What water, drug dealers and camels have in common

Rising level of Lake Nakuru. Abundant resources like water can be made exclusive and profitable. Photo by XN Iraki

NAIROBI, KENYA: Christmas is the period of adventure. In my festive stupor, I visited a five star hotel for a drink.

It was not one of those exotically named drinks like vermouths, spirits or tequilas. It is a drink that even those aged under 18 are allowed to take.  Stop over thinking, it was water.

 It has been my intention to keep my figure eight by reducing the intake of any drink or food that I suspect can spoil my appearance.

In quick succession, I took two half-litre bottles of water.

Though bottled at the source, the liquid is chemically the same as the one that flows from your tap; you shower with, drink, put off fire with, and is used in religious ceremonies as a sign of life.

It is the most common liquid on this planet keeping its saltiness aside in oceans.

Then the bill came.  I read through it like a love letter. A friend sitting next to me wondered why I was taking inordinate amount of time on the bill.

The price of half a litre of water was Sh300. It is a brand you will find in any super market going for Sh30. Not that I had no money to pay for it, but the economist in me took over.

The highest cost in bottling water is the bottle. Other processes have big names but don’t really change the structure or the taste of water.

Even if the hotel had bought that water from a supermarket, not a dedicated supplier, it was still 10 times dearer!

If that is not super profit, I wonder what it is. Before the bill came, we had wondered how that hotel makes money when there are so few clients. My answer was, “they make money from the few who come.”

Remember no Kenyan want to question a bill for fear of appearing “mshamba” or poor. The Sh300 for a half bottle of water was a great lesson on how to make money.

First, make yourself exclusive, it could brand name, location or even reputation. Then price your services and products to keep off “hustlers and sufferers”.

The few clients feel special and privileged to frequent such a high-end place. We love exclusivity and love paying for it. 

Paying Sh300 for half-litre of water is cool, and you even talk about it. In Kenya, if you start a business and charge cheap you will run out of business.

The trick is charge a premium, you will get the money as we race towards exclusivity.  But how many can afford such exclusivity?  Could there be more money in the “middle”?

Where else can you make such profits from the most natural occurring product, pure water, you can even tap it from the sky as rain and, free. My hunch tells me only illegal drugs like cocaine can make such a profit. 

It seems all the risk we take in illegal business is not necessary.

Just spend time understanding the Kenyan mind and you will make unbelievable profits.

Court of arms

 Two, make money from the most ordinary things like water. The price of water and the profit thereof makes me think that we should put the camel on our court of arms not the lion.

One Mau Mau veteran told me the lion got into the court of arms because it was only thing that mzungu feared in addition to the mosquito.

The camel takes little of the precious water. Half litre of water was three times the price of one litre of petrol imported from Middle East.  

Three, money comes from limiting information.  When the waiter noted that I was not happy about paying Sh300 for a half litre of water, she told me it would have costed me Sh400 if I had bought a litre.

Who would pay keen attention to price of abundant water? If you are reading this, I am sure you are sympathizing with me and asking why I was in a hotel I could not afford.

One could even ask why I was diluting other people’s class, why not remain a hustler in River Road or just buy water hawked on the highways instead of complaining about water?

Operating costs

Four, do not focus on volume, getting as many customers as possible; that increases your operating costs and thins your margins.

If you can make yourself exclusive, you will be in the money. Exclusivity reduces competition too. Why else are hotels starred?

Other sectors are also starred. In schooling, we have international schools that charge more in kindergarten than some local universities.

Even churches are starred, with chapel’s way above churches. Even Uber got Uber select; they were quick to learn of Kenya’s dalliance with exclusivity.

Even matatus have the shuttles which carry fewer passengers.

While economic models teach us the beauty of competition, the truth is that real money is made by reducing competition.

Some use regulatory means like Carrefour trying to keep off competitors from certain malls, to gain exclusivity.

How did we end with law that demands we put solar panels on our rooftops?  Others use more subtle means, like price discrimination or innovation. How are you making your money?

-The writer teaches at the University of Nairobi.