Monthly Archives: September 2011

KFC is here, so what?

My article on the opening of a new Nairobi KFC restaurant that appears in the current issue of Up, a free magazine on interesting things happening in Nairobi. It was edited by Bikozulu.

Edit Jan 2022: Up Nairobi site seems to be gone, so here’s the original article with a few typos fixed.

KFC Stirs Nairobi taste and talk
By Bankelele

There has been quite a bit of online chatter following the opening of a new restaurant by the Kentucky Fried Chicken franchise at the Junction Mall in Nairobi.

The launch night attracted thousands of Nairobi residents who formed long queues out into the stairwell of the mall and one source hinted that the opening night gross at the restaurant exceeded an astonishing Kshs 2.5 million (approximately $28,000), which is probably a record of sorts.

A week later, the queues are still there and on my one visit there I stumbled into many familiar, friendly, faces who were there to sample the world-famous flavoured chicken which is even served in laundry size buckets – suitable for families or groups. Many were there to re-discover meals they had eaten abroad – in the US, or South Africa, while some other older ones were able to recall with nostalgia that there used to be a KFC restaurant in Westlands, that closed a few years ago. For the majority though, it was a first visit to sample an American brand that has chosen Nairobi to establish a footprint in East Africa. The customers all flocked to Junction from the first day, without the franchise having to put up any advertising on radio, TV, Internet or newspapers.

Away from the Junction, there were messages posted on Facebook and Twitter on the arrival of KFC; some celebrating the arrival of the restaurant, and others lamenting its instant popularity. People happily posted pictures online as they received their buckets, or about the speed of service, and of course the taste of the food there.

On the other side, there were quite a number of issues raised: KFC was dismissed as being too expensive – and wrong comparisons were drawn, with some people comparing a meal at the more familiar local Kenchic franchise priced at about Kshs 250 to a KFC one of Kshs 2,700 – since this is the price of KFC’s large 21 (chicken) piece bucket that is a family meal. The menu options at KFC are largely in the Kshs 500 – 700 range, which put it in an expensive consumer bracket, and they are not intent on competing with Kenchic regulars at those prices. For comparison, Tuskys and Nakumatt supermarkets sell the same products but which are priced differently and target different customers.

However, the opening of a fast-food (low-end by US restaurant measures) in an upscale Nairobi mall with upscale pricing was a global eye-opener. Fast foods are regarded as unhealthy but remain popular because of their low price, speedy service (you don’t even have to get out of your car), taste, and location choices that fit into the lifestyles of many busy Americans. But here in Kenya, people are flocking to the Junction including parents who are prodded by their kids. While red flags have come up about the rich in poorer countries making (western-influenced) food & lifestyle choices that are unhealthy, the parents perhaps figure that a once-a-week or once-a-month indulgence in fast food is a harmless treat similar to an excursion to the Village Market.

But the most profound story about Kenchic is in their processes, which include the people, the ingredients, the systems and standards. With people, the selection and the training of staff including some weeks in South Africa that the franchise had to drill in the service concept. The foods mainly consist of chicken supplied by Kenchic and chips (freedom/French fries) imported from Egypt. With systems and standards, there was the need to deliver the worldwide fast food consistency similar to a US KFC and do it in less than two minutes.

KFC staff went through at least three interviews and the managers selected had to attend training in South African on fast-food processes. One important attribute was understanding the operations, which perhaps entailed the need to do menial jobs like cleaning the tables. And by deploying expensive heating machines, the franchise partners have been able to deliver close to the target of meeting orders in 90 seconds (1 ½ minutes)

In terms of food selection Kenchic breeds quality birds and supplies them to their sister restaurants as well as other rivals like Steers, and now to KFC. However, with the issue of chips, the need to have consistent, speedy produce available meant they would have to go with frozen varieties. Perhaps in a few months, a Kenyan food processor will be able to handle such an order but it seems KFC had to start with Egyptian partners. Googling the food processing exports that originate out of Egypt is an eye-opener for anyone in Kenya who believes that Kenya’s agriculturally suited economy is superior to Egypt, which is dismissed as a desert reliant on the Nile River.

KFC had tremendous recent success in Nigeria and saw a need to capitalize on the growing middle-class appetites in Africa. The opening of KFC Nairobi also coincided with one in Accra Ghana, where the same chicken baskets are sold at 50 cedi, which is equivalent to about $30 and the 2,700 shillings in Nairobi.

What’s next for KFC and their local franchise partners who were able to surpass the stringent standards and deliver ‘KFC-quality’ meals, and have had record customers without any publicity? They will next take the KFC-standard recipe and their lessons learnt to the Galleria mall on Langata Road, and later on to Kimathi Street in downtown Nairobi – the ground zero of fast food in Kenya.

Urban Inflation Index: September 2011

One year after the euphoria of a new constitution, the direction of the economy is uncertain as seen in the weakening Kenya shilling, tangles in implementation of the constitution, and rising food prices. It has been a year of some price controls in the fuel, and possibly in the food sector whose parliamentary price control bill was signed into law last week by the President.

Comparing prices to six months ago and last year. On to the index

Gotten Cheaper: Nothing really.

About the same:

Communication: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings ($0.03) per minute to call across networks. It is unclear what will happen with call rates, as the smallest company in the market, Yu, launched free daytime phone calls, Airtel Kenya lost a CEO, and Safaricom has indicated that they may raise their call rates, as has happened in Uganda with MTN . The real battle is in data, where prices have not really dropped but companies are offering more speeds for less. The market here is divided between the companies with 3G (Orange & Safaricom) who compete on speed, and those without 3G(Airtel & Yu) who offer cheap internet rates of about Kshs 50 (~$0.5) per day for unlimited use.

Another communication developments that, in a way, lower the cost of business include the launch last week at G-Kenya of GKBO, which encompasses free website creation tool, domain registration, and site hosting for small companies by Google in Kenya.

Utilities: The bill on pre-paid electricity is still at about Kshs 2,000 ($21) per month, and getting about 30 – 35 units per buy via M-Pesa. However that is expected to go up after notice was issued for rates to go up 22% per kwh unit. So what alternatives are there? In a somewhat timely move, Samsung launched the NC215, a solar powered netbook laptop last week. It gives 1 hour of power for every 2 hours of charge in the sun, has a 15-hour battery life, and is able to charge other devices by USB even when it is off.

Also got a gift of a solar phone charger (T2126 Hemera from Hirsch) that works quite well; it takes about 12 hours to charge in the Sun or 2 hours via USB, has a flash light and can charge a variety of phone models.

But when you look at the rapid advances in laptop batteries and cell phone batteries over the lasts decade, you get the feeling that there has been a lag in the pace of solar devices, and that more solar based solutions and advances should be emphasized.

More Expensive

Fuel: A litre of petrol fuel, which is regulated by the Government, now costs 117.75 (~$5.6 per gallon) in Nairobi. Regulated fuel has proven to be more expensive than unregulated fuel, and while this can be attributed to the weaker shilling and fluctuating oil prices, the formula used to arrive at the price remains vague, and the limit on margins (stipulated buying and selling price of petrol, diesel, kerosene in each town) appears to have hurt small oil industry companies, more than large ones. However, among the listed companies, Kenol appears to have weathered the regulatory regime better than Total, by having diverse operations in other countries in East and Central Africa that remain unregulated.

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg bag which cost Kshs. 80 six months ago, and Kshs 65 a year ago, is now Kshs 119, the highest it has been in the short history of this index.

Other food item: Sugar : A 2 kg. Mumias pack which has hovered at about Kshs 200 for the last years, now costs Kshs. 385 (90% more than last year) and . The sugar sector has really gone full circle causing many to questions its relevance, recurring shortages shortage (why all factories close at the same month for maintenance), why sugar is grown in a food producing area and how many items we can consume without having to use sugar as a sweetener e.g. tea without sugar, or use of honey as a substitute.

Foreign Exchange: 1 US$ equals Kshs 95.6 compared (now 96.8) to Kshs 80.8 a year ago (and 83 in June 2011) – a loss of almost 20% in a year. It’s unclear of this has been a concern to the Central Bank which has made other confusing policy moves as related to interest rates at a time of mounting government debt and their laxity has enabled banks to spot and take advantage of an arbitrage opportunities to trade with government money.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($1.9) (at a local pub) a slight increase from compared to Kshs. 170 a year ago. However beer has become out of reach for many poorer Kenyan who have resorted to drinking unsafe local brews, which in some unfortunate cases have resulted in blindness or even death.

Are Kenyan Engineers Capable of Building Thika Road?

Yesterday’s post at the Thika Road Blog sparked a response from @BridgeMkr

Having grown up in Kenya then gone to the US for college and worked there ever since in bridge design, I would say that the Kenyan education system was more than adequate in preparing me for engineering school and a career as bridge engineer.

Based on that, I would say that the civil engineering graduates from Kenyan Universities have the basic tools to succeed as engineers in this world.

I read a comment that Kenyan universities are preparing students for 1980’s style construction – and if that is true, then I would say that is a good thing. If one clearly understands how to design structures built in the 1980’s then they understand the basics of design and construction.

There are buildings and bridges built in the 1900’s that are still standing. Over the years, the basics in design & construction have remained the same, with the difference being how well/accurately we calculate the design loads, and how well we design the structure to withstand these loads, the safety factors we apply to them, and the materials we use to construct them. If one understands the basic principles, then the next step of understanding modern design factors, codes, and materials is very simple.

I would rather have an engineer that can design a bridge using the old code by hand, than one who can only design the bridge using modern software packages, (and who does not know how the program comes up with the solution).

China has over a billion people therefore they will have way more engineering graduates. The way forward for Kenya and Africa, is to continue to produce civil engineers who clearly understand the basics in design and construction. Some of these graduates can then go to universities aboard to get their masters and post-graduate degrees, and who can later transfer this additional knowledge back to Kenya and Africa. The graduates that remain in Kenya upon graduation should go work under the direction of more qualified engineers, who can give them guidance on how to design various basic structures at first, with the complexity of the structure increasing as their career progresses. In engineering, like most things, experience, with the ability to learn, counts the most. Those graduates that went abroad, on return to Kenya can start out designing more complex structures based on the experience gained, but should still work under the guidance of more experienced engineers.

It may surprise a few people but today in the US, there is a debate raging on whether a master’s degree in civil engineering should be the minimum qualification for someone to be a registered civil engineer. It is felt that the current undergraduate programs are not adequate, especially if the pay for civil engineers is to go up.

In order for Kenyan and African engineers and companies to compete for, and design, major construction projects like the Thika Road Project, there needs to be a requirement that Kenyan and African engineers and companies be involved in the design and construction of these projects. This can be done by requiring some portions of the project to be designed and constructed by local engineers.

Another requirement, which would add to the cost of projects, but would ensure the transfer of knowledge, is to have independent designs done by local engineers. This means, having Chinese /European/American design firms design the complex structures but at the same time have local engineers and companies independently produce designs of the same complex structure. The local firm’s designs can then the compared to those produced by the foreign firm. Another problem with design & construction in Kenya and Africa is having adequate QA/QC procedures in place to ensure that structures are designed correctly and constructed according to the engineers design using the specified materials.

Through this process, current local deficiencies (if any) would be revealed, and at the same time the local firms would learn how things are done differently by foreign engineers/firms. This design exercise cost is very small, compared to the actual construction costs and I have been involved in projects where two independent designs have been produced.

Tatu City & Vision 2030

Tatu City was endorsed as a Kenya Vision 2030 project and an event was held in Nairobi to celebrate the signing and also clear up some misconceptions about the project.

The Future is Urban Mugo Kibati said urbanization is the future, the world over, and it will happen without proper planning, Vimal Shah said that while Kenya is currently about 30% urbanized, by 2030 Kenya (which is just 212 months away), this will have risen to an urbanized population of about 75% urbanized. Are they going to stay in poorly planned cities or better-articulated developments?

What is it? Dr. Gituro Wainaina, who is one of the Vision 2030 secretariat directors said that the message must get out that Tatu is not a gated community, it is where you work or where you sleep. Later it was mentioned that it was a brand new city, that will complement, not replace Nairobi, and at completion will be worth $5 billion – the single biggest FDI injection. It looks new and different from other projects (every toilet in Tatu City will flush with recycled water. Every roof should harvest rainwater!) and the Ruiru Council has embraced the project, are building capacity to manage with Tatu and are are going to reap the benefits of the project, which might lead other municipalities and counties to do that.

Vision 2030 is not about Government Projects: Mugo Kibati said that Vision 2030 is not about government projects and they envision that the majority of projects will be by private investments or government partnerships with the private sector. He said that the Government is only meant to be a facilitator that provides incentives – adding that with Tatu on one hand and the government’s planned technology city in Konza on the other, he is watching the race to see which will complete theirs faster – the public sector or the private sector?

Nairobi needs 10 Tatu Cities: Tatu will do create 3,000 houses a year in a country that has an annual housing shortage of 35,000 to 40,000 per year. Nyagah said that Nairobi needs another 10 Tatu’s to barely satisfy the demand and that they welcomed other mega housing developments that have been inspired such as Migaa, Thika Greens, and on other towns like Eldoret (Sergoit)

Is Tatu is Destroying Farmland? At a time when the country can’t feed itself adequately, this has been partly attributed to the use of land has been attributed to land use Mugo Kibati said that current 60% farmers in Kenya, are feeding about 80% of the citizens. In future, the government would have to make some harsh decisions about denoting land as agrarian, commercial, residential etc. (in a Land Use Masterplan). Having a 70% urban population in 2030 will still leave 30% in rural areas which is still high. The current subdivision of arable land is unsustainable, and the government has to get more people out of farms and find them employment in other sectors; this will leave arable farming to farmers, who will mechanize, and invest in-agro business; i.e. Farming should be done by professionals, as it is in developed countries like the US that are able more than feed their countries and export surplus with less than 5% of their population being farmers.

M-Tatu Mortgage?: Nyagah challenged James Mwangi, the absent chairman of vision 2030 (who’s also the Equity bank CEO), to create to create a mortgage, where someone can repay a daily amount e.g. kshs 500 per day and buy a house and name it M-Tatu.