ELSEWEDY’S POWER PLAYS

By di­ver­si­fy­ing its projects and mar­kets, the Egyp­tian ca­ble man­u­fac­turer is ink­ing bil­lions of dol­lars in new deals and forg­ing ahead in the re­new­able en­ergy field

The Africa Report - - TOP 500 AFRICAN COMPANIES - By ARIANE LAVRILLEUX in Cairo for Je­une Afrique and HONORÉ BANDA

Egypt’s Elsewedy Elec­tric (#59) has been on a sign­ing spree, grab­bing con­tracts large and small. The biggest was the $2.9bn joint ven­ture with com­pa­triot com­pany The Arab Con­trac­tors (#119) to build the con­tro­ver­sial Ru­fiji Dam in Tan­za­nia’s Selous Game Re­serve, signed in De­cem­ber of last year. The project is due to add 2,125 MW to the national grid – which will nearly dou­ble its ca­pac­ity – but in­ter­na­tional cam­paign­ers have com­plained that it will do ir­repara­ble harm to wildlife habi­tats.

At the sign­ing, Elsewedy’s chief ex­ec­u­tive Ahmed Elsewedy told me­dia: “With this un­prece­dented con­tract, Elsewedy Elec­tric and its part­ner are sup­port­ing Tan­za­nia’s eco­nomic devel­op­ment by ex­ploit­ing the coun­try’s wa­ter re­sources to build an af­ford­able, re­li­able and sus­tain­able en­ergy mix for Tan­za­nia’s fu­ture.”

In the same month, Elsewedy signed a $500m loan with the Cairo-based African Ex­port-im­port Bank. Those funds will help it to de­velop new projects, like a planned new manufactur­ing unit in Uganda.

Mean­while, cam­eras were flash­ing on 28 Jan­uary, dur­ing the visit of France’s Pres­i­dent Em­manuel Macron to

Cairo. In photos, the di­rec­tor of Elsewedy Elec­tric’s in­ter­na­tional re­la­tions signed an agree­ment with the chief ex­ec­u­tive of France’s Mon­tagne et Neige Développe­ment Group (MND Group). MND’S Xavier Gal­lot-laval­lée said he was “par­tic­u­larly proud” to forge a new al­liance with the Mid­dle East and North African ca­ble leader, which ex­ports to nearly 110 coun­tries.

In this small ca­ble­car spe­cial­ist, which em­ploys nearly 400 people, Elsewedy Elec­tric saw an opportunit­y to de­velop new mar­kets in ca­ble trans­port – a tech­nol­ogy that has some­thing to of­fer many grow­ing cities in the re­gion that lack pub­lic trans­port. So could people one day be go­ing to the top of the pyra­mids of Giza in a ca­ble­car?

Con­ti­nen­tal drive

These new part­ner­ships il­lus­trate the Egyp­tian gi­ant’s de­sire to con­tinue its di­ver­si­fi­ca­tion, with ac­tiv­i­ties rang­ing from cars to telecom­mu­ni­ca­tions and en­ergy. Listed on the Egyp­tian stock ex­change, Elsewedy Elec­tric has suc­cess­fully in­te­grated into the global mar­ket with­out dis­tanc­ing itself from the fam­ily that founded it and the coun­try where it was launched 80 years ago. The busi­ness, which was passed from fa­ther to son, is not only num­ber one in power ca­bles and tele­coms in Egypt, where it owns nine fac­to­ries, but it has also es­tab­lished itself with success in 25 coun­tries and has nearly 14,000 em­ploy­ees world­wide. Its 2018 turnover was 1% lower com­pared to the pre­vi­ous year, but Elsewedy recorded growth of 12% in its last quar­ter, which al­lowed it to end the year with­out any debt.

Now the largest ca­ble man­u­fac­turer in the re­gion, Elsewedy Elec­tric gen­er­ates 55% of its turnover from ca­ble production in Egypt and about 10 other coun­tries. While ca­bles re­mains its core busi­ness, they are no longer its main growth driver. Since it launched its con­ti­nen­tal drive in 2002, the com­pany has changed its scale. Its am­bi­tion is now to be­come a provider of in­te­grated so­lu­tions, de­vel­op­ing, equip­ping and manag­ing elec­tric­ity net­works on national or re­gional lev­els.

The group has al­ready de­vel­oped around 10 turnkey in­stal­la­tions in An­gola, Ghana and Mau­ri­ta­nia, where it has de­liv­ered elec­tri­cal sub­sta­tions at the same time as trans­mis­sion lines: “We plan to dou­ble the num­ber of these in­te­grated projects over the next five years. By pro­duc­ing ev­ery­thing from A to Z, from ca­ble to en­gi­neer­ing, we have a solid com­pet­i­tive ad­van­tage,” says Tarek Wahby, head of Elsewedy Elec­tric’s Africa sales of­fice.

How­ever, there is no ques­tion of a rad­i­cal change. The com­pany wants to con­tinue to move for­ward on sev­eral fronts by set­ting up plants on the con­ti­nent and sell­ing trans­form­ers (such as in Ethiopia, Nigeria and Zam­bia) as well as buy­ing land to use for in­dus­trial parks. In both ar­eas, its mar­ket re­search has led Elsewedy to fo­cus on Uganda. It is one of the fastest-grow­ing coun­tries on the con­ti­nent, with 6% growth in 2018, and has a big in­fra­struc­ture deficit.

The com­pany is also on the look­out for other African mar­kets. It set up oper­a­tions in Morocco in Oc­to­ber 2018 in the hope of par­tic­i­pat­ing in the coun­try’s ex­pand­ing re­new­ables sec­tor.

In terms of ex­ports, Elsewedy Elec­tric is also at a strate­gic turn­ing point in its devel­op­ment. While 50% of its production is pur­chased lo­cally in Egypt, mainly by the state and its pub­lic com­pa­nies, the com­pany plans to ex­pand into Latin Amer­ica and Asia. The method is the same as in Africa: do not fo­cus on a sin­gle busi­ness seg­ment but fill in the gaps in each coun­try’s mar­ket. This is done by favour­ing the en­ergy sec­tor, whose growth fore­casts ex­ceed those of telecom­mu­ni­ca­tions. As a re­sult, Elsewedy Elec­tric was able to be­come the lead­ing pro­ducer of ca­bles and trans­form­ers in Al­ge­ria by set­ting up as a pioneer in 2002. This po­si­tion has en­abled it to es­tab­lish itself

through­out the en­tire en­ergy production and dis­tri­bu­tion chain and to par­tic­i­pate in ma­jor projects such as the Al­giers air­port and metro.

If Elsewedy Elec­tric is think­ing about the con­struc­tion of new production units in Asia, its strat­egy is also about re­gain­ing ex­port mar­kets, par­tic­u­larly in Africa, where Chi­nese com­pe­ti­tion on prices is fierce. The in­ter­na­tional cer­ti­fi­ca­tions for its prod­ucts have helped Elsewedy to com­pete, and the de­val­u­a­tion of the Egyp­tian pound also boosted its sales out­side its do­mes­tic mar­ket.

Rid­ing the pound

The cur­rency de­val­u­a­tion, at the end of 2016 was a dou­ble-edged sword for Elsewedy, which makes a large part of its sales in dol­lars and eu­ros. In 2017, its turnover in Egyp­tian pounds jumped by 74%. Elsewedy safe­guarded its prof­its, with a 15% net mar­gin com­pared to

16% in 2016. At the same time, the firm was hit by rising cop­per prices. In 2018, sales stag­nated at E£42.49bn ($2.5bn), with an 11.7% net mar­gin.

With the cur­rency los­ing half its value, Elsewedy Elec­tric’s prod­ucts have be­come cheaper than In­dian, Chi­nese or Turkish im­ports. In ad­di­tion, the trade agree­ments signed by Egypt with the Com­mon Mar­ket for Eastern and South­ern Africa (COMESA) and the Euro­pean Union give it priv­i­leged ac­cess to these mar­kets. This is enough to off­set the in­crease in cop­per prices.

Elsewedy Elec­tric is also just be­gin­ning to shift to smart grids, which are grow­ing rapidly thanks to re­new­able en­ergy. Since so­lar and wind en­ergy production is in­ter­mit­tent, grids must be much more so­phis­ti­cated and de­cen­tralised than they are to­day in or­der to de­liver and store elec­tric­ity ac­cord­ing to de­mand.

For the mo­ment, the Egyp­tian com­pany is de­vel­op­ing smart me­ters for its lo­cal mar­ket of 97 mil­lion in­hab­i­tants, and for Europe through its Slove­nian sub­sidiary Iskrae­meco, ac­quired in 2008. “We have taken this global trend into account, and we want to im­prove on the other com­po­nents of smart grids,” says Wahby.

In the mean­time, Elsewedy Elec­tric has po­si­tioned itself as one of the key in­vestors in the world’s largest so­lar park, which is un­der con­struc­tion in Ben­ban, south­ern Egypt. By the end of this year, its six mil­lion so­lar pan­els will cover an area of nearly 37km2 and could sup­ply up to 350,000 in­hab­i­tants with elec­tric­ity. The production will be man­aged by Elsewedy Elec­tric and France’s EDF, which will sell it to the Egyp­tian pub­lic elec­tric­ity com­pany for $0.084 per kwh, a price aligned with those of the French com­pany in France.

It is pre­cisely this type of in­ter­na­tional part­ner­ship that Elsewedy Elec­tric in­tends to de­velop in or­der to gain a foothold in the re­new­able en­ergy mar­ket. At the dawn of the rush, and against giants such as Prys­mian and Siemens, Elsewedy Elec­tric is bet­ting on grad­ual adap­ta­tion with­out aban­don­ing its his­tory as a ca­ble sales­man – the rea­son for its success.

Ca­bles are the heart of Elsewedy Elec­tric’s busi­ness, with nine fac­to­ries in Egypt, but are no longer the main driver of the com­pany’s growth

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