Time to consolidate -- in style

Often provocative and a self-professed 'teaser,' Naguib Sawiris spoke to Aziza Sami about the prospects for his family business and the controversies surrounding it
It was well after people began to grasp the seriousness of the recession facing Egypt that I met with Naguib Sawiris last week. The private sector, which was already suffering due to domestic conditions, had been virtually paralysed by international tensions following the 11 September attacks on the US. The banks were tight-fisted, following several highly publiscised trials of businessmen who had defaulted on loans. The Sawiris family and its Orascom group of companies, however, appear to have escaped the downward pull of economic conditions, having adhered to the principle of calculated risk advocated by family patriarch Onsi Sawiris.
Nevertheless, the family has for months been subject to a torrent of criticism by Sawt Al- Umma. The weekly publication reported allegations by an accountant who said that Orascom Telecom, chaired by Naguib Sawiris, and Orascom Construction Industries, had increased their capitalisation by means that contravened the Companies' Law and that that they had engaged in profiteering. The accountant also characterised the Sawiris family, exemplified by Naguib and his wife, as being elitist and leading a decadent lifestyle. Other press accounts alleged that MobiNil (the Egyptian Company for Mobile Services), again chaired by Naguib Sawiris, had prepared its 1999-2000 financial results in a manner that had inflated its profits.
Accustomed to such controversies, Sawiris has, in previous instances, typically responded to the inevitable press questions about them. This time, however, he declined to comment about the details of the Sawt Al-Umma articles, saying that Orascom had just filed its twentieth lawsuit against the newspaper. "Our books are in order. We would not have resorted to the courts if we had done something wrong," he said.
Why the hostility directed at Orascom, then? I asked. Is it due to the generally negative image of businessmen, made worse because of bad loans, or is it specifically directed at the Sawiris family's businesses?
"It's not a phenomenon you know," he said, "It's just one newspaper whose editor has a long- standing personal vendetta. We're Upper Egyptians and we're stubborn; extortion doesn't work with us." Concerning a letter published by a privately-owned newspaper a few years ago that contained threats against Sawiris, which the paper alleged had been written by a terrorist organisation, he responded, "It was obvious from the text that it was a fabrication, and that a businessman was behind it. However, Adel Hammouda, the current editor of Sawt Al-Umma, who was with Rose El-Youssef [a national weekly magazine] at the time, insisted on making a big story out of it. He did so even though from an investors' point of view it was very damaging because of the implication that a Christian businessman was being targeted on account of his religion. Although I said so at the time, Hammouda elected to ignore my advice, intruded on my personal life and provoked lots of other battles. Ultimately, he was removed from Rose El- Youssef, with the impression that it was my doing. I wish it were, but unfortunately it was not."
Sawiris lambasted the funding of newspapers by businessmen. "It's not a healthy environment to work in, with businessmen backing newspapers and encouraging them to attack other businesses. When these businessmen back out of funding the papers, for one reason or another, they in turn become targeted. It's an atmosphere which definitely does not contribute to a business's stability or productivity, when one has to waste time in responding to such issues."
When he obtained a licence to operate Egypt's first mobile phone service, the highest profile private venture in Egypt since privatisation began, Naguib Sawiris found his name becoming synonymous with what had been until then a veteran and low-profile family business. He became the de facto spokesman for the conglomerate founded by his father, Onsi, who had made his fortune in cement and contracting in Libya during the 1960s. In recent years the elder Sawiris has given the chairmanship of his companies for contracting, tourism and telecommunications to his three sons.
Thrust into the limelight by the MobiNil venture, Naguib was driven by his proclivity to confront and respond to criticism. This began right at the mobile phone service provider's inception with allegations that the Sawirises had unfairly won the bid for a licence over Mohamed Nosseir. Sawiris became a seemingly ubiquitous presence in the media, appearing in the opposition and national press, on national television and the satellite channels, proffering his views on politics and economics and responding to criticism, and what were generally suspicious attitudes towards his family and Egypt's new business elite.
In his office near Sphinx Square in Mohandessin the 46-year-old engineer was typically self-assured. Did the family decide that he should take on this public role? I asked. "There was no consensus, really, I did not choose this role. In fact, you could say that I was pushed into it because my father and two younger brothers are quite low-profile and press-shy. But if people start slinging mud at you all the time, failure to respond will be taken as an admission that the dirt being thrown at you is correct."
With economic liberalisation, the family business expanded and its companies, Orascom Projects and Tourist Development, Orascom Telecom, Orascom Construction Industries, and its finance arm, Orascom for Investment and Development, became active in numerous fields.
Many of the family's endeavours have been in highly visible sectors like tourism, IT, manufacturing alcoholic beverages and cinema. In tourism, Orascom established the highly successful El-Gouna, comprising a complex of five-star hotels and a resort located on the Red Sea near Hurghada. The Conrad and Marriott hotels followed.
Orascom Telecom has a stake in Egypt's largest internet service provider and has aspirations to become the "foremost telecoms operator in Africa and the Arab region."
Part of this new business empire's strength is due to its formidable network of international relationships, and a fortune placing it amongst the world's 500 richest families, according to Forbes. Orascom has alliances with numerous multinationals, including Volvo Penta, Alstom and British Gas, among others. The conglomerate is the local agent for IT giants including HP, Microsoft, Oracle, Lucent Compaq and Motorola.
The magnitude and pervasiveness of the Sawirises' economic presence, and rumours of their influence and political contacts, have led many to draw parallels with Italy's Agnelli family, the owners of Fiat. The name "Sawiris," perhaps more than any other in the country, has become synonymous with the re-emergence of capitalism in Egypt. Like the names that dominated the business scene prior to 1952 -- Talaat Harb, Ahmed Abboud and Suarez -- the Sawirises have built a reputation for being able to initiate large- scale projects whose fundamentals are so sound that the businesses continue to thrive after being sold to other interests.
Before our meeting, Sawiris had ruled out certain topics. "I will not discuss the local scene," he had said over the phone, alluding to the state of the economy, "Only my business." He explained his uncharacteristic reticence, saying that he was "extremely depressed" by domestic economic conditions.
During the past two years, the family had divested its interests in the McDonald's franchise, the Renaissance Company for Cultural Production, which had established and managed several movie theatres, and El-Gouna Beverages. These moves led to rumours that the Sawirises were pulling out of the market because of the recession, and opting to invest in IT regionally to diversify their risks.
"They're not related, these two issues," Sawiris said. "The [regional] expansion was normal. We gained experience here that we felt we should utilise in exporting telecommunications and construction services. Unlike exporting a TV set, whose components are imported, services are 100 per cent Egyptian. But here the export of services is still very undervalued, although this employs lots of Egyptians abroad ."
Local conditions notwithstanding, Orascom Telecom has grown very quickly during the past two years and is "doing very well." It now has a presence, through licences and joint ventures, in 19 countries in Africa and the Arab world. The most recent of its endeavours has given it a foothold in the vast Algerian market.
The family is also establishing a cement factory in Algeria, and has won some major construction contracts in the Gulf region. In tourism, Orascom has initiated a project in the Gulf of Aqaba, "a second El-Gouna," which is currently proceeding slowly because of regional political turmoil.
What would be the conditions for the Orascom group to maintain and increase its local investments? "Unfortunately, we are not able to expand for the time being. The banks are not in the mood to lend money to anybody, and there is a lot of consolidation and down-sizing going on in the market. The prudent step is to consolidate our activities, get rid of the non-core ones and reduce exposure and debt. Over the past two years this is what we have been trying to do because it is better to maintain your position than to expand and risk losing everything."
Conceding that Orascom had divested its cinema, restaurant and beverage manufacturing interests before the recession, Sawiris said that those companies had "brought us lots of headaches, no thanks and no money." El-Gouna Beverages, which produced wine and beer, was sold to the Sawirises' main competitor, Ahmed El-Zayyat's Pyramids Beverages company, making the latter the sole private manufacturer in this field.
Controversies related to monopolies and unfair advantage have dogged the Sawiris family, with allegations that provisions of the investment incentives law, under which they had founded El- Gouna Beverages and the Renaissance Company for Cultural Production, gave them an unfair advantage over investors just starting their businesses.
Concerning Pyramids Beverage's new monopoly, Sawiris said, "El-Zayyat did not buy a licence to become the only beer manufacturer. Anyone can open a factory. If they think it is a profitable business, then they should go and challenge him. We were charged with the same thing when we founded the company owning cinemas. My answer in all cases is: why don't you go and do the same?"
My interview with Sawiris also came at a time when the mobile phone market was anticipating the entry of a third company, joining MobiNil and Vodafone (Click). "There's definitely a place for a third company. But the current economic situation is bound to affect the new entrant at a time when people are saving money because their incomes are being reduced. Tourists are staying away and people are losing their jobs. I think it will be difficult to attract new clients."
Part of MobiNil's success can be attributed to the largest advertising campaign this country has seen. Recently there has been talk of a rift between MobiNil and advertising guru Tarek Nour, which had resulted in his defection to the rival Vodafone, ending a long and fruitful partnership. There was talk of Sawiris boycotting Nour and encouraging other businessmen to do the same. He brushed aside the rumours, "Nour elected to change camps of his own accord. We were not the ones to terminate our contract with him, so you have to ask the person who decided to end the relationship. It's a decision that he might now regret, which is why we are hearing all of those stories. As far as I am concerned, it's a great loss for him -- not for us."
Sawiris expressed confidence that his company would maintain its edge in advertising. "You can see now in Ramadan that we are getting all of the public's praise for our TV ads, compared to Vodafone's. I am not trying to tease anybody, although I am a teaser, by nature. It shows, simply, that we, [MobiNil] CEO Osman Sultan and myself, had a lot of input in our ads and that the product was the result of a collective effort. Now that Nour is with Vodafone, people will see a different kind of output."
Moments before I met with Sawiris, he had accompanied three foreign investors to the lift leading out of his office. Concerning the prospects for attracting additional multinational companies to the country, Sawiris said, "We have to do more to attract them." What did he mean, I asked, "I am speaking as a businessman," he responded cryptically.
The Sawirises' extensive contacts in the West, with multinationals and funding institutions such as the World Bank and USAID (the United States Agency for International Development), have led to slights such as their being "agents of Western interests," and the more academic barb that they are members of the "comprador class." For Naguib Sawiris, such labels simply miss the point: he has repeatedly asserted that contracting alliances with international investors is precisely what businesses need to do to survive contemporary economic conditions. "Obtaining know-how from them [the multinationals] and giving them knowledge of the local scene," is a mutually beneficial arrangement, he stressed. Although the Sawirises have expanded their businesses regionally, the majority of their investments have been in the domestic market.
Given Naguib Sawiris's candour in previous interviews about how he thinks the economy should be managed, his reticence about the domestic market was curious. In the past he has alluded to a need to reform the banking sector, real rather than apparent privatisation, and for the government to be more responsive to businesses in charting a course out of its current impasse. Explaining his silence on these matters now he said, "Right now I am extremely depressed by 11 September and its consequences for the economy. When one is depressed, one's judgement is not at its best. You have to understand that when you are the largest investor in a country, and the economy is in its worst condition, you are also the largest loser -- therefore, I have the right to be depressed."
His gloomy outlook is tempered by a measure of optimism, however. "In confronting the phenomenon of the Afghan Arabs, who were responsible for many of the terrorist attacks in Egypt, the issue of terrorism will finally be put on the international agenda. This was something President [Hosni] Mubarak had called for, but nobody listened. Finally, although I am not in favour of linking the two issues, the Western world may become more aware of the injustice to which Palestinians are being subjected in their own land, because sometimes, unfortunately, misery has to befall one party for it to realise what is being suffered by others."
Beyond the world of contracting and making cement, Sawiris expresses a keen interest in the lighter side of life and in the arts. His major investment outlets in that sphere have been in the cinema and a division of Orascom Construction focusing on restoring monuments. The latter was also the subject of controversy in the press over the private sector's involvement in an area that some asserted was eminently public.
Along with such allegations there is the insinuation that through the restaurants, resorts, and cinemas, the Sawirises have played no small role in fostering aspirations for "Western lifestyles." In broaching this matter, I cited the comments of a prominent Coptic woman a few years ago when a US commission of inquiry investigating the status of Egypt's Coptic minority visited Cairo. "The Sawirises have been too provocative, too high-profile in their investment choices. Why, in a predominantly Muslim country, did they invest in alcoholic beverages, of all things?" the woman asked.
Sawiris retorted: "I will not discuss issues that are not within my jurisdiction. I believe that this is a private matter and that each person will be judged by God according to their beliefs. But I want to tell that lady to remember that Jesus, when he went to the Galilee wedding, created wine. Anyway, we've sold the beer business to Ahmed El-Zayyat, so maybe now she'll be happy.
It is not a question of a Western lifestyle, Sawiris insists. "Let me put it in another way. We are propagating what I prefer to call a 'cultural improvement' in the quality of our lives. All of our projects have a cultural component. I like cinema and theatre, and the old Arabic movies. Whenever I turn the TV channels and find a classic black and white Arabic movie, I want to stop and watch. As for the restaurants and the resorts, why not improve things inside Egypt? Today, if I have the option to travel in Egypt or abroad, I'd choose Egypt, and El-Gouna would be my first choice. Do we have to go to Europe just to eat in a pleasant restaurant or go to a clean cinema? It has nothing to do with Westernising. When more than 95 per cent of our investments are inside Egypt, then you would have to say that we are actually very local."
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Private initiatives 11 - 17 May 2000
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