APC’s key competitive advantages and growth opportunities

198
Mr Konstantinos Kioleoglou, CEO, APC

BY ANTONY MUTUNGA

Who is Africa Plantation Capital after nearly three years of operation in East Africa region?

Africa Plantation Capital Ltd was incorporated back in October 2015. It is part of the APC Group, a group of associated companies including the award‐winning Asia Plantation Capital, which has widened its global corporate presence to include Africa Plantation Capital (APC) in Kenya with major acquisition of freehold lands for the creation of high value bamboo plantations. APC is set to play a key role in the Groups’ expansion within the East Africa Region. Currently the company is represented by three offices in Nairobi, Mombasa and Kampala, as well as operating and managing several fully irrigated bamboo plantations, four bamboo nurseries, one agarwood nursery, two bamboo arboretums in Kilifi County and one more nursery in Entebbe, Uganda. We currently have over 150 employees and close to 200 casual workers within our East Africa region operations.

What are your plans for the near future?

My responsibility and mission is to set up the company’s operations and promote sustainable agroforestry projects such as Bamboo Plantations in the region. I am here to establish our brand name and create a network that will provide the necessary conditions in order to expand all over the region.

Now that we have several plantations and we keep buying land and planting, our main concern is to focus on the local production of bamboo products. APC group has already expressed interest in several products such as bamboo tea, bamboo charcoal tablets as well as bamboo bicycles, besides our main product, bamboo fiber for the clothing industry. There is also a huge demand for semi processed bamboo biomass to be used for energy. After the latest ban of plastic bags a new market for bamboo pulp is now growing.

Our target for Kenya was to establish a plantation management team that would be qualified to provide quality plantation management services and able to manage large scale Bamboo plantations. Our aim was to introduce to the Kenyan market as well as to the region new technologies, agroforestry models as well as new species such as Agarwood. We are happy to have achieved both targets. We believe in partnerships and this is why since day one we have been “investing” in creating strategic relationships and welcoming partners to this venture both from the public as well as the private sector.

APC was recently awarded by KNCCI as the Best Agribusiness Company for 2017, what does that mean for APC and you?

This is not the first award for APC. Back in 2016 we won the “New Business of The Year, 2016” award from Kenya National Chamber of Commerce and Industry as a recognition for our efforts to establish a good brand name and an impressive rate of growth. Following this award we got our ISO certification, for ISO9001: 2015 “Quality Plantation Management” by Bureau Veritas under UKAS international standards. Last year, we were nominated in three categories for the 2017 awards; Best Customer Focus, Best Growth Strategy and Best Agribusiness Company for 2017. We were 1st runners-up at the first two categories and we did win the award for the Best Agribusiness Company 2017.

The company has been awarded several times in Asia and Europe, but winning two awards in two years of operations in Kenya has an extra value for us. It is the confirmation that all our efforts have a positive result and we are determined to continue towards a very successful venture, expand more, and create jobs and a better environment.

Where does APC Group have plantations and operations?

APC Group is successfully managing 173 plantations in Thailand, China, India, Malaysia, Myanmar, Sri Lanka, USA and currently in Kenya. We are also operating several nurseries, process facilities and distilleries in Thailand and Malaysia.

For the East Africa region, we want to create sustainable plantations at least in three countries. We are already operating in Kenya and Uganda. Our target is to have a minimum of 5000 acres under management in the first five years of operations, which means over 700,000 bamboos under management. To achieve this goal, we are establishing our own multiplication centers and nurseries in order to secure high quality seedlings.

We are already operating four multiplication nursery facilities in the coast and building one more in Kiserian. We are also setting up a similar facility in Entebbe, Uganda, which will cover our needs for our upcoming plantations there.

The APC group has a vast plantation management experience and although the company’s prime crop is Agarwood, we are also growing teak, bananas, chilies, maize, patchouli, vetiver amongst others.

Currently, we have almost completed our first bamboo tea production facility in Kenya, we have started the works on one facility for bamboo charcoal tablets, got approvals for the Kilifi processing facility unit one and have almost secured a merger with a bamboo bicycle company in Uganda in order to start producing bikes in the region.

We are closely working with some of the largest companies in the region to set up facilities for pulping as well as to introduce bamboo as an alternative ecofriendly electricity source.

What is your business model?

APC Group has been following a vertical production line model. For example, when it comes to agarwood we have a model that we call, From soil to oil. The company is doing everything from producing the seeds to producing the final oud oil. With bamboo, the company’s plan is to produce, harvest and process bamboo-to-bamboo fiber, tea, charcoal and other end products for exports. We believe in largescale projects, which give the benefit of the economy of scales.

Bird’s eye view of APC’s bamboo plantation in Kilifi.

APC’s bamboo nursery.

What is so special about bamboo?

Bamboo is referred to by a lot of people as the miracle crop or the crop of the future. It is one of the most lucrative agroforestry products helping the environment while creating great returns. Bamboo has been used for everything from food to bridge building to the clothing industry for centuries. While it is growing fast and giving amazing yields (when properly grown), bamboo also absorbs carbon dioxide and releases 35% more oxygen into the atmosphere than an equivalent stand of hardwood trees. It has a remarkable growth rate.

Some species of bamboo grow more than three feet each day. When it is harvested, it will grow a new shoot from its extensive root system with no need for additional planting or cultivation.

Bamboo is versatile. It can replace the use of wood for nearly every application. It can be used as a food source but can also successfully replace the cotton fiber providing high quality materials stronger than the traditional cotton fibers and smooth as cashmere. Paper, flooring, furniture, charcoal, building materials, activated carbon, clothing, food and much more can be made from bamboo as the end products lists is endless.

I have to add that bamboo, unlike most cash crops, requires no agricultural chemicals to thrive. Unlike cotton, which is one of the most intensely sprayed crops in the world and rapidly depletes the nutrients in the soil, bamboo sequesters nitrogen and cultivation does not add chemicals to the environment. Bamboo also helps with soil protection. Once hardwood forests are clear-cut and the stumps are burned to provide fertilizer and space for growing crops, erosion inevitably occurs as the topsoil and nutrients are washed away by rainfall. The eroded soil then clogs rivers and streams and affects the lives of people and animals living downstream. Bamboo roots remain in place after harvesting where they prevent erosion and help retain nutrients for the next crop.

I could continue for hours talking about the benefits of bamboo. It is a fact bamboo is a miracle crop that produces amazing yields and results while protecting the environment and nature. It is important to clarify that bamboo will create good returns when it is processed. So before people rush into this agribusiness they should seriously consider the investment required without which bamboo may not produce the expected returns.

What is the harvesting timeframe for the miracle crop?

The ideal time frame to start harvesting bamboo is by year five although a lot of people make the mistake of harvesting earlier. That affects the growth potential of the grass and the yields provided. The yields produced and what you are planning to do with your bamboo production is what will determine the expected returns. It is not as simple as it sounds. You need to choose the correct species that will do well in the area where you have your farm. You need to spend time and resources in order to identify the ideal type of bamboo that will give you both great quality and good yields.

Another factor that plays a key role to the success of a bamboo plantation is the mode of cultivation that you will apply. Most of farmers prefer to choose the simplest way to grow bamboo which is you plant it and let it grow on its own depending on the rainfalls and its strong surviving characteristics.  That will not provide the best quality or yields. At APC Group we always follow a fully integrated cultivation model. Our plantations are fully irrigated and monitored 24/7 by our scientists and experts.

We believe that in order to make money you need to spend money. This is the reason that we only deal with large-scale projects where investing in infrastructure will make financial sense because of the economy of scales. The bamboo projects we are currently setting up in Kenya and Uganda are estimated to start producing returns from year five with average net projected returns (ARR) of 27.97%, and accumulated net profit returns in the 25 years project period of 699.33% as our minimum projections.

In the meantime, side products such as Bamboo Tea can create a good income from year two. These numbers are subject to the market conditions and are based on minimum price of sale and minimum yields that have been provided after relevant research for specific type of bamboo in the specific area we are planting, using our model and for end product being the bamboo fiber.

Africa Plantation Capital is also securing a serious source of income, offering plantation management services to third parties who are seeking for professional assistance to create sustainable and profitable green projects following the highest international quality standards.

Are you planning to introduce more species and other trees in Kenya?

Initially, we started working with species that have been introduced to Kenya and tested by Kenya Forestry Research Institute (KEFRI) in the coastal region. Last June we got an import license for Agarwood seeds and we are in the pleasant position to have established an Agarwood nursery in our facilities in the coast where we are growing healthy agarwood seedlings. This is really an exciting venture as these are the first agarwood plants growing in this part of the world. Bringing innovation and supporting research is a core value for Africa Plantation Capital and we are dedicated to doing so.

Who do you depend on in management, local or international experts?

For all our projects, it is the groups’ policy to always have on board the best team that is available. For our projects in the East Africa region, we are using our international team, combined with the huge experience of KEFRI together with our local experts. In Uganda we have already approached NAFORI and have signed an MOU with Uganda Bamboo Association in order to create the required relationship with all relevant bodies. Of course by now we have the best bamboo plantation management team in the region including over 10 agronomists, foresters and other experts. Rickson Kirui, our head agronomist is leading our plantation management team in Kenya and is working closely with Robin Jewer, the group’s Agricultural director and his team. This is a non-negotiable aspect of our operations. You need the best to get the best results.

Are you satisfied with the available expertise in Kenya?

Well, I have to admit that initially we were a bit worried regarding the available human resources in Kenya and East Africa in general. It was a pleasant surprise to find out that Kenya has amazing human resources that can cover every need. From simple casual workers to top managers even the most demanding employer can find excellent people. At APC for instance, I am the only foreigner. Our current managing director, Mr Kelvin Kaloki, together with the rest of our directors are doing a great job and I believe that the Kenyan market has the capacity and the quality to cover the needs of every company.

What is your opinion about the future of the Kenyan Market?

Kenya has been growing with a good pace and several sectors of the economy have been outperforming amidst the shocks that the economy has gone through because of terrorism issues and the latest political developments. Last year, Kenya’s course was challenged by several economic turbulences and the political instability, which affected all sectors of the economy. With the real estate sector becoming stagnant as per all available reports, the external debt growing, unemployment breaking records year after year and the tourism sector suffering after the terror concerns, Kenya needs to focus on its best sector of the economy – agribusiness and agroforestry. I believe that these are the most promising sectors of the Kenyan economy. Primary production sectors can secure a steady, sustainable growth for this country, creating thousands of jobs and real wealth.

I believe that the future of Kenya is positive as long as the authorities together with Kenyans will focus and start investing more in Agriculture and modern agricultural business models, setting up large scale projects. This is the reason we decided to invest in this country, with a not so popular for Kenya crop and bringing our successfully tested vertical production model to implement it in the region on large-scale projects.

We are already moving towards this direction and we hope to motivate more Kenyans to follow our steps and invest in the real economy of this beautiful country.