3 November 2010
In October 2010 InReturn Capital closed an investment deal with Vipingo Stone Mining, a company that produces machine cut coral stones for the construction industry. The company operates in Kilifi, a town along the Kenyan coast, 50 km north of Mombasa. InReturn has signed an agreement to finance Vipingo’s first quarry with an option to finance a second and third quarry. The investment will be used for the purchase of mining equipment and working capital. Since the inception of the concept, InReturn’s team has worked closely with the entrepreneurs to set up the first quarry and has provided the entrepreneurs with advice on strategy, business modelling, contracting and legal issues.
Coral stone mining in the coastal area is a very attractive industry. Coral stone is the main construction material used in the area due to its availability, pricing and heat isolating qualities. Kilifi accounts for the production of 95% of all Machine Cut Coral stones consumed in the whole of Coast province and the surrounding hinterland. There is ample room for new entrants into this business. Current and future real estate development in the Coastal Province, and particularly the stretch between Mombasa and Vipingo, is an indicator for sustainable high demand for the product. With the Lamu port becoming a reality, all eyes are on Kilifi for the provision of building coral stones, not only for the port itself but also other industries which will be spurred by the port and the construction of the highway which will link Lamu to Ethiopia and Juba.
The two shareholders and directors, Njue Mugo
and Caesar Waganagwa, are seasoned entrepreneurs and managers. Njue Mugo has
executed many construction projects in Mombasa and Eastern Province through his construction company Mesgo. Caesar Waganagwa gained extensive general management
and marketing experience in Kenya, Europe and Asia having worked for notable
brands like the Tamarind Group, Sarova, Hilton and Swiss nu-FO. Mr. Sammy
Njuguna, a Kenyan engineer and an authority with respect to coral stone mining
in the area, will supply the stone cutting machines and supervise the mining
The area of Kilifi has had a strong reliance on sisal farming and manual stone quarrying for local livelihoods. About 60% of the population of the area does not earn any formal income and average income is less than USD 1 per day. The potential for the proposed stone mining development to stimulate the local economy is therefore very important to the neighbouring communities. The investment will have a positive impact, directly and indirectly, on the livelihoods of close to 200 households.
Plan One of Vipingo Stone Mining Company’s core values is to become the industry champion in ensuring strict adherence to labour laws of the country. Vipingo’s Human Resource Policy goes significantly beyond the minimum requirements as the directors are staunch believers that a company can only be as strong as its team members. To this end, Vipingo Stone Mining and InReturn have agreed on a social plan which will not only benefit the team members but also the local community. An equally important core value is to ensure sustainability of the environment while at the same time empowering the community to maintain a sustainable livelihood even after the exhaustion of the quarry. In this regard, Vipingo Stone Mining will assist the owners of the exhausted quarry sites to build fresh water ponds in which they can start crayfish farming operations. Vipingo Stone Mining directors have also pledged to contribute in enhancing the current efforts by quarry site owners to develop a tree nursery from which all the seedlings to be planted in the exhausted quarries will be drawn.
Eelco Benink of InReturn commented: “After our first meeting with Caesar and Njue we became really enthusiastic about the opportunity due to their professionalism, drive, thoroughness, and enthusiasm. With all the planned development in the area and coral stone being the perfect building material for the region, this is an attractive market opportunity. After several visits to the area it became clear that there is an enormous potential to professionalise the sector and to raise social and environmental standards. Vipingo Stone Mining’s modern equipment has some unique design features that will give the company a competitive advantage, ensuring an efficient and clean production process and producing very high quality construction stones. We see a unique opportunity to make good financial returns while also achieving a significant social and environmental impact.”
Caesar Waganagwa of Vipingo Stone Mining had the following to say: “It has been a pleasure dealing with the InReturn team right from the day we presented the concept. They have walked with us through every step of the business process with a healthy emphasis on looking for potential pitfalls, an attribute you will rarely find in conventional money lenders like banks. The entire exercise has been so thorough and demanding that by the time we started with the implementation process, we felt we had a really robust plan which could overcome any foreseeable obstacles. We appreciate the flexibility of the InReturn team which was characterised by their ability to ‘think out of the box’ to overcome the many obstacles we faced along the way. We would highly recommend InReturn to any entrepreneur who has a brilliant business proposal!”
InReturn Capital’s investment team: Eelco Benink, Anthony Gichini, Bart Meijs,
Ezra Musoke, Njeri Ngaruiya and Steven Otto.