Business mogul Thom Mpinganjira, who is also chief executive officer of FDH Financial Holdings Limited, made a moving speech at a corporate gurus conference in Lilongwe Wednesday, narrating the challenges and hurdles he faced to establish one of Malawi's fastest growing business empire.
Dr Thom Mpinganjira whose financial services group has four subsidiaries, namely FDH Bank, Discount House, FDH Money Bureau and FDH Financial Advisory Services,
The conference hall was silent that one could hear a pin drop as delegates which included Malawi's corporate gurus listened attentively to the Mpinganjira story.
He took the attentive audience to how he started his business which includes FDH Bank, First Discount House, FDH Money Bureau Limited, FDH Financial Advisory Limited and MSB Properties Limited to the hurdles he faced along the way and how he overcame them.
Mpinganjira, a Chartered Accountant and Fellow of the Association of Chartered Certified Accountants (FCCA), worked for different companies including Deloitte, Blantyre Print, Mandala and National Bank of Malawi (NBM) plc before setting uphis own business empire.
He was the first Malawian Stockbroker and was Chief Executive Officer of Stockbrokers Malawi Limited from 1997 to 2000.
But how did he start?
"My involvement with Stockbrokers Malawi and Malawi Stock Exchange revealed to me that there were vast opportunities and money to be made in the financial services sector in Malawi."
"I started the process of setting up a Discount House while in full time employment at the Stockbrokers Malawi and Malawi Stock Exchange in December 1999 after chancing upon an opportunity following a discussion with my brother, Dr Peter Mpinganjira," Mpinganjira narrated.
He explained that in 1999 the minimum capital requirement for setting up a Discount House was US$1.5 million in Malawi Kwacha equivalent and at Mwk46.6667 to USD1 the total was Mwk70, 000,000.00. At today's rate of Mwk770 to USD1 the equivalent is Mwk1, 155,000,000 or Mwk1.155 billion.
"I invited four friends to join me so we were five of us to pool our resources and raise the USD1.5m capital. Next I approached Malawi Development Corporation (MDC) to be our anchor institutional investor whose Board approved that MDC should partner FDH."
"I then hired my young brother, Dr Peter Mpinganjira, to put together a comprehensive business proposal. I paid him Mwk1, 500,000 at the time. This was needed in order to attract institutional investors including MDC," explained Mpinganjira.
First Discount House was registered on 6 March 2000 and the next step was to apply for a license from the Reserve Bank of Malawi but the first hurdle was to surface early.
"Between December 1999 and March 2000, for one reason or another, three of the four colleagues had bowed out of the idea. We were only two of us left and by September 2000 I was left all alone," recalled Mpinganjira.
"In November 2000 I submitted the License application. MDC agreed to take up 55% of the shareholding while I remained with 45%. The original plan had been that MDC takes 25% and the five of us take 15% each. You can begin to understand just how terribly wrong the plan was going."
"For over four months following that, there was to and fro correspondence between me and the Reserve Bank, as they sought to be satisfied that the application met the requirements. I have files and files full of letters," explained Mpinganjira.
After the long drawn out discussion, the Reserve Bank approved the license in principle and as per the Law, the Minister of Finance had to give final approval of the license.
"On 5 April 2001, the then Minister of Finance, Dr. Matthews Chikaonda (nowdeceased, May His Soul Rest in Peace), rejected the application on the grounds that the Government of Malawi had agreed with the IMF and World Bank to get out of the financial services sector, MDC was therefore not allowed to get into this new venture with me. It was a deal breaker. I was devastated, having toiled from December 1999," said Mpinganjira.
"The General Manager at RBM at the time said to me: 'Don't give up! Look across the borders as well. Don't limit yourself to Malawi'. By this time I had spent K5.4 million cash from my personal money which is equivalent to Mwk89 Million today," added Mpinganjira.
He recalled that search for investors started again in earnest in April 2001 and first approached Old Mutual Malawi and Press Corporation plc which turned him down before he was rescued by his stock broking and Stock Exchange contacts.
"There is power in networking," advised Mpinganjira.
"First, I had a powerful proposal. Secondly, the fact that MDC had accepted the deal gave the proposal a lot of strength and credibility such that international organisations were interested to come in."
"So when I emailed the proposal to Kingdom Financial Holdings Limited (Kingdom) in Zimbabwe and Old Mutual in Cape Town, they answered me the same day and said they were interested and they immediately agreed to visit Malawi scheduling meetings within 30 days."
"The shareholding and management arrangements were agreed. Old Mutual insisted on bringing in Press Corporation on board but also on condition that I bring in Kingdom on board as a Technical partner seeing that neither I nor Old Mutual had run a Discount House before."
"So we ended up with myself (24.9%), Old Mutual (20%), Kingdom (25.1%), and Press Corporation (30%). There was very serious haggling to arrive at this split.The irony is that both Old Mutual Malawi and Press Corporation in Malawi rejected me but at the behest of Cape Town they came on board," explained the financial guru.
Re-submissionfor the application for the license was done on 11th June 2001 with the new shareholders namely Dr T. F Mpinganjira, Old Mutual, Press Corporation and Kingdom Foundation and finally RBM issued Banking License number 0017 for First Discount House on 20th July 2001 and opened its doors on 8th April 2001 and started trading three days later.
But it did not take long before another hurdle came in Mpinganjira's way.
"In around 2001, my cousin Brown Mpinganjira had fallen out of grace with the UDF government. He was fired from his job as a cabinet minister for leading the anti 3rdterm Presidential bid. My family was subsequently targeted. My brother Dr Nathan Mpinganjira was fired from MDC at 15 minutes notice," recalled Mpinganjira.
"My brother Dr Peter Mpinganjira had his internet business, Web and Internet Systems Services (WISS) shut down. I knew I could not sustain my publicly funded job for too long. I had to get out before I got firedso I resigned from my juicy MSE job of CEO and joined First Discount House on 1 June 2002.The setting up of First Discount House had now became a do or die venture for me and failure was no longer an option."
"On instructions from the authorities, we got no penny of business from Government or its related institutions. Not surprisingly, within a short time our discount house business stagnated and plateaued becoming very clear that we were heading nowhere by December 2005."
"At the next Board meeting I told the Board that we should diversify by following the Kingdom Zimbabwe model going into Banking and Stock broking.Press Corporation as a shareholder had serious objections because of their interest in National Bank of Malawi (NBM), as getting into banking would be direct competition to NBM," recalled Mpinganjira to a highly attentive conference.
RBM gave First Discount House a green light to go into banking as long as Press Corporation was out of First Discount House as they could not be in two Bankshaving majority control in NBM and the only way out was to buy out Press Corporation FDH were to proceed with its diversification plans.
Eventually, FDH paid twice the original offer to Press Corporation for them to exitat a total cost of Mwk100 Million in August 2006, an equivalent to Mwk557 million at today's rates and only two shareholders, Kingdom and Mpinganjira bought out the 30% of Press Corporation while Old Mutual opted not to participate.
"After buying out Press Corporation, FDH needed US$1.5million Capital in cash in order to apply for a banking licence.I convinced the Board that listing First Discount House was an option to consider. By Listing FDH would be selling new shares at the Malawi Stock Exchange and use the proceeds to capitalize the Bank. At this point in time US$1.5 Million was equivalent to Mwk215 Million. Exchange rate had moved to Mwk143.3333 to 1 US$," narrated Mpinganjira.
But while he was contemplating setting up the Bank, he got a word that Nedbank South Africa was rationalizing its African operations and Nedbank Malawi would be on sale and quickly finalized the sale agreements only for the deal to fell through as he was about to put pen to paper.
"Meanwhile in January 2007 we quickly set up FDH Stockbrokers Malawi while still working on the establishment of a Bank," explained Mpinganjira.
The Malawi Stock Exchange granted them a provisional approval for the listing process for them to raise the required money to register a bank. The Initial Price offering (IPO) was to raise a total of Mwk267,428,572.00 from the sale of 205, 741, 286 ordinary shares of a nominal value of 25 tambala each in the capital of First Discount House Limited at an offer price of K1.30 per share.
"Then Murphy's Law hit: "If anything can go wrong it will always go wrong". So it did. A day before the IPO launch date of 4 July 2007, I received a letter from the Malawi Stock Exchange that the "FINAL" approval had not been granted by the Board of the Malawi Stock Exchange to proceed with the Listing! The launch and listing could not go ahead."
"At this stage we had already set everything up including the printing of 3,000 prospectuses, the venue Mount Soche Hotel paid for, Invitations sent out to 300 guests," recalled Mpinganjira.
"At that stage fees and costs already committed and paid or yet to be paid totaled Mwk23,790,920.33. And that went down the drain just like that!This figure ended up at Mwk26 Million by the time all bills had been paid.That was the biggest frustration ever in my life. I just wanted the earth to open up and swallow me fully knowing the reputation consequences for me personally and the First Discount House brand," said an emotional Mpinganjira.
"For the following 5 working days from July 9 2007 I went to the office, locked myself up and sat and did nothing, failing to face my Board, employees and the public. I remembered my favorite verse Romans 8:28, got over this and as they say, the rest is history."
"We went back to the drawing board and got a banking license on the 27 November 2007 and the FDH Bank opened for business on the 15 July 2008. The shareholders loaned MWk215 million to FDH Financial Holdings Limited for the Capital. Our bank has been growing since and the story of FDH Bank is now well documented," explained Mpinganjira.
He also talked about the hurdles he faced when he was acquiring the controversial Malawi Savings Bank (MSB) as figures were hidden to those bidding for the bank with a diplomat wondering how he paid K5.4 billion for the bank instead of its true price of K1.
Mpinganjira then offered his lessons of establishing a business empire.
"Put God first-The Bible: The Best Success Manual. All wealth comes from God, whether people accept this reality or not. God gives us the power and means to create and the opportunity to manage it for Him. He requires a spiritual return on investment (SROI)."
"Be ethical in all your dealings.Your reputation is the quickest way into high places in business and society. Mess up once and you are finished. That is how one email to Old Mutual Cape Town and Kingdom Zimbabwe brought in two international shareholders into FDH. Ethical behavior has to be a lifestyle," offered Mpinganjira quoting renowned world richest businessman Warren Buffet 'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
"My driving passion has been to leave a legacy for my family," concluded Mpinganjira before receiving a standing ovation.