit more time to gain traction in the market.
You cannot approach Sadolin’s former distribution network- Court Tells Akzo Nobel
Somehow, Kansai Plascon managed to learn of this Akzo Nobel plan and went to work- putting their money, literary where their mouth was.
According to their 2018 Annual Report, Kansai Plascon reported spending another USD5.3 mn (UGX19 bn) on various consultants to complete the deal but also smoothen their landing and hit the ground running.
In Uganda, Kansai Plascon hired TBWA Uganda one of the best advertising agencies to handle their market launch. They also hired Corporate Image Limited, a brand and reputation agency to manage both the awareness needs but also any potential image and reputation issues.
On the legal front they hired M/s Muwema & Mugerwa Advocates & Solicitors – a law firm known for their hard-hitting and unconventional approach to the law.
Fred Muwema, the firm’s founding and Managing Partner holds over 20 years of extensive experience in Commercial legal practice and litigation. He has handled numerous commercial transactions on mergers and business acquisitions, receiverships, legal audits, company formations and restructures for business ranging from banking, manufacturing and mining etc.
He is also known for handling some of Uganda’s major disputes in areas of trade, tax, telecom, broadcasting sector, banking, intellectual property and constitutional law and he didn’t disappoint.
Muwema advised Kansai Plascon to sue Akzo Nobel in the commercial court for seeking to unjustly enrich themselves by taking advantage of and grabbing Sadolin’s market profile and customer base, once the company ceased trading under the Sadolin brand.
He subsequently dragged Akzo Nobel to court for “actively and aggressively approaching former Sadolin Uganda’s (now Kansai Plascon Uganda) customers who have been grown over time, to switch allegiance and continue buying Sadolin products under a new arrangement.”
In the case, Miscellaneous Cause No 163 of 2017, Muwema successfully argued that Sadolin Uganda (now Kansai Plascon) had “invested a lot of effort and resources in promoting Sadolin as the number one paint brand in Uganda with little help from Akzo Nobel” and that it was “therefore unfair for Akzo Nobel to take benefit of Kansai Plascon’ customers without compensating it.”
On 07th July 2017, court granted a 3 months injunction against Akzo Nobel, up to 11th October 2017 upon which the two parties would enter into arbitration proceedings.
“An interim measure of protection doth issue restraining the respondent (Akzo Nobel), its agents, assigns or licensees from: Directly or indirectly soliciting and or selling any Sadolin paint products to the distribution network or customer base developed by the applicant in Uganda under the trademark license agreement of 1st May 2015, between the applicant and the respondent pending a hearing and determination of the arbitration proceedings,” reads an extract from the ruling by the commercial court registrar.
With this injunction Kansai Plascon had secured a very important window and did not waste any single minute of it.
After closing the acquisition deal on 1st August 2017, two days later on 3rd August 2017, Kansai organised a press conference at their Namanve factory to announce the acquisition of the former Sadolin Paints Uganda and the rebranding to Kansai Plascon. A few days later they would roll over a nationwide radio, outdoor, online and TV campaign to announce the new brand name.
Sadolin is now Plascon, they told the market. They would also roll over a trade campaign that rewarded several distributors, painters and house owners.
According to audited results for Kansai Plascon Uganda that CEO East Africa has had access to, the company in 2017 alone increased their cost of advertising by 59.1% from UGX4.9bn in 2016 to UGX7.8bn.
How Kansai Plascon managed to stay a step ahead of Akzo Nobel remains a mystery but a clue could lie in the a one, Mr Wim Bramer a senior executive who worked for Akzo Nobel for 11 years as Director International Business Development based in London- but but was involved in branding, distribution footprint, exports, licensing, joint ventures and acquisitions in Europe, Middle East, Africa, Central Asia, Far East and South America.
Mr Bramer had left Akzo Nobel and joined Kansai Plascon as the Managing Director for East Africa in January 2016.
Akzo Nobel revises plan, relaunches under Regal Paints
Paint companies- like all other construction supplies manufacturers, use the same distribution channels- hardware outlets and duukas. So it is not uncommon to find one hardware shop, stocking products, in this case, paint from over 15 paint makers.
So, thwarted by Kansai Plascon’s legal manoeuvre, Akzo Nobel, decided they would instead pick an existing company to manufacture and distribute their Sadolin brand. An existing company would after all already be using the same distribution channels as any other paint maker. With this strategy, they could still ride on the popularity of their Sadolin name.
Akso Nobel couldn’t find a better partner than Crown Paints East Africa, to manufacture and sell their Sadolin paint in East Africa.
The company had been operating in East Africa since in 1958 and in Uganda since 2006- under Regal Painnts- a company they own 100%. In Kenya, Crown Paints is said to be a market with an annual turnover of about KShs7.4bn (UGX260.4bn) in 2017 and is the only paint company listed in the Nairobi Securities Exchange. The Company also has presence in the three major East African markets- Kenya, Uganda and Tanzania.
In Uganda, Regal Paints, is among the top 10 paint brands with an already established distribution network across the country.
However, Crown Paints was a little bit cash strapped to fund the quick regional rollout of Sadolin products, but Akzo Nobel, desperate to make this deal work, had to lend an equivalent of KShs136,380,000 (UGX4.9 billion) to Crown Paints Tanzania Limited and KShs41,616,000 (UGX1.5bn) to Crown Paints Rwanda Limited as working capital- all because then needed to keep the Sadolin brand alive and present in every corner of the region.
With the deal, done and dusted, on September 28, 2017, Johann Smidt and Deon Nieuwoudt the Managing Director and Africa Executive respectively, at South Africa’s ICI Dulux Pty Ltd- a subsidiary of Akzo Nobel and Rakesh Rao the Crown Paints East Africa Group CEO put up a powerful relaunch of Sadolin at Kampala’s Sheraton Hotel, complete, with pomp and sabre-rattling.
Johann, according to The Independent, a weekly news magazine in Kampala, said that Akzo Nobel was putting up their own UGX10bn plant at Regal Paints’ Kampala Industrial and Business Park, Namanve compound to produce Sadolin Paint for local and regional markets.
“Our Sadolin plant in the KIBP now under construction will be the primary site for manufacturing and distribution of Sadolin,” he told stakeholders and the media.
Rakesh Rao, on his part said that the partnership signalled a strong statement on Akzo Nobel‘s investments and continuity of the Sadolin brand in Uganda and the region.
“Sadolin brand has been a household name for many years,” he said, adding that the firm would sell its own Regal Paint products besides Sadolin Paints in the market.
Sadolin strategy yet to bear fruits
But how much of this Akzo Nobel/Sadolin strategy has succeeded?
To track how and if the Akzo Nobel/Sadolin strategy has succeeded in disrupting Kansai Plascon, we looked for Regal Paints’s financials to gauge the performance of the business before and after the October 2017 Sadolin partnership.
According to the financials for Regal Paints that CEO East Africa Magazine has had access to, between 2015 and 2016, Regal Paints’ sales turnover declined by a minor 2% from UGX15.1 bn in 2015 to UGX14.8bn in 2016. However, even with the declining sales, Regal Paints managed to reduce their losses from UGX1.1bn in 2015 to UGX500mn in 2016.
But in 2017, Regal Paints turnover, rebounded by 14.86% from UGX14.8bn to UGX17bn- perhaps partly driven by the Sadolin portfolio. Regal Paints even declared a UGX100 mn profit that year.
2018 would have been the year when Sadolin’s full impact would be felt- but Regal Paints’ turnover, only grew by 8.82% to UGX18.5bn. The company also registered losses of UGX2.9 bn.
However, thanks to what is believed to be an Akzo Nobel’s investment and increased stock in the market, Regal Paints’ assets, doubled from UGX3.2bn in 2017 to UGX7.1bn- particularly, the value of plant and machinery grew from UGX2.6bn to UGX6.3bn a sign that perhaps Akzo Nobel was delivering on their investments into Regal Paints’ operations so as to fortify them against a raging Kansai Plascon.
Kansai Plascon progresses, largely unharmed
For Kansai Plascon Uganda, it appears they have maintained their previous growth levels with little or no visible impact as a result of Sadolin’s re-entry into the market.
According to their audited books, sales turnover for Kansai Plascon (then Sadolin Uganda) in 2016, grew by 3.9% from UGX146.6bn in 2015 to UGX152.3bn in 2016. That year, profits, grew by 60.8% from UGX16.6bn in 2015 to UGX26.7bn.
In 2017, Kansai Plascon grew slightly faster that in 2016- turnover improved by 4.6% from UGX152.5bn to UGX159.3bn. However the cost transiting from Sadolin to Plascon, took a toll on profitability.
According to information available to us, in 2017 total operating expenses nearly doubled, growing by 92.3% from UGX5.2bn in 2016 to UGX10bn in 2017. This was largely driven by a 59.1% rise in the cost of advertising from UGX4.9bn to UGX7.8bn. Administration expenses also shot up by 112.5% from UGX4.8bn to UGX10.2bn.
Consequently, 2017 saw a 69% dip in profitability to UGX8.3bn, from UGX16.6bn.
In 2018, turnover further grew by 4.7%, reaching UGX166.8bn. However, expenses remained high- operating costs, although they eased down by 15% to UGX8.5bn, driven by a 28.2% reduction in the advertising bill to UGX5.6bn, administration costs further went up by 10.5% from UGX10.2bn to UGX11.4bn.
But the company still remained profitable- although there was a slight 3.6% reduction in profit to UGX8bn compared to the previous year.
Two years down the road, all odds seem to be in favour of Kansai Plascon; it remains to be seen how 2019 will pan out- but it is less likely that Akzo Nobel (Sadolin/Regal Paints) can cover up the huge gap between itself and its archival.
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