Ice is important business
Lake Victoria is the biggest lake in Africa, the second biggest in the world.
A man in his mid sixties, Norman Batuma confidently awaits us amidst his employees bustling by with big bags of ice on their shoulders. He has a big smile and jovially greets Alex Byamugisha, the XSML investment officer accompanying us.
"Nile Perch is one of the more common species caught in the lake. But a decade ago, a disastrous “development” project and bad fishing practices decimated the Nile perch. It was an environmental and social disaster. At that moment, the governments of Uganda, Tanzania and Kenya agreed upon very stern regulations, which were strictly followed by the fishermen, who had joined forces to protect their livelihood.
Today, there is more than enough fish. The fishers are strictly following the regulations and guaranteeing a sustainable fish population.
Even better, the fish caught in the lake isn’t just consumed locally like before. It is now also processed and shipped to Europe. But, to ensure that the fish stays fresh from the water to the plate, the fishermen, truckers and factories need ice. Lots of ice.
"So, ten years ago, I got involved in the ice business. As I owned this strategically-placed property on the shore, close to the airport, all I had to do was invest in a few ice-containers and get started.
To make ice, you only need two things: water and energy, but you need a lot of it.
We get our electricity from the national grid, paying around 40 million Ugandan Shilling (around 10,000 Euros) per month. It isn’t always reliable - last week, we lost three days of production due to a power cut. But the alternatives are either not feasible or too expensive. The amount of energy required cannot be supplied by regular back-up generators and installing any kind of renewable energy source would have a prohibitive start-up cost: almost 2 million Euros for solar panels, not to mention the space requirements.
Initially, we also got our water from the national supply. However, thanks to the loan we got from XSML, we managed to dig our own borehole, which gives us a steady and cheap supply of water.
"What usually happens is that the fishermen come to our landing site to fill their boats with ice, before heading out and fishing at night. That way, the fish will keep fresh until they dock and unload their catch. At that moment, the fish will be transferred to the trucks, which again need ice, to be transported either to a factory or to be sold directly in Entebbe or Kampala. The fishermen make a lot of money, as a kilo can fetch almost 10,000 Ugandan Shilling (2.5 Euros).
We sell about forty tonnes of ice per day. About two thirds of that goes directly to the fishermen, a quarter to the factories and the remainder to smaller buyers, who either buy to resell in town, or use it themselves in restaurants or in shops.
The fishermen dock their boats and give my employees their bags to fill. A bag of ice will cost them 10,000 Shilling. If the fishermen pay them extra, my people will even bring the bags back to the boat. Most do.
"The market for ice is big. We don’t have many competitors, as the industry has high barriers for entry, with a large upfront investment required for the machinery. Also, the business location must be easily accessible from both water and land.
For us, however, there is still plenty of room to grow. On the one hand, we want to expand our production. While our current capacity is forty tonnes per day, we want to go up to a hundred tonnes. On the other hand, we want to expand our distribution. At the moment we have two refrigerated trucks to deliver our ice to other, smaller, landing sites, but we’re checking out the potential of delivering directly to the Kampala market.
For this second phase of our growth story, we will be talking to XSML again, as we did for the first loan. There are several reasons why we want to continue working with them. One reason is that other lenders will demand higher securities up front, making it more difficult to survive as a business. But the main reason is that XSML doesn’t just act like a bank, like a lender. They act like a partner and are not just interested in their own return on investment, but also in ours. They also drop by frequently. They learn about the business together with you, they listen, they give advice, they help you grow."
Norman Batuma founded Ice Industries ten years ago and built it into a thriving business with the investment support of the XSML team.
XSML manages the African Rivers investment fund, in which BIO participates with USD 5 M.
African Rivers Fund
Equity € 4,118,275.00 (2016)Sub-Saharan Africa, Democratic Republic of Congo, Uganda
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