Rasamy: Wheels of Fortune!
Case written by Kristina Pilaeva, MBA Student
“Because my country, my parents and my entire family
gave me the opportunity to discover and study in
Québec, I believe, in return, that I should make my own
small contribution to the development of my homeland.”
Rémy Bonou
Rémy Bonou is a 27-year-old student from Ouagadougou, the capital of Burkina Faso.
He came to Québec in 2003, to study. Having grown up in a family of entrepreneurs, it
was not long before he was able to identify some interesting business opportunities.
Burkina Faso is one of the world’s poorest countries. Roughly 80% of the population is
illiterate, and only 17% of all children finish high school. The per-capita GDP is around
CAN$190. The farming sector is the driving force for the country’s economic and social
development, and is the main source of income and jobs for nearly 92% of the working
population. It also accounts for more than 50% of total export revenues.1
Rémy Bonou’s parents both received their postsecondary education abroad. His father
René studied agronomics at the University of Leningrad (now St. Petersburg, Russia) in
the 1970s. It was there that he met Rémy’s mother, Assetou, who was studying
pharmacy. They both returned to Burkina Faso after graduation, where René was hired
by the government and Assetou ran the pharmaceutical store at the Ouagadougou central
hospital. Both were good at their jobs and were appreciated by their employers and coworkers. Unfortunately, however, the country’s situation changed radically in the next
few years.
Since gaining its independence, Burkina Faso has been ruled by ten different political
systems, including three constitutional governments and seven military regimes. Every
time a new government came to power, it brought in its own people, which meant a wave
of layoffs among government employees. In 1981, the wave hit Rémy’s father, who was
subsequently unemployed for six years in spite of his qualifications and skills. Being
extremely independent, René Bonou was upset at having to stay home and depend on his
wife’s income. In 1987, tired of waiting for his contacts to resume power, and not
wanting to give in, he decided to launch his own company, Ninky Transport. Although it
started small, the company now has 120 trucks that transport containers, petroleum, cattle
and so on. It works in partnership with European companies that have branches
throughout the world. In 1996, René Bonou founded a second company, Saftrans, which
works in the freight, customs clearance and transit sectors. Its services complement those
offered by Ninky Transport.
Because Burkina Faso does not have access to the sea, road transportation is extremely
lucrative. The country, located in West Africa, is landlocked, and shares borders with
1
Source : http://www.primature.gov.bf/burkina/economie/fapercu.htm
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Benin, Ivory Coast, Ghana, Mali, Niger and Togo (see the map in Appendix A). Before
the civil war in Ivory Coast, virtually all goods imported to Burkina Faso transited
through Abidjan. Since the war, however, they must detour through Togo and Ghana.
Lomé, the most frequently used port, is located in Togo, some 1,000 km from
Ouagadougou, meaning that all imported and exported goods must be transported over
land. This is clearly a significant market for the transportation companies, including
Ninky Transport.
With the success of Ninky and Saftrans, Rémy’s mother was no longer obliged to keep
her job. She had a second child in 1990 –Samuela – and in 1992 she decided to open a
drugstore and become her own boss, in the hope that this would give her more flexibility
to take care of her daughter. She works mainly with European suppliers and uses
Saftrans and Ninky to import her products.
From Ouagadougou to Trois-Rivières
Education is important to the Bonou family, and the parents have always made sure their
children work hard to succeed. Rémy studied at the Bogodogo High School in
Ouagadougou – a regular public school because his father felt he should be able to
manage in life without privileges.
After obtaining his French Baccalaureat in 2000, Rémy went to work for his father. The
experience taught him about the road transportation sector and brought him into contact
with people who would subsequently help him to understand the logistics of land
transportation.
“I learned a lot of things that you don’t find in books. I met people from customs, the
Ministry of Transport and so on. My father knows everyone. He calls them at least
once a month to talk to them, ask them how they are, and find out what’s happening in
their lives. He knows the names of their children and where they go to school. It’s a
very personal relationship. These are the kinds of details on which business survival
depends in Burkina Faso. Mutual aid is fairly common.”
Two years later, René Bonou decided to send his son abroad to university. When he first
arrived in Québec in 2003, Rémy took a certificate in computing at Laval University. In
2004, he enrolled for the Bachelor’s degree program in business administration at the
UQTR.
“I was at university, but it was always in the back of my mind to start an export
business. Because Burkina Faso is one of the poorest countries in Africa, consumers
tend to prefer less expensive, used products. New products are often out of reach,
price-wise, for the average Burkina Faso consumer. (…) In Canada, goods are often
thrown away when they still have several years of useful life left in them. I saw this as
an opportunity.”
One day, on the way to Montreal, Rémy Bonou’s car had a flat tire. He took it to a small
garage, where he saw rows and rows of used tires for sale. During his conversation with
the garage owner, he came up with the idea of exporting them to Burkina Faso.
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“I was fascinated by the quantity of tires available and their low prices. A tire that is
considered to be “worn out” in Canada is still very usable in Burkina Faso, because of
differences in the climate and road conditions. A used Canadian tire can run for a
further 12 to 18 months in Burkina Faso, especially as there are no technical
requirements with regard to matching tires; as long as all four are the same size, it’s
fine. What people generally need are small tires for compact cars – R13, R14 and R15.
There are no technical requirements as far as surface rubber thickness is concerned.
The garage owner told me that Québec had warehouses full of tires that had been
discarded by their former owners. He even gave me the name of my first supplier.”
During the winter of 2006, Rémy decided to launch the project and prepare a formal
business plan as part of one of his courses at the UQTR.
Rasamy Import-Export Inc.
During the fall of 2006, Rémy launched his own company, known as Rasamy ImportExport. The new company is incorporated in Burkina Faso, with 90% of the capital held
by Rémy and 10% by his father. The company’s name is an acronym created from the
given names of his immediate family members: R for René, his father; A for Assetou, his
mother; SA for Samuela, his sister, and MY for Rémy. Most of the administrative
procedures took place in Burkina Faso:
“I didn’t get involved in the details – my accountant took care of all that. He told me
what I needed to do, and I did it. I hate paperwork and am not very good at
accounting. I know what my costs are and what’s profitable, and that’s enough for
me.”
The company’s headquarters are located in Ouagadougou, next door to Saftrans and
Ninky Transport. First, the proximity makes communication easier, and second, Rémy
receives family support, in the form of free use of land owned by his father. The
company’s only cost is the security service in the industrial park where the warehouse is
located; in return for a monthly fee paid by all the companies in the park, security guards
patrol the area. In addition, Rémy Bonou employs a full-time supervisor who works at
the warehouse. The company owns a second site in Bobo-Dioulasso (Burkina Faso’s
second-largest city) and intends to build another warehouse there in the near future.
Rasamy Import-Export employs seven people in Burkina Faso: an accountant, three
salespeople, two drivers and a warehouse guard.
The salespeople are paid a fixed salary. All employees are paid much more than the
going rate for the sector; for example, the going rate for a salesperson is around
45,000 FCFA2 per month, whereas Rasamy pays 70,000 FCFA, or approximately
CAN$140). Rémy Bonou does this to ensure loyalty. In Africa, salaries are very low,
and the fact of earning more than other people in the same sector is an excellent
motivating factor. It is also one of the reasons why Rasamy’s personnel are paid yearround, even though business is seasonal. Their salaries are part of the overheads applied
2
FCFA: CFA Franc, the currency of Burkina Faso. The official exchange rate is 510 FCFA for $1 CAN.
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to each export. For an average load of 2,000 tires, the overheads are approximately
CAN$300.
Rémy Bonou believes his employees are experienced and able to look after themselves.
The salespeople play a role that involves more administration than actual sales – orders,
deliveries, etc. His uncle Alain is Acting General Manager while Rémy is in Canada.
Everyday communications take place by e-mail.
“The salespeople are hardly overworked [...] On the other hand, they have to solicit
customers. It’s all very well doing business with large corporations, but there are also
a lot of smaller customers that we can get if we try. In the city, anyone who doesn’t
have a car has a motorbike. In the country, people use carts. There are a lot of carts
throughout Burkina Faso, and they’re often the pride and joy of their owners. They all
run on cheap car tires. Our salespeople have to go out and get these people as
customers. This means they have to travel extensively to and from the villages, but they
receive a travel allowance.”
All Rasamy’s personnel have one-year renewable contracts. Rémy Bonou is waiting for
the end of his first year in business to evaluate his staff and his human resource needs.
He has thought about reducing his sales force to just one person because he does not have
enough work for more at the present time. On the other hand, if the business grows he
will need more people, and is therefore hesitant to lay people off. For the time being, he
himself is not taking a salary from the
company.
As far as recruitment is concerned, Rémy
Bonou depends on his uncle Alain (also Ninky
Transport’s Transport Manager), who has
helped him out with the task of recruiting
personnel. In the past, Alain has managed
stores and supermarkets and has the necessary
experience and knowledge for the job. Rémy
Bonou does not employ any other members of
his family on principle; this creates some tension in his traditional African family, but he
feels it is the lesser of two evils, compared with the potential problem of having to lay off
a relative. As he points out:
“My father was surprised at first, but he supported my decision. He’s had this type of
problem himself, in the past […] When you hire cousins, you can’t say anything even if
they don’t do their work properly. And if ever you do say something, they complain to
your father and the whole situation degenerates […] I’d rather deal with their
disappointment at this stage, than have to lay them off later.”
The Tire Track
In Québec, Rémy Bonou buys tires based on their size and quality. He manages to obtain
good prices from his main supplier, but often only after extensive negotiations. The
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purchase price is an essential element of his competitive capacity, because the final price
of each tire, shipped to Lomé, increases by between CAN$5 and CAN$6. Generally
speaking, the transportation cost is calculated by multiplying the purchase price by 1.5.
Customs clearance costs CAN$1.75 per tire. Supplies are subject to seasonal fluctuations
(the high season is in the fall and early winter, from September to December), but can
nevertheless be obtained year-round.
At first, Rémy Bonou only had one supplier in Québec, a Cameroonian who owns a used
tire warehouse and has been in business in Québec for 30 years. His warehouse is
located in Laval. He has trucks that travel throughout the province, collecting used tires.
He also works with Recyc-Québec.
This supplier does not keep tires in stock; he operates on an order-only basis, and
delivery times depend on quantity. Rémy Bonou has already tried to find out more about
how the supply method works, but the supplier has been fairly discreet on the subject. He
appears to have good contacts throughout Canada, because he is able to fill orders
quickly, even in the low season.
The Cameroonian provides a value-added service, in that labour for loading the tires is
included in the price. He also provides information on weight, number of tires and so on,
for the transportation documents. He clearly knows the sector well, and has given Rémy
Bonou a tip to minimize shipment volumes: placing the R13 and R14 tires inside the
R15s. He also has contacts in other sectors. For example, when Rémy Bonou had
problems with European rims, the Cameroonian was able to refer him to a supplier with a
large warehouse containing all kinds of used car components that have either been
recycled or recovered from breakers’ yards.
The minimum batch size for export is 700 tires. With a batch of this size, Rémy Bonou
covers his costs. There are two types of containers: 20 feet and 40 feet. The maximum
load for a 40-foot container is 3,500 R13 tires.
“I can’t ship a container with 100 tires – it’s not profitable for me. Normally, if I
receive a small order, I wait until I can fill the container. That doesn’t happen often,
though, because my customers are major tire consumers such as taxi companies,
transportation companies and garages. (…) My customers use their vehicles in
difficult conditions (e.g. building sites, etc.). They know their tires will have to be
replaced frequently, and they keep stocks. They prefer used tires because of the price,
so I’m sure of a fairly constant demand.”
As for every activity in Burkina Faso, trade takes place through personal networks.
“Word of mouth” is the most common form of marketing, and the business owner’s
reputation is of capital importance. The same applies to customers. A customer with a
good reputation is allowed to pay upon receipt of the goods; otherwise, a deposit is
required when the order is placed.
“Even if people have all the goodwill in the worldl, it sometimes happens that they can’t
pay when the order arrives. So we’re stuck with the goods until we can find a new
buyer. It’s partly because of this that the company needs a warehouse. In most cases,
orders are delivered directly to the client’s premises, or the client comes and collects
them as soon as they’re unloaded. […] Orders are placed in writing, on a kind of
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contract. Longstanding customers pay upon receipt, whereas new customers and
repeat customers who’ve had problems in the past all pay a 50% deposit when they
place their order.”
Rémy Bonou provides photographs of the goods, and the customers place their orders.
Once an order has been received, he calls Saftrans, his father’s freight and transportation
company, which is based in Ouagadougou but has partners throughout the world. He
provides details of the order, the warehouse address, load weight and so on (his supplier
is usually able to provide this information). Saftrans does everything else.
In Canada, the tires are loaded into containers belonging to the transportation company,
which takes charge of the goods until they arrive in Lomé.
“I know nothing at all about transportation; all I know is what I have to pay. On the
other hand, I check every tire individually during loading, to be sure of the quality. My
uncle gave me a tip that he learned from a Québecer: you insert a 25-cent coin into
the tire tread, and if you can see the caribou’s nose, you should throw the tire away
(…) I’m not alone, I have three cousins who help me with the loading and verification
process. It takes between 12 and 13 hours to load 1,000 tires into a container.”
Once in Lomé, the containers are loaded onto Ninky trucks. Using his father’s company
gives Rémy Bonou a considerable advantage in terms of cost. It allows him to maintain a
business strategy based on low prices.
The distance between Lomé and Ouagadougou is 1,000 kilometres. The route is a
difficult one, through regions that have, in many cases, been laid waste. Ninky Transport
chooses its drivers carefully, and they know their routes well. They often drive through
regions affected by famine. All it takes to ensure safe passage is a few loaves of bread,
handed to the right people.
Delivery times from Montreal to Ouagadougou vary between one and a half months (the
normal time) and three months. Once in Ouagadougou, the goods are unloaded at Rémy
Bonou’s warehouse, or taken directly to the client’s premises. The containers are
emptied immediately and returned to Ninky Transport, where they are loaded with other
goods and reused.
For the time being, Rasamy is doing well. By August 2007, Rémy Bonou was loading
his 13th container and had encountered no significant problems. Even after paying his
costs and all taxes, he manages to sell his tires at 40% of the price of new tires in Burkina
Faso, and make a gross profit of approximately 50%.
From used tires to … second-hand clothing?
Rémy Bonou has continued to look for new business opportunities. Although the tire
project is extremely profitable and appears to offer promise for the future, he still has
other ideas in mind. He is considering the possibility of extending his market and
obtaining his own tire supplies, and also the possibility of exporting second-hand clothing
or computer hardware to Burkina Faso.
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Finding his own tire supplies appears to be an attractive possibility at first glance, but it
would require a number of changes to Rasamy’s operating methods. First, research
would be needed to identify tire suppliers. Rémy Bonou would also have to travel across
Canada to negotiate agreements. In addition, he would be responsible for all logistics up
to shipping. This would involve additional capital costs (warehouse), equipment costs
(trucks, fork-lift trucks, etc.), personnel costs and time. A detailed cost-benefit
calculation is required to see if this option is truly as promising as it seems.
Rémy Bonou is also considering the possibility of expanding his market. Benin, Togo
and Ghana all offer potential due to their geographical proximity and the fact that they
have ports (see the map in Appendix A).
With regard to Benin and Togo, not only are these two countries French-speaking, but
they also share two African languages with Burkina Faso: Dioula and Fon, which are
spoken mainly along the major road networks. In addition, some tradespeople in Togo
have already expressed an interest in Rémy Bonou’s tires. The driver of a truck who was
loading a container in Lomé was approached by an entrepreneur who wanted to buy the
tires. The contact has been made, and the last three shipments were all sold in Lomé.
The same entrepreneur says he has potential customers in Cotonou (Benin).
Ghana is an English-speaking country and some knowledge of English is required to do
business there. Even so, Rémy Bonou believes he knows the market. He has already
been to Ghana and met with people who may be interested in setting up partnerships. He
does not plan to extend his network into Nigeria, however, even though the potential
market for his company is huge. The country is politically unstable and it is difficult to
do business there. Rémy also feels he is not sufficiently familiar with either the market
or the methods in Nigeria.
With Rasamy’s present level of human and material resources, Rémy Bonou is able to
export up to 25 containers per year to Burkina Faso. If he extends his market into Togo,
Benin and Ghana, he will need new infrastructures and some knowledge of the taxation
system. On the other hand, he could opt for partnerships with local companies, instead of
establishing branches of his own company.
Rémy Bonou also wants to try and sell winter tires. He sent some in his last shipment, so
that his customers can try them.
“I want to see how things go. My customers will tell me what they think. (…) If it works
out, it opens up a lot of doors for me.”
Another possibility to be considered would be to increase his prices. For the time being,
Rémy Bonou sells his products well below his competitor’s prices in Burkina Faso, a
situation that allows him considerable flexibility. He is trying to decide how his
customers would react, because he has two major competitors. Although at the present
time he is the only one to sell so many tires (his father transports goods for his
competitors), he is not alone in the market.
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Rémy Bonou believes it may also be interesting to export computer hardware. Individual
consumers are not potential customers for this product in Burkina Faso, however, because
of the high price of computer equipment. Computers are regarded as luxury products,
and are highly taxed as a result. His goal would be to obtain government contracts. He
knows the government wants to computerize all its services, and this particular market is
therefore attractive, since goods sold to the government are exempt from taxes.
However, it is also a limited opportunity, and Rémy Bonou would have to incur some
significant overheads if he were to enter the computer trade. In addition, exporting
computer hardware is considerably more complicated than exporting tires. Rémy Bonou
is considering selling whole computers as opposed to separate components or software
(software imported separately from a computer is subject to a 56% tax in Burkina Faso).
This would mean checking every single computer, which would take time and require
qualified staff both in Canada, for the pre-sale checks, and in Burkina Faso, for after-sale
service. In Ouagadougou, a competent computer technician earns 90,000 FCFA per
month. In addition, transportation costs would be much higher for computers than for
tires. Other than the special packaging (which would increase material costs and
handling time), a container holds far fewer computers than tires. The time factor must
also be taken into consideration. Second-hand computer merchants guarantee their goods
for three months. Given that it would take between a month and a half and three months
to ship the computers from Montreal to Lomé, this is clearly not enough. Moreover, it
would not be viable to return defective components.
There is also the problem of financing. A container of tires requires financing of
$10,000. The same container, with just 50 computers, would cost roughly $25,000. In
addition, if Rémy Bonou were to sell computer equipment, he would need premises in
downtown Ouagadougou, as well as staff and so on. He would no longer be able to take
advantage of the economies of scale that he gains by using the Saftrans warehouses and
premises. At the same time, computers quickly become outdated, and this would eat into
a commercial margin that would already be lower because his potential customers have a
limited capacity to pay.
The second-hand clothing market may also be interesting. Used clothing is in high
demand in Burkina Faso, due to the high cost of new garments and the poverty of the
general population. In 2004, Rémy Bonou decided he would like to “do something” with
the money he had saved. The father of one of his friends had a second-hand clothing
store in Ouagadougou, and asked Rémy if he could send stock from Canada. After
talking to his friends, he approached a second-hand store in Montreal that sold garments
in bales of around 0.5 m2, at prices ranging from CAN$40 to CAN$200, depending on
type, weight, quality, condition, brand and so on. Rémy Bonou purchased four bales at
CAN$100, and made around 100% profit on the transaction.
“It was a special order that was extremely profitable. On the other hand, the Burkina
Faso market seems to be saturated, and I would have to drop my prices quite a lot to
gain a foothold, which would make it less profitable. I’d have to look at the situation
carefully (…) I could always opt for a strategy based on distinction – for example,
individual packaging for each garment. We’d have to see if it would work.”
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Rémy Bonou is also interested in the property market, and is considering constructing or
purchasing rental buildings.
At a crossroads
When asked what he plans to do in two or three years’ time, Rémy Bonou says he will do
whatever is profitable. His father would like him to take over the family business after
graduating, but Rémy himself is not sure this is what he wants. He is aware that it would
be very difficult for him to launch his own business without the support of his family, but
he is not prepared to set aside his own plans yet. He is aware that his father is not
considering the possibility of leaving his company to anyone else in the family (e.g.
Uncle Alain). Either he hands it over to Rémy, or he sells it.
Rémy Bonou has given himself ten years to work on his own projects. After that, he
might take over the family business. For the time being, however, he is considering other
possibilities, such as exporting second-hand engines, tires for trucks and tractors, and so
on, because he believes there is a potential market for this type of product in Burkina
Faso. If business continues in the same vein, in five years’ time he will have enough
capital available to do something else. Rémy Bonou believes money should be invested
and put to work. He is considering the emerging markets in China and India too, since
there are many possibilities for importing goods to Burkina Faso.
At a more personal level, Rémy Bonou is now learning English, so as to be able to work
more easily in Canada and in the English-speaking African countries. He is considering
staying in Canada and doing a Master’s degree, but not right away. Where he decides to
settle will depend on how his business develops.
“I want to wait for the company’s first anniversary to see how much money I’ve made.
Right now, I’m paying my expenses and the remaining money is deposited at the bank.
I’m in “awareness” mode; my eyes are open and I’m observing (…) It’s too soon to
say what I’ll be doing in ten years’ time.”
Rémy Bonou is aware that he will have to make some hard decisions, both in his personal
life and in the direction he decides to take his business.
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Appendix A
The African Continent
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