Elsewedy Electric CEO bullish on African markets despite risks

Established in the 1930s, Elsewedy Electric evolved over several decades: From a local trader of electrical products, to a manufacturer of wires, cables, and electrical products. It also provides a wide range of services and solutions in the field of engineering, construction, digital services and infrastructure, among others.

In Africa, the Cairo-headquartered company runs multiple operations as well as 19 facilities in various countries, including Ghana, Nigeria, Tanzania, Algeria, Ethiopia, Zambia, Angola, Burkina Faso, Côte d’Ivoire and Madagascar.

The Africa Report sat down with CEO Ahmed El Sewedy in his Cairo office, where he spoke about the company’s Africa aspirations against a backdrop of the Russia-Ukraine war and climate-change challenges.

*All responses have been edited for brevity and clarity.

TAR: What is your plan to mitigate the effects of the Russia-Ukraine war on the company’s business operations in Egypt?

Ahmed El Sewedy: The Russia-Ukraine war has affected us on the prices level, especially when it comes to logistics and supply chain. But at the same time, we’ve been used to dealing with cases of force majeure over the past two to three decades, so we know how to absorb these kinds of shocks.

In the local market in Egypt, where 50% of our revenue is generated, we transfer the cost difference to our customers. Meanwhile, we operate in 50 countries and export our products to 110 countries, hence I think the Egyptian pound devaluation works to our benefit. A weaker currency means our products are offered to importers at better prices, which enables us to compete worldwide and improve our exporting margins.

The company has operations across Africa. Which African markets do you think have the highest potential? 

Currently, our operations in Africa make up around 7%-8% of our total portfolio, excluding Egypt. With Egypt, that would be 60%. There are so many African countries with a great potential for industrial and infrastructure business, including Côte d’Ivoire, Senegal, Ghana, Kenya, Nigeria and Angola.

I also believe very much in Tanzania. It is a great regional hub in which we can work locally, and from there supply eight other countries around it. I think it’s one of the best spots for the future of the industry.

How does Elsewedy Electric assess and deal with potential risks in African markets, especially given that the probability of political and macroeconomic disturbances is often high?

We have been working in Africa for over the past 30 years. Are there accompanying risks? Of course, but we insure almost everything before we start working, including the projects and shipping.

We’re used to it, and we have not faced any problems over the past two years. We have a lot of projects in Burkina Faso, where the president was replaced [through a military coup in January]. However, as far as our business there is concerned, nothing has changed at all.

How have the company’s operations in Tanzania developed in recent years since the inauguration of the industrial complex in the country late last year?

The first phase of Elsewedy Industrial Complex is already operational, with investments currently worth $35m. When the first phase is complete, investments will be valued at $50m. Upon full project completion, it will provide 1,000 jobs.

Within months, a manufacturing facility of power transformers will start working in the complex, with an expected annual production capacity of 1,500 transformers. The complex will also produce 15,000tn of copper wire and 100,000 electric metres per annum. The main purpose of the project, which will also comprise manufacturing facilities of conductors and insulators, is to turn Tanzania into a manufacturing and export hub.

With COP27 climate-change conference taking place in Egypt’s Sharm El-Sheikh late in 2022, the first time to be held in Africa, renewable energy projects across the continent are expected to spike. What is Elsewedy Electric’s plan for Africa’s anticipated rising demand for renewable energy projects? 

Sustainability will be the most important thing for probably the next 100 years. COP27 poses an excellent opportunity for the company. We have been installing charging points for electric buses and cars in Sharm El-Sheikh [which is planned to be Egypt’s first sustainable green city].

We started building bus charging stations in April, jointly with the [state-owned] General Nile Company for Construction and Roads. The pilot launch will be on 30 September, with a lodging capacity of 140 buses.

Currently, Elsewedy Electric is studying renewable energy projects in 10 African nations, worth $1.5bn in total, with three of these projects targeted to start in 2022, but so far, nothing is concrete. For the time being, we have not allocated a budget for this kind of project, but I would welcome any opportunity presented by the COP27.

Elsewedy Electric recorded E£3.5bn ($186.7m) net income in FY 2021, a 16.7% year-on-year increase. Profits in Q1 2022 also increased 9% year on year. How do you think the economic ramifications of the Ukraine war will impact profitability going forward? 

We have a good pipeline of projects. We have a good plan for the next two years. We’re very bullish on our company, the way we’re working and the markets. I believe we will not be affected as much. It can affect the margins, which can drop, but other than this I feel very confident about our performance in this year and the next.

The Egyptian government has been seeking to enhance the ease of doing business. How have these efforts boosted your local operations?

The Egyptian President and government are focusing a lot on attracting foreign direct investment in all sectors and pushing exports, and I believe they give us tax privileges and at the same time facilitate needed approvals. All of this will make a big difference over the next two years.

Why specifically the next two years?

Because costs in Europe have increased dramatically and the availability of manpower there has been subsequently decreasing every day. Meanwhile, investors here in Egypt can provide manpower at a lower cost and fill this gap within the next two years, through which the status quo in Europe is expected to persist.

How different will inclusive industrial city Sokhna 360 be from other similar projects? How much progress has been achieved in the construction works so far? 

It’s situated in the Suez Canal Economic Zone (SCZONE) and is planned to combine manufacturing, educational, residential and leisure facilities. The SCZONE has already approved the masterplan of the project but is yet to approve the environmental impact study.

The location of Sokhna 360 near the Suez Canal and the Sokhna Port will give us the ability to ship products to the Gulf in maybe just one day. Generally speaking, the cost of production in Egypt gives [us] the edge, in addition to the country’s location, from which shipping to Europe can take no more than three days. Our shipping to the Gulf and Arab League countries is tax free through the Greater Arab Free Trade Area (GAFTA) and the same thing [applies] to Africa through the Common Market for Eastern and Southern Africa agreement.

The construction of phase 1 of Sokhna 360 is already underway, and the opening ceremony of our flagship factory, The Pivot Irrigation Factory, is expected to be [completed] by the end of 2022. This phase includes the admin and sales centre of the industrial zone, main gate, grading work and basic landscape, roads to the entrance and the utility infrastructure of the factory. The total area of phase 1 spans 3.7m square metres and it is expected to be over by [the] end of 2025.

Does Elsewedy Electric also have plans to develop its digital solutions portfolio?

Digitalisation in Egypt has been remarkable for the past four years, exceeding what has been achieved in this regard over the past 50 years. Going digital is the future 100%, and we want to be part of it by making our operations in different sectors smarter than before. We’re already working with a lot of companies in Egypt on that.

Elsewedy Electric is already listed on the Egyptian Exchange (EGX). Are there any plans for a dual listing or launching an initial public offering for one of Elsewedy Electric’s subsidiaries? 

We are studying other markets at the moment for the possibility of dual listing for Elsewedy Electric, but we have no intention to list any of our subsidiaries on the EGX for the time being.