City Oil, Kampala, Uganda
by Devapriyo Das
Wednesday, September 09, 2009
Their history is knit with episodes of devastation – war and hunger. They have been accused of offering a safe haven to Al Qaeda terrorists. And recently, they have redefined the art of piracy, in which large ships have been captured and released after huge ransom payouts.
Yet, despite their shattered hopes back home, the Somali community in Uganda has taken the economic landscape by storm, enjoying a commendable share of the country’s fuel industry, among other sectors. DEVAPRIYO DAS looks at this business community.
Hassan Ahmed, a Ugandan Somali, and Director of the prominent Somali-owned City Oil franchise, hints at the secret behind Somalis’ success in business. “Somalis have always had links to many areas of the world”, he says.
“With that link, they are able to have very good sourcing. Every time you source well, it will result in benefitting the consumer, because you are able to bring the costs down.”
That strategy bodes well with Uganda’s consumers who depend heavily on imports but whose purchasing power is low. It also explains why Somali businesses have become an accepted part of Uganda’s commercial life, covering essential services like fuel stations, foreign exchange, money transfer, and supermarkets.
Ahmed reveals that City Oil was formed in the 1980s as Mandela Auto Spares, and started by selling spare parts. The company then graduated to selling tyres, before realising it could capture a larger market by setting up fuel stations.
“If you look at our stations, they are not your typical stations”, says Ahmed. “They are giving auxillary services that complement fuel.”
Today, there are various Somali owned petrol station chains, including Hashi Empex, Hass Petroleum and Hared.
It is a competitive market, especially as global oil prices have followed no perceivable logic in the past 18 months; which also means the auxillary services provided by chains like City Oil have not automatically led to more customers in these difficult times.
“The public has been very sensitive to price,” Ahmed remarks. “We find that it’s very difficult to sell fuel if you don’t have the right price at the pump.”
Following the liberalisation of the fuel market in Uganda, Somali fuel enterprises have helped make prices more competitive. “Right now the (profit) margins are at their lowest point”, Ahmed observes.
He believes that even if Uganda commercially exploits and refines its crude oil reserves locally, Somali fuel stations would remain in business. “Because that fuel still needs to be pumped into vehicles”, he says. “A network needs to exist”.
It is a network built carefully over time. The first Somalis to settle in Uganda came in colonial times, as the so-called Somali Scouts in the imperial British Army. Many stayed on and assumed Ugandan citizenship, with large numbers working in the meat industry.
Thousands are believed to have left the country during Idi Amin’s rule, returning only under the NRM Government in 1986.
The current conflict in Somalia has witnessed an influx of refugees into Uganda. Some have been settled in camps such as Nakivaale in Western Uganda, while others have been absorbed by relatives living in Kisenyi and surrounding areas.
Many have prospered, while some, like construction queen Amina Hersi Moghe, owner of the multi-million-dollar Oasis Centre and Laburnum Courts in Kampala, have defied gender and cultural stereotypes to become spectacularly successful. In fact, Ms Hersi was named Woman Investor of the Year 2008 by the Uganda Investment Authority.
Being a resilient people, Somalis have prospered because they are willing to take risks and accept smaller profits. Yassin Mattan, Head of Business Affairs for the Somali Community Association in Uganda, explains that when it comes to trade, “everyone wants to be very competitive in terms of the pricing factor, so it’s the margin that people are looking for.
While some people are looking for a higher margin, these guys [Somalis] are looking for a lower margin. They’re looking at the turnover.”
Hassan Mohammed Hersi, for example, has been Manager of Half East Forex Bureau on Kampala Road, for 11 years.
“The business of exchange is all about competition and it’s very tough business,” he says. “It needs experience, needs also capital, and needs you to be a well-known person in the business for a long time.”
Born and bred in Uganda, with many business contacts, Hersi felt he could profitably run a forex business.
Today, most of his clients are Indian and Chinese traders involved in high-volume import-export businesses. “It’s all about your rates,” he responds, when asked how he attracts and retains his customers.
“People know you through your rates, what good service you give them, how your location is, security, all that. [But] if your rate is the best, they will come and buy from you and sell to you.”
Yassin Mattan himself took a risk by engaging in commercial farming, a first for Uganda’s Somali community. “I saw it as an opportunity, this lack of commercial farmers in Uganda,” Mattan says, “and the potential was there both as a business, and at the same time, for
providing food security for the country.”
Today, his Kayunga-based Maple Farms employs 40 people, utilises scientific farming practices, concentrates on growing maize and basmati rice over 140 acres, and is generating roughly 50 tons of food grain per year via two annual harvests.
Most of the crop is sold locally as internal demand -exacerbated by food shortages and sales of Ugandan harvests in neighbouring markets like South Sudan - has skyrocketed.
Recently, the Somali community in Uganda announced it would earmark Shs1.4 billion to further expand food grain production in Kayunga.
As Somalis continue to invest in Uganda’s burgeoning small and medium enterprise sector and contribute a growing share of taxes, it becomes clear: this is a community that is thriving and here to stay.