Mamuka Khazaradze, the businessman ranked the second most important in Georgia by bne IntelliNews, has a diverse array of business interests ranging from wine production to port infrastructure development, and he pioneered his native Georgia’s banking sector, setting up TBC Bank, the country’s leading lender with $4bn in assets. But for the tycoon it is education that offers the best return on investment and his heart lies in a modern building surrounded by trees by Lisi Lake, on the outskirts of the capital Tbilisi: the American Academy.
“When Guivy Zaldastanishvili, a Georgian businessman who lived for many years in the US, and I thought about an innovative high school in the 1990s, many took us for mad,” recalls Khazaradze in an interview in the three- domed historical building that houses TBC Bank’s headquarters. “We proved them wrong. Since the opening in 2000, our 580 students have graduated from top US universities, mostly Ivy League, collecting over $68mn in scholarships. This is my biggest success story, because there I see the future of my country as these students come back and contribute to its development.”
An avid supporter of his country’s traditions, Khazaradze is bullish on its economic growth as well as the development of the capital markets, and how education is a key part of the equation.
“In the last 18 months we hired seven Georgian professionals who gathered expertise and know-how in leading institutions abroad,” he maintains. “We have a lot of intellectual assets outside Georgia, if you show them that they can grow professionally here, they will return back and shape the country’s development.”
Still chairman of the academy’s board of trustees, Khazaradze has employed many of these former students. Together with other business partners, notably TBC co-founder Badri Japaridze, who has been with him in most investments, Khazaradze owns a range of companies but he has kept his non-financial business interests separate from TBC Bank.
From the USSR to the LSE
In 1992 the Soviet Union had collapsed and Georgia was in bloody chaos – quite literally, racked as it was in civil wars with the two separatist regions of Abkhazia and South Ossetia – suffocated by hyperinflation, and paralysed by corruption. As bread lines were a common sight, starting a bank did not seem a great idea, let alone an art gallery, but Khazaradze, then in his mid-twenties, did both.
The art gallery was not exactly a hit. “I made no money, I went all the way up to St Petersburg to sell the paintings and barely had the cash to pay the train ticket back, but I learnt a lot.”
He then began a retail business, and founded a bank for financing, the Tbilisi Business Centre Bank, aka TBC, of which he remains chairman.
“It was challenging,” he smiles in understatement. “Badri and I gathered the $500 needed for the registration and joined a list of 300 banks in a country which was in a total mess,” he recalls. “But it was also a greenfield, so many opportunities.”
The founders still own a 22% stake in TBC, which is today the country’s leading bank, accounting for 32.1% of total assets, 31.1% of lending and 33% of deposits as of December 2016.
These figures to do not include Bank Republic, Societe Generale’s local unit and Georgia’s fourth largest bank, which TBC acquired in October 2016 for GEL315mn (€121mn). The acquisition, the largest in the country’s banking history, came after TBC secured a premium listing status on the London bourse.
About a third of the population remains unbanked, hence there is a lot of potential for local expansion, maintains Khazaradze, who states that the future lies in mobile banking. Looking forward, he does not rule out regional expansion. “It is not part of our immediate plans, but should the right opportunity arise, we will certainly consider it,” he says
The first million
Asked the classic question about how he got his first million, Khazaradze, now 50, bursts into a laugh. “It was in rubles,” he says, reaching out for a calculator. “About €17,000 today. Still some money when you are in your twenties.”
It did not come from selling artwork, rather beer cans, and the story could easily feature in a comedy book.
“A businessman had imported 8mn beer cans from the US to Georgia via St Petersburg. But Georgian railways did not have any cranes to unload the containers, and people were filmed on TV unloading them by hand,” he laughs. “I saw the cans and they just looked “non-Soviet”, forget what was inside. I called my contacts in St Petersburg and I offered them the cans. They asked me if they looked ‘American’. I said yes. I convinced the importer to transport back 1.3mn cans to St Petersburg. I bought them for 12 rubles and sold them for 13 rubles. One million, just there.”
Beverages provided his following millions – in dollars. In 1994 Khazaradze, Japaridze and Dutch entrepreneur Bob Mejir, his other long-time business partner, decided to revive Borjomi, the most popular drinking water in USSR, whose production nose-dived from 400mn bottles in the early 1980s to 5mn in the mid-1990s.
“We thought it was easy – until we entered the factory. We had to find investors, but raising international capital was challenging, to put it mildly. Finally in 1996 we gathered $26mn, by then the single biggest investment in Georgia,” he explains.
Since then Borjomi has grown to feature 15 brands, for a total of 1.5bn litres of water bottled every year, and it sells in 40 different countries. In 2006 Russia, the leading importer of the water and Georgia’s celebrated wine, banned both, ostensibly for health reasons. By a bizarre twist of fate, it helped build the brand of today.
“We were forced to diversify, and we learnt not to put all our effort on one market, and although Russia is again the biggest importer, Borjomi has grown enormously in other markets.” Both water and wine – a Georgian symbol dear to Khazaradze – started to flow again in 2013 when Moscow lifted the seven-year ban.
Khazaradze and Japaridze exited the company in 2014. “I felt I had done what was needed.”
But not everything has gone well. An attempt to enter the agricultural sector by producing wheat failed, but “it is part of the learning curve, without mistakes there is no progress”.
Politics? No, thanks
Khazaradze is not planning to migrate from business to politics any time soon – despite past offers. He maintains that “everyone should stick to what they can best. Together with my partners I can make a difference for Georgia developing businesses, rather than being in parliament; it is not for me.”
His contribution to put Georgia on the large international map could instead be Anaklia, the $2.5bn deep-sea port on the Black Sea which an international consortium led by Khazaradze will start developing by the end of 2017.
“Anaklia will change dramatically the position and the weight of Georgia in the region. At the moment, we are bottlenecked as our port facilities cannot serve big vessels, yet we are the shortest route connecting Asia to Europe. The potential is enormous.”
This interview is part of bne IntelliNews' special cover feature on the top business figures in Central and Eastern Europe, published in our May magazine. Our correspondents ranked business leaders in each CEE/CIS country not just on wealth but on influence. The full magazine can be viewed here. Cartoon by Vladimir Kremlev