News and Views
Between a rock and a distant, unknown place: Origin of the Madhvani empire
Kampala – Source: Monitor
The Madhvani empire might never have been founded if it weren’t for Allidina Visram and a bunch of dead puppies. Vithaldas Haridas Madhvani was working with his mother in a stone quarry in Gujarat, India, when a fellow worker accidentally dropped a large rock.
The rock dropped into a crevice where four puppies were sheltering, crushing them to death. The young Madhvani was so disgusted by the sight and his own dog’s life working at the quarry that he decided to seek a new life and fortune in Africa, as many Indians at the time were doing.
In 1893, aged 18, he set for Africa by dhow with little money but a pocketful of dreams. On arrival, he worked for Visram for five years before taking the train to Kisumu, a steamboat across Lake Victoria to Jinja, and walking 24 miles to Iganga where he set up his own shop.
In 1906 Vithaldas invited his brother, Kalidas Haridas, to join him and help run his growing business. In Tide of Fortune, Manubhai Madhvani writes glowingly about his great uncle and his business practice.
“He observed a very strict policy on pricing, keeping a 20 per cent profit margin on all items. If, in his absence, any of his partners overcharged a customer, even by five per cent, he would return the amount with an apology.”
In 1908 Muljibhai Madhvani, the man whose name the empire would later take, joined his uncle, Vithaldas Haridas’ business aged 14. Madhvani’s brother Nanjibhai had joined a few years earlier.
Muljibhai was sent to run a shop in Kaliro where he met Nanji Kalidas Mehta, who would go on to become a life-long friend and fierce business rival. In 1914 he moved to Jinja and opened another shop there.
Like many Indian businesses at the time, Vithaldas Haridas & Co entered the lucrative cotton trade with operations in Jinja, Iganga and Kaliro. The entry into sugarcane growing and processing was almost by accident.
In 1918 the company bought 800 acres of land in Kakira with the intention of setting up a cotton plantation. However, heavy rains ruined the cotton crop and the company concentrated its efforts on ginning and trading, instead. In 1921 Muljibhai started the Kakira Cotton Ginnery to process cotton grown from the area.
By 1925 Vithaldas Haridas & Co had eight cotton ginneries, the joint highest number with two of the biggest cotton companies at the time; the Uganda Company and Narandas Rajaram & Co. By comparison, Nanji Kalidas Mehta had four ginneries.
Muljibhai decided to experiment with growing sugarcane on the land in Kakira that had failed to support the cotton crop. His son Manubhai writes that by early 1922 “Muljibhai began producing jaggery (an unrefined form of sugar) using donkey-driven wooden mills to grind cane. “This was the beginning of the Kakira estate, which eventually became his master work.”
Although there was no sugar industry to speak of, D.P.S Ahluwalia notes in his book, Plantations and the Politics of Sugar in Uganda, that small-scale sugar-producing operations had been on as early as 1910 with exports of 257 tonnes of jaggery worth £200 reported that year.
As this series reported earlier, it was Mehta who first saw the potential profit in sugar and who then set up the first sugar plantation and factory in 1924. Although Vithaldas Haridas & Co was keener on cotton, expanding its ginning operations significantly in 1928; Muljibhai kept his eye on sugar and, in 1929-30 started the second sugar factory in Uganda at Kakira with an estate of 4,000 acres.
The sugar sector expanded rapidly. By the time C.G. Hansford, a mycologist appointed by the colonial administration to assist with the development of the sector, arrived in 1926, Mehta had between 1,500 and 2,000 acres of planted sugarcane at Lugazi. By 1932 the two estates at Kakira and Lugazi had expanded their acreage under sugarcane to 10,250 acres.
In 1932 Vithaldas Haridas made Muljibhai, who up to that point had been an employee, a partner and managing director. Vithaldas Haridas Madhvani, his brother Kalidas Haridas and his son Vallabhas Vithaldas remained the majority shareholders but the control of the company was now under Muljibhai.
Madhvani takes over
Vithaldas returned to India in 1935, followed in 1938 by Kalidas and Nanjibhai, leaving Muljibhai free to direct the growth of the company. Although cotton was still a major focus, under him the company began to diversify and invest more in sugar, installing a crushing plant with a capacity of 1,000 tonnes per day, and then doubling that capacity a few years later.
Mehta’s book Dream Half-Expressed offers insights into the competition that emerged between the two families as the Madhvanis turned their focus to sugar. “Vithaldas,” Mehta wrote, “had also started a sugar factory on a smaller scale and competition knew no bounds. To minimise the evil of unhealthy competition, a syndicate had to be formed.”
Mehta formed a syndicate with three European-owned sugar firms in Kenya and controlled their exports to England while trying to manipulate local prices of sugar. However, Vithaldas, whose main focus was on the local market, but who also now owned a sugar factory in Kenya, would have none of it.
“I tried for three years to get Vithaldas Haridas to join the syndicate but failed,” Mehta recalled. “The Kakira Sugar Company set up a bigger mill, the syndicate broke up and the two European companies of Kenya went into liquidation.”
The expanded capacity of the sugar factory at Kakira meant increased production but this required the availability of more sugarcane for crushing. Increasing the supply of sugarcane, in turn, required increasing the land under cultivation.
In order to maintain their advantage over their rivals at Lugazi, the sugar barons at Kakira would have to use some of their methods and invent others in order to acquire more land on which to grow more sugarcane.
This would provided the capital from which a significant chunk of Uganda’s industrial base would be built but it would also have long-term effects on the areas the plantations were located and, ultimately, on the politics and economy of the country.