In this interview with The Worldfolio, Alwan Hitti, Chairman of Hitti Group, discusses the keys of success of the family-run business, how they have diversified, focusing on quality, and how they are looking to expand operations into Europe
Like the rest of the world, Africa remains uncertain about what is to come after global geopolitical shifts like Trump’s election in the US or the Brexit win in the UK. Investors are now turning their eyes to other regions and Africa is becoming a key part of their global portfolio. How can Africa take advantage of this new global scenario and gain investor confidence? Is it time to invest in Africa?
Despite turmoils, economies in Africa have been growing for the past 50 to 60 years, as they have managed to become independent. Particularly for Ghana it has been 60 years of independence where we have been able to see and feel the growth.
I am the third generation in Ghana and from what I hear from my grandfather or father on how Ghana was and how Ghana is today you can see big changes. I have been in Ghana for the last 30 years and I have witnessed some of these big changes. We didn’t have roads like the roads we have today. There was only one highway, the Tema Highway. Today, we have more highways; we have the N1 highway and we are planning to do highways from Ivory Coast all the way to Togo and up north, so things are improving. Every government that comes tries to improve the country’s infrastructure. I was recently away for three months and when I came back I found new public transport, new buses and new lanes specifically for buses. We also have railways coming on. So this is a very positive thing for Ghana.
If we talk about Accra, it is a city that is expanding. People will have to live outside the capital and come to work on a daily basis. Today, it takes them hours to leave their homes and arrive at their working place. But by improving public transport, by developing the railway system, things will go faster. You cannot expect a worker to work hard when he has to wake up at 4am to reach work by 8am. He has no family life; he can only eat and sleep, to wake up the following day. But overall, every government has tried to improve the infrastructure in the country, and that has allowed the country to grow.
With a growing middle class, an energetic start-up scene and a new pro-business government, Ghana is looking to one of become Africa’s fastest growing economies once again. In your opinion, what are the challenges in securing sustainable economic growth and what role must the private sector play to achieve this?
Ghana has seen significant growth, with rates of around 7-8%, reaching even 12%. So, it is normal that after this period of steady growth there should be some stability, which we had from 2013 to 2016.
Don’t forget what happened with the credit crunch. Everything collapsed, the whole world collapsed. But Africa was not affected; it was only affected four years later. When Dubai had a crunch, also the bubble burst, everybody ran away. But if you look at Ghana, despite the difficulty times between 2013 to 2015 not many people left. Investment slowed down, but people were still working. We have slowed down; we had many projects that we have had to put on hold, which is normal.
If you look at interest rates, they have been above 30%. It’s very difficult to work in this environment. But the government that is in place today is working and is willing to work with the private sector. They are listening to the challenges that the private sector has and they are responding to those challenges. They have started dropping down the interest rates and have stabilized the local currency, the Ghana Cedi, which is very important. And they are also investing heavily in infrastructure. So this is what we need today to encourage further investment from the private sector.
So, it is very important for the private sector to be aligned and work hand in hand with the government, to boost the country’s economy. The private sector should not sit down and watch the government do something before they do. It’s a job that goes in parallel. You do your job, we do our job. And the more you create employment, the higher the purchasing power, which allows economic growth in the country.
In our interview with the Minister for Business Development he told us about the elimination and reduction of certain taxes in the budget of 2017, such as import duties on raw materials and machinery. What is your opinion of these measures of the new administration? Are you feeling optimistic?
We are still waiting to see how it will work out. They are reducing the taxes on importation, which is fine, and hopefully will boost the manufacturing industry. However, the government also needs money for infrastructure development and so forth so, if you reduce the taxes on imports that bring a lot of revenue to the government, where will they make up for it?
I understand that, yes, they want to boost manufacturing so they will reduce the interest rates, the duty on the raw materials, and probably increase the duty on the finished product. Then yes, that will help us a lot, definitely.
Hitti Group was established in 1969, and with 7 factories in West Africa and a presence in 27 countries, it has positioned itself as one of the biggest, most successful and diversified conglomerates on the continent. What have been the key elements behind Hitti Group’s success and what vision do you have for the Group?
Hitti Group is a family business but we have a very important team, with whom we share ideas. I am not the only decision maker and it’s not only the shareholders or family that are making decisions. We talk to our managers. We have a very close relationship with our management team and our workers; we have more than 4,000 workers in Ghana alone. We share ideas and talk to each other before making a decision on where and what to invest in.
The key to the success of our group has been the decision to diversify. Today we are in a number of industries. We are involved in the manufacturing of foam, furniture, pipes, PVC and polyethylene, plastics, generators, etc. Only last year we started also in the construction sector. So today, I can say proudly that every house, every shop, every room in Ghana anywhere, not only in the capital but in every village, you will see at least two or three products produced by the Hitti Group: Basins, buckets, mugs, pipes, light switches, paint, etc.
So, our success has been not only to concentrate in what the first generation did in the industry We’ve expanded on it. But we don’t want to grow only in Ghana. We want to expand and diversify geographically, so that is why we went to London to buy our own supplier who has had access to a number of counties in Africa.
You incorporated Nesstra into the group in 2008, one of the trusted suppliers of quality chemicals, material and machinery to Africa. How has Hitti Group evolved after this acquisition? What added value has Nesstra brought with it?
Before acquiring Nesstra, it was already the supplier of raw materials to the group. At that time in Africa there was little access to Internet, or mobile phones and things like that. Living in Africa is not easy. You are narrow-minded. You don’t see what is happening in the world. For us going into Europe, to the UK in particular, has opened our eyes to so many things that European manufacturers are doing.
We understand that time is money. We understand that quality pays, and that’s very important. So we decided – after visiting many trade fairs, seeing machines produced in Europe, in China – to go for very good-quality machines. So now all our machines are European made. And this has given us efficiency. We have become more efficient, we have become more productive, and we supply the highest quality in the market at a reasonable price. Just because you produce top quality doesn’t mean your prices should be high. So we also work in economies of scale. And this has helped us a lot to increase our sales, to sell more in the country and on the continent.
When I bought Nesstra it had a turnover of $25 million. This year we are hitting $160 million. And I bought it just after the credit crunch. So everybody was panicking. I mean, it’s an investment, what are we going to do? Everybody was advising us, ‘Don’t go to Europe – you’ll start a business but then you’ll close it down because it’s a different ball game, you will not be able to compete.’
While in Ghana time is not that important, or was not that important. But time today is important. You need to be efficient, you need to compete. And this is why I always say to every government that comes, that we should produce more furniture in Ghana. We have all the raw materials needed to produce your own furniture. Why should we import then? And this is one of the reasons why we have diversified and we went into furniture.
Today we produce 50 sets a day of furniture and our aim is to produce 100 sets a day. And from there we want to export. We don’t want to stay only in Ghana; we will start exporting to neighboring countries and then go to where those furniture people were sending their products to us. Because labor is cheap and the Ghanaian labor is smart, they are disciplined. So, we have good labor but we are not taking advantage of it. You only need to bring a new machine, a good quality machine so that you don’t need to have a lot of workers. And this is something that Africa was not aware of it. If you look 30 years back, Ghana was importing things like foam mattresses and buckets. Now that has stopped. Now we are self-sufficient and I believe in 5-10 years, our products will start being exported from Ghana to other countries.
What is the next step, like what other markets are you looking or what activities are in the pipeline for Hitti Group?
We want to go to Europe. At the moment Nesstra UK is an office that is covering our 27 countries in Africa, Turkey and Brazil. But now we are negotiating and hopefully we will sign the sales and purchase agreement this month to buy a European company that is supplying European customers. So, this is our next objective and we are also in construction so we started construction last year. We see that as a good way of expanding. In Ghana, we have a 1.8 million home deficit and the government is looking to bridge that gap. We have solutions and we want to go into affordable housing.
You have activities in many key industries like industrial, construction, mining, etc. In order to provide first-class services and materials it is imperative to constantly innovate and reinvest in technological advances to stay competitive in a global market. What are the efforts Hitti group makes towards innovation and ensuring international class standards?
We always make sure that we are one step ahead of the competition. In Africa, you don’t really need to be innovative because everything is happening in Europe, you just need to copy and paste. And this is what I did. When I bought Nesstra, all the manufacturers of raw material used to supply Ghana and the raw materials in 250-kilo drums. And that is expensive, because you then have to dispose of the drum after that. Everybody was buying raw materials in drums. And one tonne of drums, which is about 4 drums, cost you $100 more on the price.
So, when I went to Europe I saw how the manufacturers were supplying foam buyers. They supply them in bulk. And I asked them, “Can’t you supply me in bulk?” They said, “Yes, of course! We have the tanks, we have iso-tanks and we have flexi-tanks.” So we started with that and today, the majority of the chemicals coming into Africa, not only Ghana, are in either iso-tanks or flexi-tanks and this makes the price $100 cheaper per metric tonne. And just count how many metric tonnes are being imported into Africa? We call it innovation because it is new here but actually 30 years ago they have been practicing it in Europe.
How have you managed to integrate the different activities in the group to serve as a one-stop shop?
This is our concept: today I can build a house cheaper than anyone else because my group produces 65% of the items that are going into the construction of that house. So, I reduce my margin, I increase my production and then I can sell a house cheaper than any contractor that you have here. That’s the reason we need to be one or two steps ahead of our competition.
How does Hitti Group give back to the community?
I was born in Ghana. Ghana has been a very successful story for us – for our family. So it’s time for us to give back. How do we give back? We have 4,000 workers. We select some of the good workers and pay for their children’s schooling. We send them to university. We are also building schools for some of the villages. The relationship that we have with the workers and with the people here is very cordial.
What makes Nesstra the perfect partner of choice for those companies seeking to enter a market like Ghana?
We are on the ground. We have people on the ground, we have local people and we know the market very well and that’s the reason why we have been successful. In every business you do, the key is knowledge. You need to know your product, you need to know the market; you need to know the local market. Anyone from the UK or elsewhere when entering a country, they don’t know the local market. They need to understand that you need to partner with the right people and I believe from the history of our success, we could be the right partner for foreigner investors that would like to invest in Ghana.
The most important thing is to know the market. People perceive Africa as a jungle, but things have totally changed. Now we have a lot of Africans who went to university and they are back and today the banking system is equivalent to any banking system in Europe.
We have a lot of foreign banks coming into Ghana which did not happen 30 years ago; apart from of course Barclays and Standard Chartered. But the other new banks that came in, they came in only 10 years ago. So you can see that the level of business has been quite big.
Any foreign investment coming to Ghana will be secure. So you can come, you can secure your investment even by law you are secured. If you think you have an investment and you have a problem, there are laws that protect you and your investment. So any investment into Ghana is welcome. Ghana is the most peaceful country in the region. So yes, I believe Ghana will become a hub for West Africa where you can live peacefully, happily, make money and invest more.
Hitti Group is a family business; you are the third generation running the company. What would you say is the most rewarding part of running a family business?
To see my people and my workers happy. Sharing with them the bonuses, because everyone in our company has been part of the growth of the company. If the company makes money, part of this money is distributed to every single person in the company. So when I see them, I enjoy giving them this money and making them happy. I think this is the most rewarding thing for me.