Life in a seller's market
Some reflections of Asian business in East Africa
The use of the red colour in the title has a purpose. East African Asians have always made good money from their business ventures in the three countries. Here is a hypothesis - had they been running those business ventures in other markets outside East Africa, they might have not done too well and even incurred horrendous losses. The red ink of the auditor would have made life very unpleasant for them.
The East Africa of 1950 to 1972, when I was there, was a seller's market. I expect that things have not changed much since. There were three ingredients of monetary success - fast growing populations, increasing purchasing power and high profit margins made possible by protection from competition.
These conditions did not just create "the dukawallahs' delight" but also created the environment for higher level investors to make a good bit of money. The dukawallah was the trader, the merchant, retailer or dukandar, who bought at low prices and sold with high profit margins. Simple? Oh so simple but there were hidden costs and sacrifices.
While there were a tiny number of Asian business failures, the majority of Asian businessmen made good investments in markets which wanted more and more suppliers. One group of Asian business houses that did not always do too well were the Sikh building contractors. They loved their drink more than their businesses and, I dare say, even their wives. Notably, a few Sikh contractors also became multimillionaires. Most Asians found themselves running businesses that were operating in expanding markets for consumer goods. As the East African business environment has 'peaked', the Asian businessmen have tried to move into capital goods which require higher costs of entry. Allow me to come back to this later.
And now, lets go back to the red ink. The Asian businessmen also made mistakes which were shielded by the very buoyant markets. I will highlight a few of these 'protected' failures next.
The use of the red colour in the title has a purpose. East African Asians have always made good money from their business ventures in the three countries. Here is a hypothesis - had they been running those business ventures in other markets outside East Africa, they might have not done too well and even incurred horrendous losses. The red ink of the auditor would have made life very unpleasant for them.
The East Africa of 1950 to 1972, when I was there, was a seller's market. I expect that things have not changed much since. There were three ingredients of monetary success - fast growing populations, increasing purchasing power and high profit margins made possible by protection from competition.
These conditions did not just create "the dukawallahs' delight" but also created the environment for higher level investors to make a good bit of money. The dukawallah was the trader, the merchant, retailer or dukandar, who bought at low prices and sold with high profit margins. Simple? Oh so simple but there were hidden costs and sacrifices.
While there were a tiny number of Asian business failures, the majority of Asian businessmen made good investments in markets which wanted more and more suppliers. One group of Asian business houses that did not always do too well were the Sikh building contractors. They loved their drink more than their businesses and, I dare say, even their wives. Notably, a few Sikh contractors also became multimillionaires. Most Asians found themselves running businesses that were operating in expanding markets for consumer goods. As the East African business environment has 'peaked', the Asian businessmen have tried to move into capital goods which require higher costs of entry. Allow me to come back to this later.
And now, lets go back to the red ink. The Asian businessmen also made mistakes which were shielded by the very buoyant markets. I will highlight a few of these 'protected' failures next.
posted by K Singh Ajimal at
7:11 pm
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