The Nairobi Solution Ch.5
Erik kept the phone to his ear, but got up from the desk and walked across the office to close the door before continuing.
“Claire. I need you to keep the problem with the Chinese quiet. Just for now.”
“What do you mean keep it quiet? How am I supposed to do that? Tu es completement fou! I have a board meeting coming up and I’m putting together the packs for the directors. They are going to want to the full status of the project. How am I supposed to not tell them there is a major change in the cost of the rail stock? And that assumes the Chinese will still deal with us after you told them to go stuff themselves in Shanghai”
Claire was uncharacteristically agitated.
“Look technically we are just working through a potential misunderstanding. They sent an alarming letter, but nothing has been decided. We are still working through things. At this point there is no need to startle the board and trigger a big review. Tell them about how the track laying is on schedule. Which is true. And you are moving ahead with procurement of the rolling stock. Which is true. End of meeting. And we move on. Just say that.”
“Erik… you are asking me to conceal material project information from the IFC. Do know how absolutely fucked I am if this comes out?”
“Nothing is going to come out. You and I are the only ones who know about the letter from CERS. I am going to find us a solution for the rail stock.”
“And how are you going to do that? The Chinese are right. The Japanese will be even worse. Where in the world are you going to magically find a low cost supplier of train locomotives on absolutely no notice?”
“I have a potential solution,” Erik lied. “Just don’t blow everything up with the IFC by getting them into a tizzy about the Chinese. Buy me some time, and keep the project on track, it’s what we both need. I’ll figure it out.”
“Possibly, I can fudge my way through this meeting. But that’s it. Not the next one for sure. You have to get this sorted. Do you understand? Otherwise, you know what happens. The funding stops, your loan blows up and your bank with it.”
“I’ll find a supplier,” Erik said with fake confidence. “Goodbye. And thank you!”
Erik released a long breath of air and stared out at the Nairobi skyline. This was stressful. How was he going to sort this out? Ever since the Shanghai meeting he had that same sickening feeling. The feeling when a trade is going wrong and you know you should sell and get out of it. But there was no simple way to sell and get out of this trade. No click of a button. He was stuck in it. The only way out was forward. Through it. He had to find a way.
Erik was broken from his rumination by a knock on the office door. It was his secretary.
“Miss Wanjiru is here to meet you.”
Oh yes. He’d forgotten. As part of being CEO he also had to review new loans if they were material to the bank. This Wanjiru meeting was about a potential agricultural loan. Erik needed a risky farming loan right now like a hole in his head, but he smiled and asked the secretary to waive in Miss Wanjiru.
Miss Wanjiru was taller than Erik, well dressed and her shoes clacked as she walked across the office to the shake Erik’s hand. Erik smiled, said hello and gestured to an arrangement of couches for them to sit for the meeting.
They both asked for coffees, Kenyan coffees, and made polite chit chat. Her first name was Grace and she had printed out copies of her presentation.
Finally, their coffees arrived. It had been a long day. Erik needed the coffee so he could perk up and focus intelligently on her proposal.
“So Grace. My understanding is you are looking for 90 million shillings to start a farm in..” Erik forgot the name and had to look at his papers again “Makueni County. Can you tell me what you have in mind and also what a chia seed is.”
“May I ask where you are from?”
“Well. I’m not sure. I grew up in Montana. Worked in San Francisco for a few years and now live in London.”
“So, you lived in San Francisco and don’t know what a chia seed is?”
“I take it that somehow living in San Francisco means I’m supposed to know what a chia seed is? Is it a health food thing? Must be.”
“Yes. chia seeds are highly nutritious, high in Omega 3, high in fiber and especially good for your gut. It’s a growing trend. California is the biggest market and where it all started.”
“And you can grow them in Kenya?”
“Kenya is perfect for chia seeds. The ideal growing location for chia seeds is a narrow band between 15 degrees north and 15 degrees south of the equator. Kenya falls in that band.”
“Ahh.. I see. Got it. That’s why the name of the company is ‘5 Degrees’ as in 5 degrees south of the equator. OK. Makes sense. Now that I understand better what you’re doing I want to give the numbers another look. Can you give me a minute?”
Erik sipped his coffee and looked over the tables in her spreadsheet.
“Are these chia prices realistic? I have no idea.”
“There actually about 25% conservative.”
Erik continued reviewing the numbers He noted the yield assumption, the equipment investment assumption, the land lease assumption, the cost of goods sold, the shipping cost assumption. The projections were that 5 Degrees would lease the land in year 1, scale up in year 2, and then be in full production by year 3. Leasing instead of buying the land made sense.”
“Are these transportation costs realistic? Is it really feasible to ship chia seeds from Kenya to California?”
“Now? No. But I’m calculating that by the time we are ready to run at full production the new railway will be operational. The land we are looking to lease is 10 km from where they plan to build a station in Emali. We will dry the seeds, package them with our own brand, then truck them to the railway, where they will go to Mombasa. From Mombasa we will send them to either Europe or the US.”
The new railway… Erik let out a breath of stress again. He didn’t want to think about that.
“Hmmm…. And what do you do now Grace? Are you in the agricultural industry? Is that how you came up with this idea?”
“No. I’m in the accounting department at Kenya Power. My current job has nothing to do with farming. I know farming because my Dad was a farmer and we grew up on a farm. But I want to start a new farm that sells high value health food with its own brand and is profitable and modern. 5 Degrees. Once we get the chia seeds going I have 2 other products we will launch to further grow the brand and our relationship with the grocery chains.”
Grace was impressive. A real whipper snapper. Bored of her accounting job, wants to start a farm, and smart enough to build her own brand and earn proper margins.
“How much are you and your partners contributing into this project? What will be the starting equity?”
“Around 6 million shillings.”
Erik looked up from the presentation and saw Grace was struggling to maintain her smile and confidence while knowing this was probably a deal killer.
Such is Africa Erik thought. Young and full of dreams, but no money. One day that would change, but for now it was both a stumbling block and an opportunity. It was why banks like Turkana could make lots of money with high spreads. It was why he was here.
“If I have to. I can add my father’s farm as collateral too.”
Erik had just met Grace, but he liked her. He liked her spunk. Liked that she had come prepared with detailed forecasts and a proper business idea which she had pitched well with confidence. It was impressive. He wanted to back her.
“I like the name. I like ‘5 Degrees’. Need to review this again with my team, but it makes sense. I see why you are excited and the numbers seem to work.”
“Thank you very much Mr. Anders. Thank you for meeting me and I assure you, you won’t regret supporting 5 Degrees.”
They shook hands again and Erik walked her out of the office and said goodbye.
He closed the door. On his way back to the window to ponder again his life’s problems he stopped and looked at Grace’s presentation where it still lay open on the coffee table.
He sat back down on the couch and flicked through it again. His eyes couldn’t help stopping at the slide with Grace’s shipping cost assumptions.
Erik thought of something. He pulled out his phone and called Nicole.
“Hi Nic. Do you have a second?”
“Yes. I’m just on High Street Kensington, but what’s up?”
“Are chia seeds a thing?”
“What do you mean?”
“Do your health nut friends back in California eat chia seeds? Like Ameilia. Does she eat chia seeds?”
“Yes, definitely. Amelia especially. Chia seeds have lots of antioxidants and are good for your gut. I used to buy them when we shopped at Whole Foods but then you always complained about the cost of our grocery bill, so I cut them out.”
“OK. That’s what I wanted to know.”
Just then Erik’s phone started to beep. It was Dwight on the other line.
“I have to go. Dwight is calling on the other line.”
“Just quick. When are you going to be back?”
“Maybe 2 weeks. I don’t know. Gotta go. Dwight is calling.”
“OK. Love you.”
What was Dwight calling about? And which Dwight was it going to be this time? Friendly, best friend Dwight, or Mt. Vesuvius?
“Hi Dwight. How are you doing?”
“Good. Really good in fact. I might have found a solution to your locomotive problem.”
Interesting choice of words but Erik didn’t comment.
“That’s fantastic! Tell me. What’s the plan?”
“Pack your bags. You’re going to Zimbabwe.”