Edgar Nkunda, Chapter One: Lacking Bus Fare, He Bought a Factory

I was introduced today by the University of Dar es Salaam to a man with an amazing story. Actually, I think most everybody in the world has an amazing story if only you can take the time to hear it. But some stories are remarkable in unexpected ways.

Edgar Nkumbe grew up in the fabric weaving business. As a child, his father had four automatic weaving looms. Four is a good number because one person can keep four machines running by them self.

Edgar finished high school in 1992 and became a door-to-door sales person. Then in 2005, he learned of a textile factory that had failed and was selling its machines. He thought that he would go and see if he could afford two machines. After all, machines are often sold merely for scrap steel prices in Tanzania. It seems that he set his sights low. After all, he was going for only half of a full complement of four. And this was more than hopeful for he didn’t even have bus fare to get there and back.

After explaining his interest, the owner asked if the price was low enough, would he buy all sixty machines. Undaunted, Edgar said yes and after the appropriate long negotiation they agreed on a price of 16,000,000 Tanzanian shillings (tsh) or about $13,000. He also had just 16 days to raise the money or the deal was off.

He talked to his father and they decided to ask family and friends for help. After many meetings, there was a strong consensus: there was no interest and they thought he was a bit crazy.

Then Edgar learned of a government organization called SIDO (Small Industry Development Organization), kind of a Tanzanian SBA. SIDO operates industrial parks and gives small loans to businesses. They agreed to give him space in an old factory for about $100 per month and a loan for 16,000,000 tsh. Processing the loan would take some time though. With just hours to spare, he returned to the seller with a permit showing his use of the space and a copy of the loan application. He got the grace time he needed.

When the loan came through, the seller’s patience was thin. He needed to get the machines moved. They are big and heavy and require forklifts and trucks to move. The cost, 3,000,000 tsh. This time SIDO said, ‘no.’ But dad had an idea. Maybe this time family would say, ‘yes’ to a small amount. They asked the moving company if they would take a down-payment to cover fuel, and a loan on the rest. 10% down was acceptable and family decided to help. The machines were moved. This was July, 2005 and 3 months later, Edgar had repaired and powered up two machines.

I was ready to breathe a sigh of relief. –But too soon!

A machine goes through 1,000,000 tsh of yarn per month to keep it in operation. Edgar pleaded and SIDO agreed to fund just a one month supply for one machine. With this, Edgar made some sample weavings that he took to fabric companies and achieved his first order. His problem was still the same: he couldn’t afford the materials to fulfill the order. The company agreed to provide the yarn and pay him the difference when they bought the finished fabric. For three and half years, Edgar has operated in this fashion.

I breathed a sigh of relief. Success at last!

But as I dug further, I learned a disturbing truth.

The buyer has shrewdly refused to supply Edgar with enough yarn to operate all 60 machines, though Edgar has repaired them all and they are in good working condition. By doing so, Edgar’s factory never becomes profitable. Instead, the buyer supplies Edgar with enough yarn to run 24 or 25 machines for just one shift, the threshold to pay his employees and rent but never turn a profit. This is less than ¼ of his capacity. Moreover, the buyer dictates the price he will give for fabric. Worse, all of the books are kept by the buyer. Could it get worse? The buyer never pays for an order in full but instead it is the buyer who supplies the cash to make any other payments such as rent or payroll. Edgar doesn’t have a bank account and literally is at the mercy of this buyer. As long as Edgar cannot afford his own yarn, he has no options. He can’t go elsewhere because nearly all of the fabric buyers are Indian and it is alleged that they commonly practice price collusions and syndicates within Tanzanian industries. This is fully Edgar’s belief.

The problem is not just business collusion. Money lending in this way is a practice common in the third world. Through arrangements like this, informal lenders take all of the profit and allow only enough to the worker to keep them alive and serving the lender. Right now, Edgar is essentially an indentured servant with seemingly no way out. This resourceful man has been caught in a trap. He doesn’t even know what his balance with the lender/buyer is – whether he is ahead or behind. This condition has now persisted for three years.

He is so ensnared that he had difficulty imagining running his business without it.

What he needs is some basic working capital to buy an inventory of yarn. This is a low risk investment with quick returns that will change many people’s lives. And the capital will come with business guidance from Cheetah and the University of Dar to get his business in working condition.

This is the work of Cheetah.

When I parted with Edgar, he gave me one of the first two samples of fabric he had used to start his company. I felt guilty to leave with this keepsake but he insisted. I finally accepted it believing that you, dear reader, will stand with us to buy Edgar his freedom.

(Above, a picture of one of the two original samples that Edgar created to start his company. It is laying on a piece of "gray fabric".)

Next chapter: Edgar Nkumbe’s dream. You won’t want to miss it. It’s as remarkable as his story. Go here to continue:

http://cheetahdevelopment.blogspot.com/2009/06/edgar-nkunda-chapter-two-dreams-and.html