Lifeblood of the economy: India's impact on business

By Paul Busharizi

Fortune magazine once estimated that the Madhvani family alone accounted for up to a third of the Ugandan GDP by the time President Idi Amin expelled the Asians in 1972. They have stretched it a bit because by the family’s accounts the combined turnover of their group that employed as many as 20,000 people in 1972, was $150m.

 If you add the turnover of the other prominent industrial and trading Asian families in Uganda, their influence on the economy boggles the mind. But even more impressive is that none of these Indian families landed on our shores at the turn of the 20th Century with ready-made fortunes.

The arrival of the Uganda Railway at the beginning of the last century is widely seen as the trigger for the Indian community’s entrance  into Uganda. Shipped in mostly as manual labour to lay the railway line, there were also clerical workers, engineers and other professionals among their number, which is estimated peaked at about 70,000 by 1972.

Most returned to India on completion of the railway, but a smaller number stayed back to try their hand at commerce. All along the railway line from the coast to Jinja, their small tin roof dukas served as the nucleus around which trading centres and eventually huge urban areas grew. “I tasted my first sugar from an Indian’s shop,” Tephero Kiwanuka remembered.

The Indian, only known as Singh or Kalasinga, had a shop between Bweyogerere and Seeta, which Kiwanuka now past his 80s says he used to run past on his way to and from school. “Big brown granules, I couldn’t afford it but he let me have some when I helped him sweep his front yard one day.” They traded in other household goods – cooking oil, textiles, cooking utensils and farming implements imported via Mombasa and dropped off by the railway as it charged its way to Kampala.

Sir James Hayes Sadler, Uganda’s colonial commissioner, decided that Uganda’s hot muggy, tropical climate was ill-suited for European settlement and therefore should not be developed as a white settler colony but as an African smallholder farmer economy.

Landownership by Europeans and other foreigners was, therefore, discouraged or at least not as heavily promoted in colonies as Kenya, Zimbabwe and South Africa. One of the consequences of this policy is that Asians found themselves in trade while the Europeans were in industry and the Africans farmed.

The Asian businessman soon cut himself a niche as a middleman between the farmer and the exporters under a tacit arrangement with the colonial government. In fact this was one of the sticking points of the Buganda riots of 1945, that Asian monopoly over cotton ginning be lifted in order for the African businessman to also get a foot in a door of this lucrative trade.

To illustrate, it is reported that cotton exports jumped from £200 in 1905 to £369,000 in 1915, with most of this value lost to the farmer  because of administrative price controls placed on the price the farmer could receive for his cotton. The trade in cotton was so lucrative that the UK government in 1915 stopped subsidising the cost of running Uganda.

A leap into industry

The Asian community already versed in commerce and eager to climb to the next level, up from small retail shops, jumped at the opportunity to not only broker the produce from the hinterland but add value to the country’s rich agricultural bounty. Muljibhai Madhvani, the founding father of the Madhvani Group, may serve as a template for how some of the Asian businesses lifted themselves from being retailers to industrialists.

In his book Tide of Fortune, Manubhai Madhvani, the son of Muljibhai, narrated how his father went into the sugar processing business to take advantage of the untapped market and seeking too, to diversify away from the trading of commodities, recognising that he could capture more value by climbing up the value chain.

Speaking about the general trend of growing Indian businesses he said, “Typically they began by trading, then moved into cotton ginning, followed by the agricultural processing of sugar, tea, coffee and other cash crops, before they expanded into basic manufacturing (soap, steel and beer).”

On his return from school in India in 1949, Manubhai remembered, that already the Kakira complex included the following: sugar factory, oil mill, juggery mill, soap, tin factory, cotton ginnery, maize mill and more.” The commercial success bred envy and they were often used as a convenient target to score political points, first by anti-colonial activists and later post-independence leaders looking to win cheap points from local constituencies.

While Amin expelled the Asians in 1972 — his way of redressing the economic imbalances — President Milton Obote before him had already started a process with his move to the left whose main thrust was to see “political and economic power vested in the majority,” this was meant to apply to all businesses.

Amin’s expulsion of the Asians, while creating a new class of indigenous businessmen, was a shock to the system since literally overnight decades of commercial acumen was lost, the repercussions of which continue to reverberate through the economy today.

“Amin neglected to mention that one of the many reasons he was banishing us from Uganda was that, he had failed to deliver on the economic promises he had made at the time of his coup,” Manubhai wrote in his book.

“Taxes had not been reduced, food costs were rising and robbery and violence were massively on the increase. The only people in Uganda with any wealth to plunder were the Asians, who would lose about sh6b (about $1b today) as a result of their expulsion. The attraction of such a sum for an exhausted exchequer is not hard to see.”

By the time Amin was ushered out of power in 1979, the economy was 80% of the size of the economy it was in 1970, which in real terms was  a more dramatic contraction in no small part because the population had grown during the period. The political instability during the period was a key factor but the absence of a seasoned commercial class to smooth over the shortages and hardship – played by the Asians before 1972— was sorely felt.

Generalities can be deceptive but the Asian community managed to turn the expulsion into a stepping stone to greater things excelling wherever they found themselves – the UK, Canada, India or Kenya. Still traumatised by the expulsion from a country they called home, many have not returned in response to Obote’s second administration or the current government of President Yoweri Museveni to do so.

However enough have come back — about 10,000 — taking advantage of a newly liberalised economy to continue where they left off, exercising self-discipline, long term vision and cobbling networks to once again dominate the country’s business landscape.

Their footprint can be felt in everything, from manufacturing to retail trade, from real estate development to agriculture and from ICT to motor vehicle garages. There seems to be no statistics that indicate the current share of the economy they dominate but anecdotal evidence suggests that while they may not be as dominant as they once were – since the economic players are more diversified – they still are dominant players in the economy.

“It’s wrong to think of us as a homogenous group working in unison, but if you choose this categorisation we are quite formidable easily to the tune of several hundreds of billions,” a third generation Ugandan Asian said. “In a way we did not choose to be here, Uganda chose us and we intend to be working to the best of our ability to make this place a better place not only for us, but for everybody as well.”