Ministry of Finance 

     

The Path to Growth:   

Experiences of Egyptian Entrepreneurs  

January 2008 

 

CIDA Canadian International Development Agency 

 

International Development Research Centre 

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 Acknowledgements 

The Small and Medium Enterprise Policy (SMEPol) Project would like to express appreciation to a number of people and organizations that made this publication possible. First of all, thanks are extended to those organizations that assisted with identifying the successful growth-oriented entrepreneurs and enterprises that are featured, specifically, the Industrial Modernization Centre (IMC), the Entrepreneurs Business Forum (EBF), the Egyptian Businessmen’s Association (EBMA), and the Egyptian Businesswomen Association (EBWA).

Secondly, gratitude goes to the founders and owners of the nine companies who agreed to be profiled, willingly gave of their valuable time for interviews with the SMEPol team, and went out of their way to provide up-to-date information on their businesses, their successes, their challenges, and their plans for the future. Without their cooperation, the dream of this publication would not have been realized.

Finally, the efforts of a number of other individuals who contributed to the preparation of the publication are acknowledged: Olivia Elias, Lois Stevenson, Nerveen Osman and Samer Sayed.

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Table of Contents  Acknowledgements ................................................................................................................ 3  Introduction.............................................................................................................................. 7  Why are growth firms important? .................................................................................... 8 A profile of Egyptian growth firms .................................................................................. 9 A profile of the growth entrepreneurs ............................................................................. 9 Identifying the opportunity ............................................................................................. 10 Key growth success factors .............................................................................................. 10 The constraints to growth ................................................................................................ 11 External helps..................................................................................................................... 11 The environment for entrepreneurship and growth.................................................... 12 Concluding remarks ......................................................................................................... 12 

Allied Soft ............................................................................................................................... 13  Bird ICTTM............................................................................................................................... 16  Deraya Sales Services............................................................................................................ 19  Educational Projects Company (Edu Fun) ........................................................................ 22  Egyptian Traders Company................................................................................................. 25  Femina by Heba El Shenawey ............................................................................................. 28  L’Aroma Gourmet................................................................................................................. 31  Mobeliana Furniture Company........................................................................................... 34  Special Foods Industry International Co. (SFII)................................................................ 37 

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Introduction 

The Path to Growth: Experiences of Egyptian Entrepreneurs brings together profiles of nine Egyptian growth companies and the entrepreneurs behind them. It was the goal of the SMEPol Project to learn about their growth experiences and strategies and to present them as good practices for others to follow. In the course of interviews with the founders, we asked them to share how they started and developed their businesses, their major difficulties and how they surmounted them, the key factors of their success, their plans for the future, and their views on the institutional support environment for growth firms in Egypt.

We used a number of criteria in selecting the firms to be profiled. First of all they had to have been in business for at least one year, have at least 20 employees, and have achieved an annual growth rate in employment of at least 20 percent. We also wanted to include a diversity of types of businesses and sectors, and firms of different ages with different growth patterns.

The nine selected enterprises individually employ between 20 and 3,000 professional and skilled workers, accounting for approximately 4,000 jobs in diversified sectors of activity – Information and Communications Technology (ICT), specialized business services, retailing of food and ladies fashions, manufacturing of furniture, garments, educational products and processed olives and foodstuffs, and agricultural commodities trading. The magnitude of this employment is staggering when one considers that the average size of an Egyptian enterprise is 2.9 workers!1

The seven companies willing to share their 2007 figures reported global revenues of almost LE 2 billion. Not bad for a set of companies that averages about 8 years in business (ranging in start-up dates from 1990 to 2006). In addition, six of the companies are largely focused on the export market, some of them fully internationalized.

Most of the enterprises were started by an individual entrepreneur, but two of the companies were started with three partners each. So therefore, the nine enterprises have 13 owners. Collectively these entrepreneurs currently own and manage a total of 17 1 Egyptian Labour Market Survey (ELMS), 2006.

enterprises, meaning that some of them own more than one. Overall, these founders were quite young when they created their business – four of them were established by entrepreneurs in their 20s and the remainder by entrepreneurs in their 30s.

Most of these companies started as micro or very small firms, six of them with five or fewer employees, one with 12, one with 40 and one with 50. At varying rates, over varying periods of time, they have all grown exponentially.

Company Sector Start Date

Emp

Allied Soft ICT services 2002 1,000Bird ICTTM ICT software 2006 20 Deraya Business Services 2002 200 Educational Projects Company

Manufacturer of educational

products and furniture

1990 280

Egyptian Traders

Agricultural commodities trading house

1992 114

Femina Manufacturer of garments; chain of

branded retail stores

2000 300

L’Aroma Gourmet

Chain of coffee houses

2003 70

Mobeliana Furniture Company

Furniture manufacturer and

exporter

1997 75

Standard Foods Industry International

Processor and exporter of olives

2000 80

They are all distinctive in their fields. Allied Soft operates the largest IT Business Process Outsourcing (BPO) facilities in the Middle East; Deraya is the leading sales outsourcing company in Egypt with the vision to be the leading one in the Middle East and North Africa; Educational Projects Company is Egypt’s largest producer and exporter of pre-school educational toys and furniture; Egyptian Traders is the number one Egyptian company for rice exports and the number two in wheat trading; Mobeliana Furniture Company is one of the largest and most respected furniture makers and exporters in the country; Standard Foods Industry International (SFII) is the leading Egyptian manufacturer and exporter of processed olives; and Bird ICTTM is about to become known as a transformer of instant messaging services. Both

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Femina and L’Aroma Gourmet have a chain of branded, company-owned retail outlets in Cairo and other parts of the country.

Why are growth firms important? 

Why is it important to examine the profile of growth-oriented Egyptian enterprises? The first reason is because there are so few of them in the economy. Micro, small, and medium enterprises (MSME) make up the bulk of the private sector in Egypt, as they do in most countries, and contribute substantially to job creation, however, relative to the total stock of enterprises in the country, there are very few that grow beyond 10 employees. Egypt suffers from the ‘missing middle’ syndrome, with almost 94 percent of its enterprises employing less than five workers. Of the 1.79 million private sector companies registered with the Social Insurance Fund, less than one percent (0.75) have more than 20 employees!

Not only are there few enterprises with more than five employees, most MSMEs are characterized by a low level of skills, technology, capital and knowledge with limited growth potential. The obstacles they face have been well identified2 – limited access to up-to-date technology and equipment, training, business development services and financing, combined with the heavy burden of legal and regulatory compliance associated with business registration and licensing. They also have weak access to marketing channels and insufficient linkages to supply chains and larger firms.

It is well established that few micro and small enterprises (MSEs) grow beyond their start-up size. The Economic Research Forum (ERF) survey of 5,000 MSMEs in 2003 and 2004 reported that only 19 percent of MSMEs registered growth from one year to the next (measured according to an index comprised of invested capital, physical space, number of workers, and value of raw materials used) and that, even among the ones that grew, the average growth rate was only 2.2 percent.3 The conclusion of the draft Framework for the National Strategy for Micro and Small

2 See Enhancing Competitiveness for SMEs in Egypt: General Framework and Action Plan, Ministry of Finance, November 2004. 3 FEMISE 2005 NETWORK (2006), FEMISE Report on the Euro-Mediterranean Partnership 2005, coordinated by Samir Radwan, Economic Research Forum and Jean-Louis Reiffers, Institut de la Méditerranée, France (based on data from ERF, 2005).

Enterprise Development was that prospects for increasing the private sector were limited unless steps are taken to alter the structural distribution of enterprise size and the growth trajectory of MSEs.4

Secondly, it is important to examine growth-oriented enterprises because they contribute disproportionately to employment generation and economic growth. This conclusion has been documented by numerous empirical surveys and studies in North America, Europe and elsewhere over the past two decades and led to great interest among researchers and policymakers alike in knowing more about why some firms grow, while others do not, and what can be done to increase the proportion of growth firms.

Statistics Canada, for example, conducted a major study of Canadian growth firms over the 1993-2003 period,5 adopting the following definitions for growth firms:

Hyper Growth Firms: those with at least 150 percent growth in employment;

Strong Growth Firms: those with between 50 and 150 percent growth in employment;

Slow Growth Firms: those with between 0 and 50 percent growth in employment;

Declining Firms: those with negative employment growth.

The study found that while hyper and strong growth firms accounted for less than seven percent of all firms, they were responsible for half of the net jobs created by continuing firms from 1993 to 2003. The study also found that strong growth firms, with ambitious but controlled growth, were more likely than hyper-growth firms to be net job contributors over the medium and long term. In is interesting that micro and small firms accounted for nearly 99 percent of the hyper and strong growth firms and that high growth was not concentrated in high-knowledge or high-technology industries. Growth firms were found in all sectors. 4 “Mobilizing Egyptian Micro and Small Enterprises 2008-2012, Framework for the National Strategy for Micro and Small Enterprise Development”, prepared by the Social Fund for Development with technical assistance from the Canadian International Development Agency (CIDA), the Ministry of Finance/SMEPol Project and external consultants, July 2, 2007. 5 “The Growth Process in Firms: Job Creation by Firm Age”, Growth Firms Project, Phase IV, Small Business Policy Branch, Industry Canada, Ottawa, November 2006.

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Lastly, it is important to examine growth firms because there is virtually no research and data on this group of enterprises in Egypt. Unless we attempt to understand more about the dynamic of growth firms, there will be little we can do to encourage more of them. And this will be to address the country’s employment and growth objectives, as well as poverty reduction targets.

A profile of Egyptian growth firms 

Age, growth patterns and internationalization

These enterprises varied in terms of age. The oldest firm was established in 1990 (Educational Projects Company) and the youngest in 2006 (Bird ICTTM); two-thirds were started in 2000 or later. The average age of these enterprises is just less than 8 years.

They started with varying amounts of capital, although this ranged from LE 50,000 to LE 3 million, depending on the capital intensity of the business and the entrepreneur’s access to cash. This came mostly from savings, family members, and in some cases, advance payments from clients. Most of them started from very basic premises with limited space and equipment. Some took their time to amass sufficient capital from profits to expand – build a factory, hire more workers, etc. – and most were eventually able to negotiate credit facilities from a bank. In a couple of cases, the entrepreneur was able to secure investment or venture capital from a third party to provide the equity to finance rapid growth.

Most of them have not taken very long to achieve the growth they have, although the paths they have taken are not all the same. In some cases, growth was very slow in the beginning, until a catalyst changed the direction of the company. For three of the companies, it was participating in their first international trade show that opened their eyes to the export potential for their products, which they then set about realizing. For two of the companies, growth has been directly linked to opening up more retail outlets – each shop in the chain resulting in increased employment and revenue. For three more companies, growth has been directly linked to attracting new clients, identifying new market segments or applications, and developing new products or services. And for the remaining company, an innovative technology start-up, sales are projected to skyrocket when mobile and Internet service

providers adopt his innovation as an enhancement to instant messaging.

Due to their efforts and perseverance, all succeeded to significantly upgrade their technical capacity. Special Foods Industry International moved into its fully equipped factory four years after creation. Femina rented a much bigger manufacturing space, secured a warehouse, and has expanded to include seven stores much larger than the 150 square metre shop that she started with. Educational Projects Company has recently tripled its production capacity. And Egyptian Traders is launching a big investment program aiming to control its own fleet of ships and trucks and to build its own silos in each of Egypt’s big ports. All of the entrepreneurs have upgraded their premises and enhanced their working environment.

Mobeliana, Educational Products, Allied Soft, Egyptian Traders, and Standard Foods Industry International are now well-established in the export and international market, while Deraya and Bird ICTTM are considering expanding into regional markets as soon as they are ready. The two retailers – Femina and L’Aroma Gourmet – are of course domestic market-oriented, although both involved in import activity.

A profile of the growth entrepreneurs 

Education and experience

All of these entrepreneurs, partners included, are university graduates, some holding post-graduate diplomas. Degrees range from engineering to mass communication, to medicine, dentistry, pharmaceutical studies, and architecture, to construction, business administration and artificial intelligence. All worked as employees for other companies for different lengths of time before starting the business. Dr. Heba El Shenawey (Femina) and Dr. Khaled Awad (Bird ICTTM) practiced for only one year as a dentist and a general practitioner, respectively. For the rest of the group, their salaried careers lasted between 3 and 20 years. Only two of them had previous entrepreneurial experience.

The majority of the entrepreneurs chose to invest their energy in a business or sector not related to their educational specialization or their previous salaried work, and admittedly had a lot to learn about doing business in the industry they entered. For example, the three partners of L’Aroma Gourmet had some knowledge of business management and marketing, thanks to

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their university business studies and the seven years of advertising and sales experience they gained working for large international companies, but didn’t know anything about making coffee! And Yomna El Sheridy, SFII, didn’t know very much about the olive industry. The notable exceptions are Dr. Reda, Allied Soft, who capitalized on his IT consultancy experience, and the three Deraya partners who had lots of experience in sales service before branching out on their own in a similar business.

Identifying the opportunity 

“In a country like Egypt, which is still extremely underdeveloped in terms of service and quality, there are a lot of opportunities for SMEs. But you have to be different, to offer something unique, either a product, service or an expertise. There should be a reason why you stand out in the midst of competition”(Ahmed Soliman, Deraya).

Without exception these nine growth firms evolved from the entrepreneurs’ pursuit of “opportunity”. Most of them undertook an extensive search for business opportunities, largely Internet-based, to gather market and production data as well as information on international trends and opportunities. Most of the entrepreneurs can quantify the market potential magnitude for the products and services they provide based on global trends and estimates. Some started businesses in fields of activity where they felt Egypt had a comparative advantage (agricultural products, furniture making) and where they could improve on what others were already doing, either in terms of quality, innovation, efficiency, or price. Others read growing market trends, for example, in the outsourcing of business processes, the outsourcing of the sales function, and in the mobile phone market, and started businesses ready to meet those needs. Some of them hired consultants to conduct market and feasibility studies and business plans were the norm rather than the exception.

Based on the opportunity they saw, the majority of these entrepreneurs had very ambitious goals from the beginning. “We wanted to be the first provider of sales services in Egypt, the Middle East and North Africa in four targeted sectors” (Ahmed Soliman, Deraya). “We wanted to be one of the main traders in Egypt” and now that this target has been achieved “we are striving to be number one in the Middle East” (Ashraf El Attal, Egyptian

Traders). “We aimed to be the first to meet the expectations in the field of IT outsourcing services” (Mohamed Reda, Allied Soft). However, Heba El Shenawey, Femina, now generating revenues of LE 25 million and employment for 230, says, “Initially, I just wanted a small shop. I didn’t want a factory and a big store.”

Key growth success factors  

As a key factor in their success, these entrepreneurs stressed the importance of having a long term vision and a clear business model. “We wanted first to have new, brilliant ideas; second to study the market; and third to implement them in such a way that each one will be handled by an independent company under our control” (Khaled Awad, Bird ICTTM).

Preparation or planning is another crucial factor. All agreed that it is necessary to anticipate growth and to take the preparatory steps. Commitment to quality was a critically important factor. All of these entrepreneurs aim to make a difference by offering the best product/service to meet international quality standards. “We aim to be the best in what we are doing” (Ahmed Soliman, Deraya). “Quality, consistency and customer satisfaction are the keys to our success” (Ahmed Gaafar (L’Aroma Gourmet), an opinion shared by Yomna El Sheridy, SFII: “Every day, there are new competitors entering the market and I have to be on the top of the game all the time.” Several enterprises have gone through the whole process to obtain ISO or other quality certifications (e.g. Allied Soft, Mobeliana, SFII).

Another key success factor for these growth-oriented entrepreneurs has been their commitment to continuously update their own technical and managerial knowledge. They enrol in regular training sessions, attend specialized seminars or conventions either in Egypt or abroad, visit international fairs, and study the management and marketing methods of international companies.

All of them apply a wide range of innovative solutions to meet client’s expectations, particularly when it comes to design features, an extremely important factor in their competitive advantage. Heba El Shenawey, Femina, decided very quickly to design and produce her own collections to meet the specific needs of her Egyptian customers. From the very beginning, Mobeliana invested in a design department to give a personal touch to its furniture lines that

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are so much appreciated “Italian furniture producers come to Damietta to buy the exclusivity of my designs.” Educational Projects Company employs a team of 10 industrial designers and artists who for the past two years worked on a concept for a totally new educational toy collection, which is soon to be launched. For those serving local or regional markets, knowledge of local tastes/habits appears to be a considerable competitive advantage.

The relatively low wage levels in Egypt are another important competitive factor, especially for the exporters. “We offer European quality with Chinese prices” (Ahmad El Shawy, Educational Projects Company). Finally, geographical location was noted as a strategic competitive advantage, especially for the companies who export to European and/or regional markets and those who serve as an offshore IT outsourcing centre for their clients.

As their businesses expanded, the entrepreneurs all mentioned the need for restructuring of the company and its management, upgrading of its management information systems, and developing procedures and other management and quality controls. At a certain point in the growth cycle, they had to reorganize their companies into distinct departments with specific responsibilities, create a middle management layer and learn how to delegate effectively. And those who haven’t done it yet are planning to hire human and IT specialists so they can focus on the strategic decisions for the company. Installing management information systems has been an essential productivity and planning tool for many of the entrepreneurs.

The constraints to growth 

Growth was not an easy process for most of these entrepreneurs. One of the biggest constraints is finding and retaining qualified and committed workers. It seems that the problem is general, touching all categories of employees: workers, assistants, sales staff, and managers. “We are encountering more and more difficulties to recruit calibre people with a university degree. It’s a continuous struggle” (Ahmed Soliman, Deraya). “Despite an advertisement campaign of LE 2,000,000 this year and all of our efforts to meet the right candidates, we couldn’t fill our vacancies” (Mohamed Reda, Allied Soft).

To overcome this obstacle, all of these entrepreneurs invest in intensive training for

their staff and several have implemented loyalty programs, including incentives, benefits and social packages. The investment seems to be worthwhile. “When we lose an employee, we lose a lot” (Khaled Awad, Bird ICTTM).

Finance is another consistently recurring problem, especially during the start-up phase where the great majority experienced some very difficult periods. Banks are seen as not being much interested in lending to SMEs and ask for too much in terms of guarantees. Even the Allied group of companies, with 3,000 employees, still cannot get credit line facilities because “IT is still considered as a new sector and the majority of our clients are abroad,” says Mohamed Reda. Apart from investing their own savings, entrepreneurs had to be creative and innovative, managing their cash flow carefully and being open to taking in silent partners or formal investment/venture capital partners. Bird ICTTM took in an investor, agreeing to give up the majority of the company’s shares in exchange for capital and management and strategic advice. “Otherwise, we would have been today at the first stage of our development” says Khaled Awad.

External helps 

Some research studies indicate that successful, rapidly growing firms acknowledge more than the others the need for external advice and assistance. This is certainly the case with the growth firms profiled in this report. In the field of human resources, the majority of them are buyers of specialized services especially when it comes to training. Almost all of them sought assistance from an expert to meet particular needs, for example technical assistance with organisational restructuring, legal matters, venture capital partnerships and the purchase and installation of state-of-the art machinery and equipment.

Several of the entrepreneurs have benefited from public support. The Ministry of Communication and Information & Technology (MICT) financed IT training programs delivered by Allied Consultants when it first entered the Egyptian market. Allied Soft and Bird ICTTM

have both accessed venture capital from the MICT Technology Development Fund (TDF), a venture capital fund targeted to support new IT ventures. Khaled Awad won a place in the Smart Village as a prize in the Business Idea Award competition organized by the Egyptian Entrepreneurs Business Forum. Mobeliana was

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able to benefit from locating in the New Damietta Industrial Zone, including reduced land prices and a 10-year tax exemption for investors. The Industrial Modernisation Centre (IMC) has been helpful to several of the entrepreneurs. Ahmad El Shawy, Educational Projects Company, and his staff regularly attend training sessions provided by the IMC, which also helped the company find and contract an international designer to assist in the conception of its new toy collection. Yomna El Sheridy, SFII, got technical advice and assistance from the IMC when she was buying machines for her new factory, established in a Free Zone. She also participated in several study tours organised by the IMC, while Expo Link sponsored 80 percent of her trade show participation.

The  environment  for  entrepreneurship and growth 

The majority of the profiled entrepreneurs remarked on the noticeable improvement in the private sector operating environment in Egypt over the past two to five years, compared to the past. One comment summarizes the general feeling: “There’s a new spirit in the country, a more open market.” Specific mention was made of favourable changes in export and tax legislation and the fact that Egyptian retailers are now allowed to import garments without having to be located in a Free Zone.

Despite the progress made, the entrepreneurs feel that there is still a lot to do. They state that procedures – to register, to obtain a construction or production licence – are still too complicated and confusing. They also noted a lack of information on sectors in Egypt, on market trends and dimensions, on production statistics, and on international market developments and trends. “Maybe this information exists but we do not know where” says one of them. They suggested the need for one big Internet portal where all of this information would be available, as well as for more professional companies who can undertake studies of different markets and how they are changing.

There were recommendations for a facility mandated to help SMEs and work in close consultation with a broader base of enterprises, including appointing consultants to help entrepreneurs, particularly those who are considering creating their own business. Others suggested that the government should launch promotional campaigns to enhance the industrial

image of Egypt and local products/services, in addition to facilitating technology transfer and offering equipment funding schemes. All of the entrepreneurs called for urgent educational reform, better alignment of higher education with the needs of enterprises and more training facilities and qualified providers in all fields (IT, sales, management, etc.). Finally, they recommended changes to bank lending practices to be more responsive to the financial needs of small, growing enterprises.

Concluding remarks 

Despite the fact that the companies profiled in this report face the same structural weaknesses and constraints as all MSMEs, they have a different profile than the average Egyptian MSME. They illustrate that is possible for Egyptian men and women to take an idea, implement it as an enterprise, and develop with a high rate of employment and revenue growth. According to the OECD, “those individuals who are willing to take risks, be innovative and exploit business opportunities in a market environment are among the most important agents of change.”6 The stories you will read in this publication are examples of these agents of change!

In conclusion, we hope that the following case studies will motivate other entrepreneurs with growth-potential enterprises to take actions to realize that growth. We also hope that policymakers will be better informed about the characteristics and behaviours of growth-oriented entrepreneurs and the factors which lead to growth, including elements of the business support environment. Finally, we hope that efforts will be stimulated to undertake more research and analysis on Egyptian growth firms, with particular attention to measuring how many there are and their growth trends over time. Seeking observer status in the EuroStat and OECD working groups on business demography statistics, Factors of Business Success (FOBS), and Entrepreneurship Indicators may be a positive step.

This study of the path to growth is very exploratory; a larger study to build on its findings would contribute significantly to the existing knowledge base.

6 “High Growth SMEs and Employment”, OECD, 2002, p. 9.

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Allied Soft  Dr. Mohamed Reda, Chairman and Chief Executive Officer 

Mohamed Reda, Chairman and CEO of Allied Soft, has become a guru in the field of information technology (IT) as well as an inveter-ate entrepreneur. Graduating from Cairo University with a degree in

Economics and Political Studies, he went on to complete doctoral studies in mathematical modelling and artificial intelligence at Carnegie Melon University. He first started out in business in 1990 by setting up a consultancy firm in Switzerland, which was involved in outsourcing business to India. Convinced that Egypt could compete in the outsourcing market, he returned to Cairo in 1995, and with capital of LE 200,000, started Allied Consultants Ltd., his first Egyptian enterprise.

Mohamed’s original idea for this venture was to develop outsourcing operations from Egypt. “In the modern world, enterprises are increasingly recognizing the need to focus on what they do the best and to cooperate with professionals for the rest. We wanted to be among the first to meet their expectations with outsourcing solutions”, explains Dr. Reda. But the beginnings of Allied Consultants were very difficult. “There was no IT culture in Egypt at the time and no private networks,” he states. Despite this, Dr. Reda and his team of fifty professionals succeeded in gaining support from the Ministry of Communication and Information Technology, which financed some IT training projects, and gradually started building business and credibility. Slowly they were able to widen their range of IT training and consultancy services.

By 2002, the training side of the business had grown considerably so he started Allied Soft as a sister company to Allied Consultants Ltd. Allied Consultants would continue to focus on the consultancy side of the business while Allied Soft would provide administrative and technical IT solutions to leading private and governmental

organisations and expand the IT solutions side of the business. “Our clients rely on us to develop and maintain IT systems, ranging from e-learning to corporate intranet solutions, large scale data warehousing and customer enquiry handling systems”, Mohamed explains. Allied Soft also provides clients with comprehensive protection systems against Internet threats.

The company now operates the largest IT Business Process Outsourcing (BPO) facilities in the Middle East, with interconnected centers in Cairo, Mansourah, Tanta, Ismailia, Kafr El Sheikh, Qena and Assuit, and several affiliate institutions. Its certified training instructors delivered more than 8.5 million training hours in the Arab world in the past five years. In Egypt alone, it has qualified around 6,500 individuals. It also performs data processing, that is, the conversion of data into digitized form that can be processed by computer, an area in which the company has acquired recognized expertise. In addition, Allied Soft has delivered more than 28 international WEB and WEB-enabled systems both in and outside Egypt.

Allied Soft’s client list is impressive. It

includes several ministries, governmental institutions and big name private corporations in Egypt, the Arab world, and including European and American international companies. The project list is also remarkable. Allied Soft cooperated with IBM to preserve in digital form 25 million old documents in the Egyptian national archives, implemented the E-learning solutions developed by Volvo IT for the education sector, and managed a pilot project to automate the functioning of courts in three Egyptian governorates, as examples. By 2004, Allied Soft had grown to 200 employees.

Interestingly enough, even an enterprise with this level of success, encounters problems with financing. “IT is still considered a new sector in Egypt and we can’t get loans from

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banks because the majority of our clients are abroad,” Dr. Reda explains. As a consequence, the growth rate of Allied Soft has been constrained, despite the impressive potentialities of BPO services, a market that is estimated to reach some US$80 billion worldwide by 2010.

Building on the company’s reputation and expertise, Dr. Reda saw the opportunity to respond to growing demand for medical transcription services in the healthcare and medical sectors. So in 2005, he launched Allied Information Technology Services (AITS), an offshore service centre offering state-of-the art medial transcription, billing, coding and medical

data handling services to organizations in the US and Europe. Finally, he was able to realize his vision of providing BPO services from his Egyptian base! Dr. Reda found the equity capital he needed

for AITS from the Al Ahly Development and Investment (ADI) joint venture fund. Starting paid-in-capital for the new company was LE 2.6 million.

AITS offers a full range of accurate and secure medical transcription and billing services to healthcare service companies, hospitals and clinics, including a state-of-the art contact center providing value-added telemarketing with both outbound and inbound services to global clients. In accordance with specific protocols signed with the client, AITS takes charge of all tasks from appointment scheduling and the entry of patient’s personal information to code checking and analysis, claims submission, and posting of patient’s statements and payments.

AITS employees process over 20,000 medical reports each day, converting then them to electronic format for next day delivery to their North American physicians and clients, consistent with the high standards of the American Association of Medical Transcription. Teams work 24-hours a day in three 8-hour shifts. The majority of AITS employees are college graduates with healthcare sector-related degrees - from medicine to dentistry to pharmaceuticals - who undertake a full company training program. By 2007, AITS employed 1,000 of the 3,000 staff in the Allied group of companies, whose global revenues had climbed to US$19 million.

With the rapid growth of AITS, Mohamed has attracted investment capital from two other joint venture funds, including the Ministry of Communication and Information Technology’s Technology Development Fund (TDF), which was established in 2004 to support ambitious ICT start-ups with high potential for success. This 2007 round of equity investment left Dr. Reda with a 33 percent share of Allied Soft. He is also planning to distribute shares to his employees. “The employees should own the success”, says Dr. Reda, whose companies are a member of the Global Compact Initiative, a United Nation (UN) initiative to promote socially responsible corporate behaviour.

Indeed, Dr. Reda constantly highlights the importance of human resources and teamwork. “Our wealth is in our people. This is true for the whole country and for enterprises,” he emphasizes. He believes that good management can solve unemployment. “We are willing to take persons without any knowledge about computers and to train them. But as surprising as it is, we still encounter a lot of difficulties to find motivated people who are willing to accept a strict discipline.” However, this hasn’t deterred him from his mission. “From the beginning, we wanted to transform unutilised human resources into high value-added inputs,” he adds, and he has proven that this can work.

Besides the investment in human resources,

Dr. Reda credits a number of factors to the growth and success of his enterprises: proper identification of market trends, being willing to work with low margins, hard creative work, and commitment to personalization of service and excellence. “In every field, we offer the state-of-the-art technologies and we conform to the highest international standards. Don’t forget, we all come from the consultancy field and we apply to ourselves the advice we used to give to our clients”, Dr. Reda muses.

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With secure long-term contracts in hand and new financial partners, the Allied group is well positioned to pursue its growth path for the next three years. “We will focus on generating more business out of Egypt and on strengthening our presence in the Middle East. By 2010, we will have 5,000 people working in all parts of the operation,” Dr. Reda projects, and revenue growth is expected to skyrocket.

In the meantime, the company has started to penetrate the Egyptian market with its healthcare services. In September 2007, AITS signed a business agreement with Egypt’s prominent Dar Al-Fouad Hospital, making it the first hospital in

the Middle East to offer this cutting edge technology. “This partnership is a landmark agreement for our company to further lead

medical transcription services across Egypt and the Middle East and we’re looking forward to a long and fruitful business relationship with our newest client, Dar Al-Fouad,” comments Dr. Reda.

What’s next? Allied Soft is working on developing its own branded Integrated Healthcare Solution for both local and international markets, based on the idea of providing cutting-edge technology on a subscription basis with very low setup costs. The solution will be largely web-based using import and export interfaces (as per healthcare standards) and might also have a set of desktop application/utility for greater convenience.

Dr. Reda has views on what is needed to create a more supportive environment for entrepreneurship in Egypt. First of all, he says there should be a facility specifically mandated to help SMEs and that works closely with a broader base of SMEs. And secondly, there is a need for a change in the attitude of local authorities, which he feels is not at all supportive presently. On the financial level, he would like to see the banking system injecting its abundant liquidities into the economy and the government increasing its funding of the private sector. And finally, he stresses that the higher education system should take into better account the needs of enterprises.

As well, Dr. Reda is a strong advocate of increasing efforts to promote the exporting of IT services from Egypt. He recently oversaw a new initiative where 28 pioneering IT companies and professionals joined forces to establish the

Information Technology Export Community (ITEC). “Egypt has promising potential to undertake more projects than it currently does,” says Dr. Reda. “To this end, ITEC will work to secure the international permits, licenses and accreditations required for various sectors, provide training for staff to make better use of the growing Egyptian workforce, attract new investments, organize missions abroad, launch awareness campaigns, coordinate with related institutions, and enhance the quality of delivered products and services.” Dr. Reda further points out, that countries, such as India and Pakistan, have outpaced Egypt in BPO even though Egypt has more capabilities in terms of skilled labor force and employment capacity. ITEC, whose board members include officials from the government and representatives from foreign companies, will act as a body to market different IT companies’ capacities to the international market.

The entrepreneur’s advice

“Don’t let yourself be cornered by the obstacles you are facing. Always look on the bright side and at how you can turn problems into motives to achieve your goals.”

Business: Allied Soft Provider of IT and business processing solutions to leading financial, healthcare, manufacturing, technology, and educational organizations throughout the United States, Europe and the Middle East Year started: 1995 Location: 13, Abdel Wahed El Wakel, Heliopolis, Cairo, Egypt Employees: 3,000 (in Allied group of companies) Turnover: US$19 million Growth rate: Exponential Ph: (20 2) 2419 6286 Fx: (20 2) 2419 5882 Email: info@alliedsoft.net Website: www. alliedsoft.net Other companies: Allied Management; Allied Information Technology Services (AITS) Affiliations: Founding member, Information Technology Export Council (ITEC); Egyptian Businessmen Association; Information Technology Chamber of Commerce; Egyptian-British Chamber of Commerce

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Bird ICTTM Dr. Khaled Aly Awad, Chief Executive Officer and President 

It took just two years for Khaled Awad, the young founder of Bird ICTTM to find a solid partner and to develop two new bright ideas to take advantage of the potential of a growing mobile market in Egypt.

Twenty-seven year old Khaled, now Chief Executive Officer and President of the ICT software applications company that he conceived in 2006, is new to the game of entrepreneurship. In fact, he studied medicine at the University of Alexandria and was already on the path for a brilliant medical career as a general practitioner at the Alexandria University Hospital. But as an adolescent, young Khaled was passionate about information technology and by the age of 13 was already designing programs for video games. Although a degree in medicine did not prepare him very well for this, in the back of his mind, he had always wanted to develop one of his game ideas into a business.

A specific event triggered him into action. In 2006, the Egyptian Entrepreneurs Business Forum (EBF) announced a national Business Idea Award and business plan competition. Khaled entered the competition with his idea to transmit stock market data directly to mobile phones and he won first prize! LE 50,000 in cash to start the business and an office in Smart Village, the new privately-managed technology office park established with public sector support, where giants like Vodafone and Microsoft are located. At Smart Village, Khaled has access to a network of other technology entrepreneurs as well as services. So, in September 2006, the career of this young doctor took a 180 degree turn. He left his secure job and created Bird ICTTM with three employees.

Before entering the competition, Khaled had

already completed an Internet search that had convinced him of the huge potential of the mobile phone market in the MENA countries, estimated at US$3.6 billion. “Our first idea was to develop the IT infrastructure to provide stock market information to mobile users. But we quickly realized that getting the necessary licenses to do this would be fairly complicated and so we switched to another idea: to develop a way to exchange enriched SMS messages at the same cost as the traditional SMS.”

PlusXMS upgrades the form and the content of the electronic message sent from mobile to mobile, from mobile to online users and vice versa. It is an extended messaging service that enables mobile and web users to send and receive rich text messages, and messages in colors with images and portraits incorporated in diverse backgrounds. It is built out of 3 main pieces - mobile pieces that run on mobile phones, web pieces that run on web portals, and an engine that links any web chatting program with mobile phones. In addition to adding ‘life’ to SMS, PlusXMS bridges the gap between mobile and web users when it comes to sending fun messages to each other and will appeal to people who are tired of putting effort into trying to make their SMS look cool.

Khaled presented his new and ‘unique to the world’ solution to potential customers in Egypt and Dubai, where it received an enthusiastic reception. PlusXMS is of interest to mobile service providers and Internet operators because it will generate more ‘traffic’. Companies that partner with Bird ICTTM in the use of this technology will benefit from first mover advantage in a competitive market environment.

In parallel, Khaled and his team designed another product solution for use with BluetoothTM data communications. LongArmTM uses short-range wireless communication systems to allow stores, cafés, restaurants, showrooms, and so on to send advertisements, coupons and other information to potential

customers who happen to be walking nearby. This service already exists in some countries, like Italy and the United Kingdom, but not in Egypt.

During the start-up phase, Khaled also began negotiating a partnership with the Horse Group, a diversified Egyptian holding company with interests

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in water filtration companies, car showrooms, infrastructure contracting, and other diversified sectors, a contact that was facilitated by a member of the jury for the EBF business plan competition. The Horse Group brought LE 2 million of new paid capital into the fledgling but highly promising venture in exchange for 65 percent of Bird ICTTM shares, the rest remaining in the hands of Khaled and his family. For a technology company like Bird ICTTM, having a ready supply of venture capital is very important. Technology applications can take several months of research and development (R&D) to develop and so the company is burning a lot of cash and not generating any revenue.

The partnership opened up entirely new avenues for the young company. “With a consolidated financial situation, we could hire more staff and accelerate our growth pace”, Khaled exclaims. A year and a half after the creation of Bird ICTTM, the first two products, PlusXMS and LongArmTM are completed. “The final versions are ready and we are in the process of finalizing the whole cycle of selling and advertising. A big launching is planned at the end of January 2008, and we have already signed some contracts.”

By late 2007, Bird had 20 employees, including a highly qualified and experienced Development Team at its Headquarters in Alexandria and a small sales team.

But, of course, all of this did not happen so easily. Khaled, who did not have any previous business management experience, had to learn in a very short time how to manage finances, how to deal with staff, how to negotiate with investors and how to approach potential customers with his business case. “For sure, I made mistakes but I tried to learn from them, especially in the human resources field where now somebody helps me.”

Indeed, the major problem was and still is recruiting qualified people. Khaled needs “very dedicated persons” because of the demanding work load and constant pressure for speedy development of the design applications. First and foremost, he is looking for employees who are passionate about IT. Along with recruitment, the other big issue for Khaled is transportation. “We are loosing too much time on the roads. Some employees spend three hours a day driving. Something has to be done to resolve this problem.”

Key to his early success has been a very clear

business model. “We wanted first to collect markets indices, analyze different industries around the world and anticipate the next technological revolution so we could build business ideas to match future opportunities. And then we wanted to implement these ideas in such a way that each one could be handled by an independent, sustainable company under our control.” He has already set up separate companies as 100 percent subsidiaries of Bird to market PlusXMS and LongArmTM and these companies, +XSMS and “iBlue, each will operate with their own funding and staff – basically spin-offs from Bird.

When asked what helped him most, although Khaled replies that ‘everything is in the hands of Allah’, he credits perseverance as his main asset. “The decision to abandon medicine was very hard to take and my family was very much against it.” He is also grateful for the push he received from the Egyptian Entrepreneurs Business Forum because it was the prize that put him on his current track. Finally, his partnership with the Horse Group eased many of the difficulties encountered by the great majority of Egyptian start-ups, especially regarding registration and financial issues. “Almost all of the Horse Group’s associates are experts in their field. They helped me a lot by giving me feedback on my business plans and advice about cash-flow management, and assistance in matters

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such as taxes, loans, and registration. This was invaluable to me.”

Because of this assistance, Khaled was able to concentrate on the strategic decisions related to the design and development of the Bird ICTTM group of products and mobile solutions and on future projects. “My role is to prepare the business plans and to put together the main strategic blocks: technical analysis, product development, marketing, human resources, funding. My priority now is to optimize my business, to make the whole cycle work smoothly and to set up an organization that focuses on client satisfaction.” A lot of attention and constant adjustments will be needed to meet the planned expansion of staff and financial projections for the coming three years.

In Egypt, total sales for PlusXMS should reach LE 17 million during this period, while sales of iBlue solutions should grow by 25 percent annually, an evolution which will require a tripling of the number of employees. On the international front, Bird ICTTM has already opened negotiations to expand into Saudi Arabia and Dubai, where it plans to be operational by the middle of 2008.

The actual growth of Khaled’s ventures is still to be realized but it stands as an excellent example of a high-growth potential early-stage technology company that has taken all the foundation steps to ensure its ultimate success.

The entrepreneur’s advice

“The most important thing is to realize that your employees are your main assets. They deserve to be treated in the most respectful way. If you lose one of them, you lose a lot.”

Business: Bird ICTTM Business development company in the field of Information and Communication Technology whose mission is to create and build innovative business ideas, develop their business models, and deploy them into companies. Year started: 2006 Location: HQ:42, El Batal Ahmed Adb Elaziz St., Mohandeseen, Giza Development office: 203, 2nd floor, Building 2, El-Sayadela Buildings, Nasr St. Somoha, Alexandria, Egypt. With an office at the Smart Village Employees: 20 Turnover: N/A Growth rate: From 3 to 20 employees in the first year Cell: (20 2) 010 746 3738 Ph: (20 2) 3336 1471 Email: info@birdict.com Website: www. birdict.com Other companies:

+XMS Co. (www.plusxms.com) iBlue Co. (www.goiblue.com)

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Deraya Sales Services Ltd. Ahmed Soliman, Partner & Director of Operations Ashraf Zaki, Managing Director Mohamed Shafei, Partner & Director Business Development  

Deraya Sales Services Ltd. is a clear example of a new economy service enterprise. With five offices in Egypt, it is the first company in the country to specialize in offering sales outsourcing to other businesses. In effect, Deraya

handles the sales function on behalf of leading firms, primarily focusing on the real estate, banking, insurance, and IT and telecommunications sectors. Using state-of-the art technology and professional sales teams, Deraya helps client companies extend their market reach and distribution and sales networks.

The three entrepreneurs who started Deraya had already amassed almost fifty years of combined experience in sales, marketing, management, and corporate venturing while working for multinational companies in Egypt, Jordan and Bahrain before branching out on their own. When they finally did, had known each other and worked together for a long time and completely mastered their field of activity. So when it came time to name their new company, they choose Deraya, which in Arabic means ‘knowledge and awareness’.

Ashraf Zaki, Managing Director of Deraya, Mohamed Shafei, Partner & Director of Business Development and Ahmed Soliman, Partner & Director of Operations are all university graduates – Mohamed and Ahmed with Engineering diplomas from the American University in Cairo (1993) and Ashraf with a Commerce degree from Ain Shams University (1984). (Mohamed later also obtained a Masters degree in Business Administration and Ashraf a diploma in computer sciences). Upon

graduation, Mohamed and Ahmed joined the sales department of Procter & Gamble where they found themselves working under the supervision of Ashraf Zaki.

After working together at P&G for a few years, Citibank recruited them to set up a subsidiary company that would sell Citibank financial products. So, in 1998, the three of them ended up as the co-founding team of Citibank’s new subsidiary, Consumer Finance, a financial services distributor with the goal of penetrating the Egyptian market with a proactive sales force. This was the very first telesales unit in Egypt and eventually grew to a team 400 sales professionals.

“We were selling Citibank Credit Cards and personal loans in a very proactive way. While our competitors were waiting for the clients to come to them, we visited them in their offices. And we boosted sales by simplifying the procedures and accelerating the decisions on loan applications” says Soliman. “The project was a big success and other financial institutions were asking us to do the same for them.”

When they were offered a contract by the Egyptian American Bank (EAB) to handle the launching and sales of EAB’s credit card, this was enough incentive for them to make the jump into their own business. Believing this was an ideal opportunity and that they had the experience and knowledge to pursue it, in May 2002, the triad resigned from Citibank to create Deraya - the first provider of sales service in Egypt. They didn’t have a big vision at the time, but they did have a lot of experience, a lot of confidence, and a two year contract with their first big client, which they were sure, would lead to others.

Their financial resources were very limited and the payment terms of the EAB contract was a commission on paid sales. Although the Deraya team could work from offices on the banks’ premises, the three partners were taking all the upfront risk. They had to hire a sales team, cover overheads, and set up systems. “The beginning was very hard. We were struggling to survive. Each month, we wondered how we would pay our staff, 40 employees at this time”, adds Soliman.

Over the next two years, Deraya picked up some new contracts, hired another 20 people, and reached a turnover of LE 2.4 million, but the EAB contract was their bread and butter. When the contract was not renewed at the end

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of two years, Deraya went into a bit of a tail-spin. “It was a big shock. We had to very quickly re-deploy our employees on other projects. Fortunately, although EAB was our biggest client, it was not the only one.” They also needed to quickly find themselves an independent office location!

They survived this difficult period by bringing in a ‘silent’ partner who did not assume any managerial responsibility in the company, but brought in some equity. The partners also succeeded in negotiating more favourable contract terms with their new clients. “Now the majority of our customers pay us on a cost basis plus management fees”, Ahmed advises. A lesson well learned in negotiating contracts and anticipating cash flow needs!

Today, Deraya’s vision is to be the leading sales service provider in the Middle East and North Africa targeting four sectors: banking, insurance, IT, telecommunications, and real estate. The company works with prestigious clients including BNP Paribus, Xerox, Vodafone, Linkdotnet, Microsoft, Bupa (a UK company that ranks first worldwide in private

medical insurance), and real estate developers such as Mountain View, as well as the Egyptian Housing Finance Company. The company provides its clients with a full range of services related to sales activity: direct sales, telesales, showroom sales (for real estate) and

retail sales. For example, Deraya has sales kiosks in Carrefour centres where dedicated teams market personal loan offers for BNP Paribas. Through Deraya sales, potential customers can obtain information on and order products as varied as Xerox printers, Push to Talk and mobile email phone services, internet services, Microsoft products, wireless routers, real estate financing, car loans, insurance and residential properties. All of this is facilitated by a fully automated sales system and back-office support.

Deraya has grown to 200 employees in 2007 with turnover of LE 16 million. “We have been in this sector of activity for a long time and built a good reputation and an extensive network”, Ahmed stresses. This business model of outsourcing the sales function is becoming a new paradigm for the 21st century business. “When companies delegate this business to an expert who concentrates on this unique activity,

they benefit from increased efficiency and flexibility. And they choose us to help them because we have mastered the whole sales structure - the selection of sales professionals, their training, and the rewards system for good performers”, Soliman explains.

Besides having different management roles in the company, Ahmed, Ashraf and Mohamed each take a leadership role for developing key sectors of business such as real estate and banking. In fact, they have established two subsidiaries: Deraya Banking Service, SAE and Deraya Real Estate Marketing, SAE to capialize on specific growth opportunities in these two sectors. The competencies of each partner fully complement the other and this partnership has worked very successfully for the growth and development of their businesses.

Deraya’s financial picture has improved considerably since the early days of the business (paid-in capital for the three Deraya operations totals LE 2.5 million), but the company continues to have difficulty with recruitment of new employees. “We are encountering more and more difficulty to find high calibre people with a university degree. “It’s a continuous struggle”, Ahmed laments. Since having a professionally trained sales force is a key success factor for their business, Deraya has had to be innovative in ensuring an ongoing supply of future sales executives. To deal with this challenge, the three Deraya partners have implemented the Deraya on Campus Initiative, a very novel approach to recruiting top university graduates, while at the same time, investing in the creation of future business leaders.

Through this program, Deraya aims to train 1,000 of the best students from Egyptian universities into proactive leaders with a business perspective and a sense of responsibility. Students are offered interactive training sessions on communication and interpersonal skills and practical experience in persuasive selling, resume writing and succeeding at job interviews. Qualified Deraya trainers teach them how to apply basic selling skills to market various products in different fields, after which the students gain practical skills in meeting customer needs and closing deals by selling products that are actually sold in the marketplace to customers in and around the university location. Those students who screen through a series of tests and interviews are then given the opportunity to join the Deraya sales team for a month where they specialize in selling one of Deraya’s products.

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Some of these trainees then become full-time employees.

To retain its workforce, Deraya creates a dynamic work environment where employees are encouraged to reach their true potential and exercise their leadership skills and innovative abilities, paying them a base salary plus performance bonuses based on sales. To Ahmed Soliman and his partners, the investment is worthwhile. “Our employees are our only asset. They are the ones who generate business”, he says.

Deraya continues to grow rapidly and will very soon move its five offices into one building in Heliopolis where it will take up three floors of office space totally 1,500 square meters. Immediate plans are underway to hire a human resource specialist and an expert who will develop the IT infrastructure and optimise their customer database. “Our database is a real treasure. Imagine, each sales executive contacts five new clients every day! We want to better organise this information,” states Ahmed.

In the coming years, Deraya will focus on its two main priorities: bringing in new clients and consolidating and upgrading its activities. “We are increasing our capital to LE 500,000 and reinforcing our management structure”, explains Ahmed. As part of their future plans, the three partners are also considering creating a holding company structure that will control three operational entities, one dedicated to the banking sector, one to the real estate sector, and the third to retail. Over the next three years, Deraya will also keep an eye on opportunities to expand into the regional Middle East market. “We are not in a hurry. We will go there once we are ready with export managers and the right local partner.”

In terms of the operating environment for businesses in Egypt, Deraya does not have many complaints. Apart from seeking external legal advice regarding aspects of business registration and bringing in a silent partner, the company has not encountered any major problems in ‘doing business’. However, Ahmed does emphasize some changes that he believes would help companies like his that are trying to develop and grow within the Egyptian context.

First of all, he suggests that authorities need to invest more in improving the educational level of Egyptians. Secondly, accessing information is a big problem. “To be strategic, we have to have information about demographic trends and markets. Maybe it exists but we do not know where.” Finally, there is a need in the field of training. Deraya’s partners and senior staff now deliver all of their own training but are becoming too busy and would like to contract out to external sales trainers. According to Ahmed, there are few competent suppliers of this kind of training service in Egypt.

The entrepreneur’s advice

“In a country like Egypt, which is still extremely underdeveloped in terms of service and quality, there are a lot of opportunities for SMEs. But you have to be different, to offer something unique, either a product, service or an expertise. There should be a reason why you stand out in the midst of competition.”

Business: Deraya Sales Services Leading sales outsourcing company in Egypt, offering sales services to a variety of industries, including banks, telecommunications, insurance and real estate companies, through an extensive direct sales network, telesales operation, retail sales system, and event management capabilities. Year started: 2002 Location: 4 El Sad El Aly St., Dokki, Giza, Egypt (5 locations in Cairo) Employees: 200 Turnover: LE 16 million (2007) Growth rate: Average annual growth of 77% in employment and 188% in sales for the past three years. Ph: (20 3) 762 0221 Fx: (20 3) 748 0331 Website: www. deraya.net Other companies: Deraya Banking Service, SAE; Deraya Real Estate Marketing, SAE

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Educational Projects Company (Edu Fun) Ahmad El‐Shawy, Chairman 

The Egyptian toy market is served by a handful of small-scale local producers trying to compete with imports of Asian-made standard toys, with a local consumer base that is turning more and more to

Western-inspired ‘educational toys’.

Local toy manufacturers admit they cannot compete with Chinese supremacy in the business. China commands around 90 percent of the global toy market share. In this market, Edu Fun, now Egypt’s largest toy producer and exporter, stands apart. By concentrating on certain items, investing in the use of innovative materials and finding the right customers, Edu Fun’s master entrepreneur and Chairman, Ahmad El Shawy, has proven that Egyptian manufacturers can thrive in the local toy market.

Ahmad grew in a family of ‘education entrepreneurs’ that founded the Manara schools in Saudi Arabia and Egypt, one in Cairo and one in Damietta. It was known for its expertise in schooling and in the design of educational establishments. Ahmad studied architecture in university and after graduation worked as a salaried architect for three years before deciding to join the family group. Only 26 years old at the time, Ahmad applied his talents as an architect, building a reputation for himself by developing an entirely new activity: the production and export of pre-school educational toys and furniture.

Today the Edu Fun brand of educational toys and pre-school furniture is globally known. In 2007 the company employed over 280 workers, was exporting 60 percent of its products to more than 30 countries, mainly in Europe and the Middle East, and opening new markets yearly.

How did all this happen? “The market for educational furniture and toys was virtually non-existent in Egypt and the Arab world at the time,” explains Ahmad, “and we thought it would be a good idea to go into it because it complemented our other activities.” His first idea was to import and distribute educational products and supplies, but when his search for global suppliers of quality products proved very difficult, he decided to go into production himself. Not knowing anything about the industry, he first looked for a foreign partner with technical knowledge. When this search also proved unsuccessful, he re-engineered research methods to set up a production operation from scratch. In 1990, he rented a small workshop in Cairo and hired five employees – this was the beginning of Edu Fun!

A year later, he moved into his first factory (bringing four workshops together) and increased his staff to 12, producing mainly for the domestic market.

In 1996, Edu Fun participated in the

Nuremberg Toy Fair, the biggest toy expo in the world. “It was a big shock”, says Ahmad. “Imagine a 6-day event that attracts almost 70,000 visitors. So from this time, we decided to concentrate on export.”

With assistance from the Private Sector Development Programme, which became the Industrial Modernization Centre (IMC), Ahmad hired a foreign consultant to do the business plan to reorient the company to the export market. “We had to create an Export Department, to familiarize ourselves with export procedures and international requirements, especially those of the European Union, and to build a distribution network.” Attending trade fairs was the key to attracting customers and, during the next three years, sales and employment both increased dramatically. By

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1999, Edu Fun had established itself as an international market brand.

Ahmad next created a Development & Design Department that now employs 10 professionals with industrial design and art backgrounds. Thanks to this in-house capability, Edu Fun has developed its own line of educational products with concentration on an adapted Middle Eastern line featuring characters with black hair and eyes, and local landscapes and scenes.

“It took us ten years to really master our know-how and to be able to compete in the international market”, stresses El Shawy. Why such a long period? “On the technical level, we had to learn everything by ourselves, how to produce, on a miniature scale, resistant and colourful products that conform to the European Union’s strict security rules.” To meet international standards, Edu Fun has to import 75-90 percent of its input materials; non-toxic paints come from Germany, glue from Italy, wood from Romania. He learned this lesson the hard way. In 1997, he lost a US$100,000 order to a US company after his toys were found to contain high levels of toxins in their paint. And when he attempted to switch to locally-purchased glue a few years ago, he was hit with the hard news that his products were falling apart after they arrived in Europe and the Gulf. Meeting international quality standards is an absolute MUST for his company’s reputation and survival!

Ahmad credits the ability of his company to

produce educational toys that meet European quality standards at Chinese prices as the main factor behind Edu Fun’s success, combined with proximity to European markets, flexibility and cost control. “We can ship to Europe in two to seven days while it takes 45 days from China. We are willing to work with small quantity orders

and we do the importing ourselves so we can keep tight control on costs”, he explains.

Although Edu Fun had to solve most technical problems by itself, fortunately, it got assistance in other areas of the business, particularly with non-technical training and business plans (he has done three business plans in fifteen years). Since 1997, El Shawy and the export team attend regularly specialised seminars. “For the last four to five years, we have been going to one-week general training delivered by international experts invited by IMC.”

On the financial level, with an initial capital of LE 3 million, mostly from family sources, Edu Fun didn’t ask for credit line facilities until the big turn of the company in 1995. “In Egypt, banks have the reputation of working with the healthy enterprises and asking for a lot of guarantees. So we waited until we got the knowledge to deal with them. It is a long process; you have to build good relationships.”

Recently, thanks to accumulated profits, a

capital base of almost LE 14 million, and an order book in advance for the next three to five months, Edu Fun can self-finance the factory’s expansion that will be completed in 2008. With a tripling of production capacity, the company will have the technical means to realize its big project for the coming years: launching a new brand of pre-school educational toys and furniture.

“It’s our own creation, a collection that we will distribute worldwide through our existing distribution net-work. Our development and design team worked on it for two years, with the help of an international designer that we found and paid for with IMC assistance,” explains El Shawy. Production will start in 2008 and everything should be ready for launch in 2009. The new factory will have potential to bring production numbers close to 100,000 units per

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month, a volume that would require the services of up to 650 workers!

“The reason we are expanding is because

we are convinced Arab countries are underdeveloped in this field compared to Europe and North America. Long term, they hold more market potential because they possess high population growth rates compared to countries like France and Germany.” The size of the Middle East toy market is an estimated US$1.5 billion per year with an annual growth rate of 11.8 percent. The yearly expenditure per child on toys and video games in the Middle East is an average of US$327, which makes it twice the level for children in Europe and the second largest spending after North America. The region has one of the world’s fastest growing populations, rising at over 6 percent annually. The number of kindergartens and play centres in the Arabian Gulf States has more than trebled in the past five years, and the number of available places for primary school education has grown by 37 percent. The opportunity is staggering!

As an importer and exporter, Ahmad sees a big improvement in the operating environment in the last five years or so. “The situation before 1999 was terrible; since then it has improved at a quick pace. But it is still a long and complicated process to obtain a production or construction licence.” Edu Fun is also challenged in the area of staff recruitment. “We have serious difficulties to find employees at all levels, workers and managers. We are losing them to the Gulf countries.”

El Shawy has several suggestions for accelerating the rate of business and economic growth in the country. What’s needed, he says, is an engine that will help technology transfer and training at all levels. He calls for equipment funding schemes and campaigns promoting Egyptian industries and products and the industrial advantages of Egypt.

But he adds: “It is important to provide decent conditions of work and life for our people, especially in the disadvantaged areas. This will help to create a climate of peace and security and will discourage outmigration while inciting expatriated Egyptians to come back and use their capabilities here.”

The entrepreneur’s advice

“Be serious. Fight for your ideas. If you want to go into production, you have to accept that is not a fast track, especially if it is not an extension of a family affair. It will take five times more effort than in trade.”

Business: Educational Projects Company (Edu Fun) Manufacturer and exporter of school furniture, playground equipments & educational toys for kindergartners and grade-schoolers. Year started: 1990 Location: 27th Mohamed Tawfik Diab St- Makram Ebid St., Nasr City, Cairo Employees: 280 Turnover: LE 15 million Growth rate: Average annual increase in employment of 25-30% Ph: (20 2) 270 7649 Fx: (20 2) 270 7571 Email: edu-fun@edu-fun.com edu-fun@talimia.com Website: www. edu-fun.com

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Egyptian Traders Company  Ashraf El Attal, Chairman and CEO 

Ashraf El Attal grew up in a family textiles business and was exposed early to the private sector world of trading. In fact, after he graduated from the University of Alex-andria with his Mechanical Eng-ineering degree, he spent two years

working for the family enterprise before deciding to spread his broader wings by joining one of the world’s top petroleum companies. “The most important thing I learned while working for five years as a field engineer with Schlumberger in Saudi Arabia and in Asia was the importance of dealing with people and of exposure to different situations. I wanted to apply this experience in my country despite the advice of my friends who thought it was impossible”. So at 29 years of age, Ashraf abandoned his promising career in the petroleum industry to create his own enterprise.

Ashraf, now Chairman and CEO of Egyptian Traders Co. S.A.E. (ETC), the company he established in 1992, saw an opportunity in the trading of food and agricultural products, a sector in which Egypt holds a comparative advantage. He made up for his lack of experience in the field by choosing a partner who already had a track record and a good knowledge of the Egyptian market. This decision proved to be very judicious even if the two of them later parted.

Today, ETC is distinguished for being a leading trading house within its sphere of business, specialized in rice, wheat, and sesame seeds, alongside trading in coffee, sorghum, wheat flour, urea, bitumen and cement. In a little more than a decade, Egyptian Traders has become the number one Egyptian company for rice exports in Egypt, and the number two company in wheat trading. Turnover has risen exponentially, from LE 9 million in 1994 to LE 110 million in 1998 and to LE 1 billion in 2007. By 1998, the company, which started with just Ashraf and his partner, had hired 20 workers, by 2002, employed 50, and by 2007 had more than doubled the payroll to 114 workers.

So what is the genesis of this rapid growth? Initially, with just the two of them, they started by exporting fast food products, like ready made soups and consumer goods, to other parts of Africa and Saudi Arabia. Things were slow in the beginning. Finance was a big constraint. “Our initial capital of LE 200,000 was insufficient to cover our financing needs and we had a very difficult time for a while”, Ashraf explains. Fortunately, he was able to persuade his clients to make cash advances and to obtain a credit line from a bank.

Then one day, a lucky incident occurred! In a casual conversation, one of his clients mentioned that he was also interested in buying rice from Egypt. “So I said we could easily handle this for him”, Ashraf opportunistically exclaims. “At first, my customer was reluctant because it is not such an easy business and we had to prove our reliability.” Ashraf reflects on this opportunity as being a major turning point for the company.

Indeed, rice trading now accounts for 90 percent of his business, a huge feat since this sector is a very competitive environment dominated by big players. But our young tycoon “likes challenges” and thought that if he worked hard, he could succeed to take not just a little piece of the pie but a big slice! The evolution of the business showed that he was right. With rice exports jumping from 4,000 tons to 200,000 tons between 1995 and 2007, he was able to secure a big share of this rapidly expanding market using a combined strategy of lower prices and better service.

During this period, Egyptian Traders moved into wheat trading as well and broadened its customer base by selling not only to private customers but to big non-governmental organizations (NGOs), such as United Nations (UN) agencies involved in food aid distribution in countries like Palestine and Sudan. This new

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market had different needs than the first one, explains Ashraf. “These organizations are a salvation to hungry people, and their main concern is that food arrives to deprived and disaster areas on time. Logistics is the name of the game.”

To learn more about this market and to improve his knowledge of what was expected, Ashraf attended many seminars and workshops. He also contracted foreign experts to come and deliver in-house training to update the competencies of his staff on topics such as trade legislation and he continues to invest in the knowledge development of his employees by sending them abroad to attend specialised conferences.

For Ashraf, one of the main difficulties was, and still is, attracting and retaining the most qualified people. “From the beginning, we were very selective. We wanted to work with the most qualified individuals but we couldn’t pay wages as high as the market. We succeeded in creating loyalty by offering incentives, in addition to a good, supportive working climate. And we invest a lot in training.”

But as the company grew, new problems

arose. “It became necessary to clarify our vision and to properly structure our operations.” Ashraf asked a friend who had just completed an MBA in Switzerland to help him reorganize the company. “In the beginning, job descriptions were vague and we had to address this issue. We created an organization with a clear division of responsibilities and several departments, each in charge of a specific aspect: sales, marketing, finance, and logistics. This was not easy because some of our people were reluctant to change.”

He also made the strategic decision to concentrate on rice, wheat and commodities trading and to abandon all secondary prepared foods product lines they had started with. And

to better position himself in the African NGO market, he opened a trading house in Sudan in 2001, the El Ahram for Development Co. Ltd., which engages in food aid supply to UN organizations worldwide.

With success of the company, the financial situation changed a lot. “We became a good prospect for financial establishments and we are currently dealing with 15 different banks.” This is good news for this high-growth company since its next challenge is to build the infrastructure necessary to further expansion. He will need a sophisticated logistics and transportation system as he seeks to have more control over the movement of his commodities from the field to the end buyer. “We are improving our systems - IT, maintenance, control – and preparing a large investment program, which involves building our own silos in several Egyptian ports and setting up a fleet of ships and trucks.” He plans to use retained earnings and leasing to finance this expansion. With an up-dated warehousing, distribution and logistics infrastructure, Egyptian Traders will have the system in place to realize Ashraf’s vision of becoming the number one trader in the Middle East.

A goal too ambitious to achieve? Not for Ashraf El Attal who from the beginning had a long term vision of what he wanted to accomplish, and is convinced that this is a key factor in his success. Of course, he adds that many other factors have been critically important in achieving the growth of the company: the preparation of business plans in order to prioritize actions and evaluate financial and commercial implications, the strong links established with clients and customers, the focus on quality, and finally, the importance given to the recruitment and training of the best staff. This last element will be more critical than ever, considering that the company is planning to

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double the number of employees again over the next 5 years, to reach 200.

Ashraf’s first advice for other business owners who wish to grow is to have a vision and to plan. “It is necessary to anticipate growth and to take the necessary steps, particularly to hire and train the right people.” The second piece of advice is to avoid isolation. “If they prefer not to merge, they should find some ways to benefit from the economies of scale and synergies that pair off with size.” This strategy of sharing resources and risks with other companies has worked well for Egyptian Traders and he advocates the setting up of collective buying groups or business services, as examples.

And although Ashraf had many complaints about the operating environment for private enterprises during his first ten years in business, he notes that it has become more supportive over the last five years.

Now 44, he owns three companies with offices in Alexandria, Cairo, and Khartoum, trades all over the world, and is active in many business and industry associations and economic development forums. He is an outstanding example of what can be achieved with vision, planning, strategy and a key eye for seeing opportunity and going for it!

The entrepreneur’s advice

“Anticipate growth and take the necessary steps, particularly to hire and train the right people.”

Business: Egyptian Traders Co. S.A.E. International trading house specializing in commodities, agricultural products and food aid supplies. Year started: 1992 Locations: Tower 1, Wataneya Complex, 14th of May Road, Samouha 21615, Alexandria; and 42, Abdel Moneim Riad St., Mohandesseen, Cairo, 12311. Employees: 114 Turnover: LE 1 billion (2007) Growth rate: Averaging annual growth of over 60% in turnover and 40% in employment Ph: (20 3) 382 2260 Fx: (20 3) 382 2227 Email : cairo@egtraders.com Website: www. egtraders.com Other companies: El Ahram for Development Co. Ltd., a trading house based in Sudan (2001) and Prima Soft Co., an IT and software development company (2002). Affiliations: Deputy-President of the Grain & Feed Trade Association (GAFTA) in the UK; Chair of the Egypt-Brazil Business Council; member of the World Economic Forum (WEF), Egypt’s International Economic Forum (EIEF), and the Egyptian Junior Business Association (EJIB); Honorary Consul of Brazil in Alexandria.

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Femina by Heba El Shenawey Managing Director  

Femina did LE 25 million in sales in 2007, but the business started from very humble beginnings only seven years ago. The owner of Femina, Heba El Shenawey, opened her first store, in 120 square metres

of rented space in the Heliopolis area with about 500 pieces of inventory in the fall of 2000. At the time she was still working in product management with Glaxo, the big drug company, a job she had taken after spending a disenchanted year as a practicing dentist, which was what she studied for at Cairo University.

Her foray into entrepreneurship was quite fortuitous. When she started her Plaxo job, she found that businesswomen wore more classic dress styles than she was used to. Unable to find much of what she wanted in a wide range of styles and sizes within Egypt, she shopped in places like Istanbul and Paris where she found a much broader selection of the right clothes for her new work environment at Plaxo. And that’s when the idea came to her, “why not import some of these clothes and retail them to other women like me in Cairo?” And that’s what she did!

After four or five months of being in business, Heba realized that she would have to quit her Plaxo job and became a full-time entrepreneur if she wanted to build a brand for her nascent store. Before long, she realized that her imported women’s wear didn’t quite match the preferences of her Egyptian customers and decided she would have to design and manufacture her own line of clothing! But, to support the output of even a small factory, she would need more retail capacity, so she opened a second store in Mohandessin, this time with 300 square metres, and set about designing the garment styles and accessories she wanted. She only had four employees at the time.

Within a year, she opened a factory in a small rented apartment in Giza with 15

employees. She brought in specialists and experts to train her workers in quality production and enrolled in courses in marketing, retailing, and fashion designing because, as she states, “that part wasn’t my base – I just had the talent to choose good clothes!”

“After the factory started, everything changed - my colors, my styles - and women started coming to shop at my stores from all over Egypt.” Eager to meet the growing demand from women in other parts of the country, she soon opened a third retail outlet in Alexandria.

“Initially I just wanted a small shop. I didn’t want a factory and a big store. But when I saw that women needed my designs, I felt it was my role to make products of high quality, fashionable design and reasonable price.”

By 2007 she had seven stores, five in Cairo and two in Alexandria, had moved her factory into a much bigger rented space and secured a warehouse. Employment in her manufacturing, distribution and retail operations had grown to 230, working in two shifts a day. Sales have grown exponentially from LE 284,000 in 2001 to over LE 14 million in 2006 and to LE 25 million in 2007. Heba’s factory produces over 80,000 garments each season – a full line of casual, smart casual, classic and evening wear, a line of modern hijabs for Muslim women, and accessories.

In the past year she doubled her production

capacity by adding 50 new machines in her factory, and has plans to double that again! She also added a new department for jersey knits in her factory, starting with 10 high-speed machines. “We buy our equipment as “assets” not expenses – and that’s how we build our business.” “I gained a lot of experience negotiating with international companies to get

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my new machines”, she adds. “This was a new experience for me. I went to machine exhibitions for the first time and had to take specialized courses in fabrics in Milan.”

Besides manufacturing for her own stores, to which she supplies 75 percent of the stock, Heba has started to exploit the contract manufacturing potential of her factory, filling several orders for custom uniforms over the past year, which have also contributed to growing sales. For the remaining 25 percent of her inventory, she imports from suppliers in Turkey, Hong Kong, China and Europe.

So how did this young 31-year old woman with no business experience make all of this happen? To raise the LE 100,000 it took to open her very first store, she pulled out all stops - sold her car, took all of her savings, and borrowed privately. She rented factory space to minimize the capital investment and used a credit facility to pay for machines, equipment and inventory.

But as she says, “It wasn’t easy to create a new brand. In the beginning I had lots of

problems with cash flow and had to borrow money from my husband and father to get me through some crisis periods.” Her husband, who has an accounting and retailing back-ground, was able to offer her

useful advice and handle all of the complex licensing, legal and tax issues.

The key to her success so far has been a well-executed strategy that includes attending international fashion trade shows to stay abreast of the latest designs, colors and fabrics; advanced stock management systems; a just-in-time distribution system; innovative merchandising; and employee development programs. In 2007, she completed the installation of a state-of-the-art computerized management information system integrating data from point of sale in all of her stores through to her production and warehouse facilities with video links to all of her stores. Now, she says, “With one phone call, I can know exactly what my sales and pro-duction figures are and what

inventory we have in stock”. The new system has increased the overall effic-iency of her operation and led to a direct increase in sales, well worth the LE 250,000 investment she had to make. Heba also boasts an electronic data-base of 75,000 customer names that enables the Femina to com-municate special offerings to its customers using SMS.

To deal with her growth in the past year, Heba has had to do some restructuring of the management of the company. It was time to create a middle management layer with separate departments for sales and marketing, production, warehousing, fashion, operations, IT, and administration and finance. “I have had to become more decentralized and delegate more to my managers. The computer system has helped to link up the whole network, but I have had to give up more authority for decisions to others and invest in training them to assume it.”

Coming up with new ideas to feed the growth of her young company is not difficult for Heba, but financing and recruiting new employees are still major challenges. “Expansion needs a lot of money”, she stresses. “We have to manage our cash flow very carefully; in fact, I have one staff person dedicated full-time to monitoring cash flow.” It is very helpful that her bank has now agreed to accept her Point of Sales as security for her credit facility, which has been a major development for the company. And Heba has implemented many benefits to retain good staff – medical insurance for all employees, training and development opportunities, and regular company planning retreats. And it seems to be working. Her staff turnover rate is only 2 percent. And because her garment company is for women, most of her managers are also women. “I like the fact that I can give young women an opportunity to work in the private sector so they can learn responsibility and gain experience.” But she still insists it is hard to find new employees who are willing to work hard and grow with the company.

Heba has an aggressive future growth strategy. First of all, she will continue to build the Femina brand by opening up new retail branches and is working on two new design lines

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– the “C&C” line to appeal to an elite customer base that wants more classic styles, and a new line for younger girls. In 2008, she will to move to a bigger factory space and launch a strategy to start purchasing some of her retail locations, a decision which will require a search for more investment capital but give her more control over costs in a spiralling rental market.

She is exploring the new retail concept of ‘shops in a shop’ and negotiating to buy ‘corners’ of larger stores for the Femina brand and her new lines, and at the same time planning the Egyptian launch of her recently acquired franchise for the well-known Turkish ADIL ISIK brand.

Heba was up against much more established

competitors for these franchise rights and the negotiation took over a year to complete. “It’s like a dream come true to finally have this brand in Egypt, to have this franchise. This is a big step for me but it’s something I have wanted for a long time.”

In the spring of 2008, she will be opening the first 170 square metre ADIL ISIK retail location in trendy Mohandessin. This new brand, which targets a different demographic than Femina stores, will allow Heba to expand her share of the ladies’ wear market.

She notes that the environment for entrepreneurship in Egypt has improved a lot over the past couple of years, especially the regulatory environment. “I think there’s a new spirit in the country, a more open market.” Egyptian companies are now allowed to import garments without having to be located in the Free Zone which has helped a lot with her next expansion plan, even though importers still have to comply with many labelling and customs procedures. Since Heba imports about 25 percent of her retail merchandise, she has had to train her foreign suppliers how to label, pack and ship garments to meet these Egyptian customs

regulations. “It was difficult at first, but now they all know what we need”, she adds.

However, Heba is the first to point out a number of deficiencies in the marketplace. “We need more credit facilities, more companies that can deliver professional training in management and IT, and more companies that can help us recruit good candidates for entry-level positions”, she points out. “And because we lack data and information on markets in Egypt, we need more professional companies who can make studies of the different markets and how they are changing. This would help us all to know more and benefit every company.” As it is, she invests a lot of time keeping tabs on what competitors are doing and learning as much as she can by watching the big international companies.

Five years from now, this young entrepreneur’s vision is have Femina stores all over Egypt, two or three sister companies in fashion and garments, her new franchise at the same level of success as Femina, and maybe another venture not in the garments sector. Obviously Heba El Shenawey is not content with the ‘status quo’.

The entrepreneur’s advice

“Never stop learning. Make use of up-to-date IT systems. Be open to criticism and always work to improve. And delegate, delegate, delegate!”

Business: Femina by Heba El Shenawey Designs, manufactures and retails fashionable clothing for the Egyptian woman through a chain of company-owned and branded stores Year started: 2000 Location: Head Office: 45, Abdel Razek El Sanhoury, Nasr City Seven retail locations in Cairo and Alexandria Employees: 300 Turnover: LE 25 million Growth rate: Exponential Ph: (20 2) 2 671 1684 Fx: (20 2) 2671 1684 Email: femina@femina-eg.com Website: www.femina-eg.com Affiliations: Member of the Egyptian Businesswomen Association

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L’Aroma Gourmet Ahmed Gaafar, Chief Executive Officer (CEO) Nadder Montassir, Chief Operations Officer (COO) Yehia El Ghamrawy, Chief Financial Officer (CFO) 

The story of L’Aroma Gourmet is the story of how three young entrepreneurs modernized the old Egyptian coffee shop concept and established their own brand that now competes with the international chains.

Ahmed Gaafar, now CEO of L’Aroma Gourmet, studied Mass Communications at the American University in Cairo (AUC), as did one of his partners, Nadder Montassir, COO. The third partner, Yehia El-Ghamrawy, CFO, earned a degree in Construction from the same university. This is where they met and became friends. After graduating, they each went their separate way. Ahmed worked for Nestle’s in Barcelona, Nadder was recruited by the Dubai subsidiary of an important American IT company, and Yehia took a position with an advertising firm. But the three old buddies continued to meet regularly and when they did, talked about their common dream – to own their own business. Seven years passed.

They were in their late twenties when they made the big jump, finally deciding to go into the food and beverage retail business. “We recognized a big potential for a serious, decent and good quality coffeehouse, a place where people didn’t just consume coffee but could meet and chat as if they were in their living room,” says Ahmed Gaafar, who besides being CEO of the company, is in charge of marketing and human resources.

First they looked for a franchise and were shorted listed by some chains, but in the end thought it would be more interesting to create their own concept instead of having to follow a standard franchise model.

The team already had experience in advertising and marketing but didn’t know anything about making coffee, and that’s where they would need to acquire some quick expertise. They asked an American expert with 19 successful experiences in launching coffee shops to tutor them about the whole process of making a good coffee. After six months they had gained lots of theoretical knowledge but still didn’t have any practical experience. So they started to make coffee for their friends, testing flavours and prices. “For three months, whenever we heard of an event, party or competition, the three of us went and served coffee,” laughs Ahmed. “At the end of the pilot period, we came to understand how the consumer thinks and took all that feedback into consideration when we opened our first shop.”

Next they went on a search for the finest coffee ingredients, but found it difficult to interest local importers in doing business with them. After all, they were young with no track record and no stores open yet! So the partners looked abroad for the best coffee bean they could find that would appeal to Egyptian taste. They found the right coffee supplier in Italy, negotiated an exclusive distribution agreement for Egypt and set up a sister company to manage this, employing a similar approach for the other ingredients they needed.

Finally, in 2003, they opened the first

L’Aroma Gourmet outlet at the El Gezira Club in Zamalek, starting with four employees. To win the Gezira bid, they partnered with a bigger company who would manage the food part of the venture while L’Aroma concentrated on the coffee and desserts.

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In 2004, they opened two more outlets, one

in trendy Mohandiseen and the other on the Greek campus of the AUC. The following year, they opened a second AUC location on the Main campus. “I am very proud to say that we were, and still are, the only vendor inside AUC,” says Ahmed. “To get the first location, we had to keep knocking on doors until they said yes; the second time, they asked us to come.”

They added food items to the menu - sandwiches, pastas, and wonderful desserts - and each of the following years, opened more outlets. “We have two types of stores: community outlets, like the ones inside schools

and sports clubs, and street stores,” Ahmed explains, “and have started experimenting with other concepts.” For example, they introduced their first coffee drive-through on the Cairo - Alexandria Desert Road and will test the idea of offering a coffee delivery service at

existing outlets. L’Aroma also provides services to some big companies – for example, a L’Aroma corner is dedicated to Mobinil staff and they have locations at Orascom and Linkdotnet headquarters. By the end of 2007, they had created a chain of coffeehouses - 10 outlets in and around Cairo and two in lovely Sharm El Sheikh, with plans to open up in Hurghada.

Naturally, opening up new outlets has fuelled growth. Sales have been increasing at a

rate of 65 percent annually, and by the end of 2007, they had 70 staff. But the old outlets are also contributing to growth. “Gezira Club sales are still increasing,” quips Ahmed. Interestingly enough, when L’Aroma lost the Club’s bid when it was reissued three years after they won their first contract, the outlet had succeeded so well in building customer loyalty that Club members asked the Board to give us another location. So we are still there!”

Such loyalty has been gained through hard work and constant attention to quality and details. “Our business is not just about serving coffee. The way we do it and the environment we create matters a lot.” Indeed, the key principles on which L’Aroma Gourmet does not compromise are quality, consistency and customer satisfaction. And of course, this means keeping employees happy as well. “In my opinion,” says Ahmed, “the attitude of staff is a reflection of the leadership. We treat them with consideration and we try to make them understand that they are not a simple extension of the coffee machine. Before they deal with any customer, we out them through an orientation course where we teach them all the basic ‘do and don’t’ rules.”

Ahmed credits the ability of his coffee chain to survive and grow in the rapidly evolving competitive environment to these principles. “Five years ago, competition was very limited. Now almost all the big coffee franchise names are present in Egypt. When one of them opens an outlet near us, we observe a temporary decrease in sales, but after a few weeks, the situation returns to normal. Our customers always come back.” He believes that L’Aroma has an edge over the larger franchises because of its cozy atmosphere, friendly service, and flexibility. Multinationals abide by strict formulas for their coffee, whereas L’Aroma is more than happy to change its recipes to cater to its clientele, who they often involve in pilot tests for new menu items or formulas. Still, Ahmed feels that the conditions of competition are not always fair. “When it comes to getting a location in one of the new malls that are opening in Cairo and in other cities, international franchises are given priority.”

Growth has not been without its challenges. “When we were a start-up, our problems were at the micro level, tiny things, like not running short of milk. Sounds mundane, I know, but that’s the operational detail you are consumed with when you open your first outlet. As we

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grew, we had to focus on becoming more organized. We had to develop procedures for inventory control and reporting, and establish an IT system,” explains Ahmed. “Today, 97 percent of the difficulties that we experienced in the early days have been solved. Now when something goes wrong, it is usually taken care of by the operational manager of the outlet.”

And with growth, they have had to enlarge the company’s perspective. “In the beginning, we had business plans for three years, now the reference period is five years. The only challenge is being able to gauge money over such a long period.”

What will L’Aroma Gourmet’s picture look

like in four years? In projecting the vision for the company, Ahmed confidently asserts: “In 2011, we will have 500 employees and outlets all over Egypt, an expansion which we will self-finance by reinvesting our profits, just as we did in the past. And we will have a sister company that will retail a second brand, but always in food and beverages.” He keeps the details secret for the moment, just adding that the preparation phase is almost finished and we can expect to see a launch of something new later in the year!

In terms of the environment for doing business in Egypt, Ahmed says there is a need to simplify and clarify legislation for starting a business and getting a licence. “We get confusing information, and procedures are too complex.” He suggests that the authorities need to do something about these points, and to appoint consultants to help entrepreneurs find their way though the bureaucratic maze. In general, though, he observes that things are moving in the right direction. “Government has done a good job. The new tax and customs laws are serious milestones.”

The entrepreneur’s advice

“Always be sure of your capabilities and forget stereotypes. Whatever you are doing, have confidence in yourself and in your ideas and be great in that.”

Business: L’Aroma Gourmet Chain of Egyptian coffeehouses 12 locations in Cairo and Sharm El Sheikh Year started: 2003 Location: Head Office: Building #2, Esraa El Mohensein St., 3rd Floor, Mohandessin Employees: 70 Turnover: N/A Growth rate: Annual sales growth of 65%. Ph: (20 2) 3302 3751 Fx: (20 2) 3302 3751 Email: agaafar@breakthrough-eg.com

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Mobeliana Furniture Company Dr. Mohamed El Behaay, Owner 

With a tradition spanning centuries, if not millennia, furniture-making is one of Egypt’s oldest crafts. This craftsmanship has been passed down from one artisan to another through generations of family enterprise. Workers are essentially ‘born’ into this career and are passionate about their artistic expression and craftsmanship. Their work has been influenced by exposure to several Coptic, Islamic, French, British and Italian designs, but most production still adheres to the use of traditional tools and techniques. In recent years, the industry has witnessed tremendous progress, establishing Egypt as a reliable source of world class furniture and accessories to international markets. Furniture exports from Egypt totalled about US$250 million in 2007, with a three-year target to reach US$1 billion annually!

There are some 200,000 furniture producers in the country, employing over a million workers, and exporting to main markets in the US, the European Union and the Gulf countries. Mobeliana Furniture Company, located in New Damietta on the North East coast of the country bordering on the Mediterranean Sea, is one of the largest and most respected!

The whole Damietta area represents one big “furniture factory”, comments Mohamed El Behaay, Mobeliana’s founder and sole owner. In fact, it is renowned as the country’s furniture cluster and famous for its skilled carpenters and finishers. Damietta City hosts 38,000 registered and formal furniture establishments and three times as many informal workshops. Together, these enterprises account for almost 40 per cent of Egypt’s furniture production and close to half of its furniture exports.

Mohamed’s father himself had one of these small units in the old part of Damietta City. “Like most Damietta children did, and still do, I used to hang out in my father’s place and give him some help,” Mohamed recalls with nostalgia. But when he finished his early schooling, he opted to go to university where he studied civil engineering. He earned his doctorate from Cairo University in 1984 and taught as a professor there until 1997 when he made the big decision to quit and go into the furniture business himself. “I was familiarized with the industry since my childhood. And I

knew that I could apply my engineering expertise, especially in planning”, he explains.

As Mohamed doesn’t do things half way, he built a new 1,800 square metre factory, the first such one to be established in the New Damietta Industrial Zone that was created by the government to attract investors and encourage the construction of new factories. “Governmental authorities were a big help”, he says. “With their assistance, we could get land at a good price, in addition to benefiting from a 10 year tax exemption.” He used his savings combined with some family investment to pay for the factory construction, which set him back about 1.5 million Euro! By 1998, his factory was ready. “I planned it like an engineer,” he says with pride.

Mohamed’s approach to furniture

production was different from the norm. The traditional industry is dominated by clusters of very small workshops, employing up to 5 to 15 workers, each one specializing in one of the five multi-staged processes in the production chain. One workshop produces the designs and hand-made parts for the piece and cuts the wood, another does the carpentry, a third does the carving, another, the painting and wood finishing and another, the upholstery. Located in a row along small narrow streets in the City, each workshop moves the furniture parts and pieces from one to the other for completion of the production process. Each ‘five enterprise cluster’ is basically in competition with each other.

Combining these five processes into one factory is a relatively rare and recent trend in Damietta. Mohamed was seeking to achieve manufacturing efficiencies by modernizing the production process in this way – bringing highly skilled workers and artisans into one location using modern tools and technologies to produce high precision, quality furniture to meet quality standards for discerning customers and international markets.

Starting with only two employees, Mobeliana focused on the upper segment of the

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domestic market for which it produced dining, living and bedrooms sets. To give his furniture the ‘Mobeliana’ touch, Mohamed very soon established a design department which now employs three employees with design or art backgrounds. This is somewhat unique in the Egyptian furniture industry as most enterprises stick to the same designs they have been producing for decades. In 2000, his company also earned ISO 9001 certification, another distinctiveness in this industry. However, growth was slow and incremental for the first six years of business. In 2004, Mobeliana had increased its workforce but was still only doing about 100,000 Euros in sales. Mohamed wanted to break out of the ‘box’ but needed to gain knowledge of international trends.

This same year, he participated for the first time in the famous Milan International Furniture Fair. “I felt very small but it was a good opportunity to display our lines and to convince foreign clients to be interested in buying from us.” Important furniture producers, after seeing the Mobeliana stand in Milan, come to Damietta and asked for exclusivity for some of its designs.

Participating in furniture trade shows and expos was to become one of the major factors in the path to growth for Mobeliana – a significant

breakthrough for this emerging company! This exposure for the company also led to contacts with large wholesalers who agreed to distribute the Mobeliana lines to foreign customers.

Mobeliana has a number of comparative advantages in international markets, some unique to the company and others more general to the Egyptian furniture industry. “We are able to make good handmade products at very reasonable prices. In Europe, they would cost ten times more. Plus we have superior craftsmanship and some unique designs,” Mohamed states.

In 2005, Mobeliana started to produce exclusively for the European markets, a furniture import market estimated at 3.6 billion Euros, according to the Egyptian Information Service. The company has been able to take advantage of

export assistance from the Egyptian government to facilitate its access to these European markets.

“Italy is our biggest export market, Greece is second and Germany and France are third,” shares Mohamed. “Recently orders from the UK have been developing so well that we decided to participate this year in the big Birmingham Furniture Fair.”

By 2007, with a broadening customer base,

Mobeliana had grown to 75 employees with revenue of 750,000 Euros. Today, the company manufactures a full line of different furniture designs for every room in the house – classic, art deco, plus a complete line of hotel furniture, which is a new market for the company.

With expansion, the company had to structure its activities. “We have now six departments: Production, Finance and Maintenance plus one Training Department and the Design Unit,” outlines El Behaay. All decisions are taken within the framework of a 5-year business plan, adjusted annually, a practice of the company since the very beginning.

“Good planning, a focus on quality, teamwork and constant training are the main factors responsible for our success,” Mohamed exclaims. “And every year, I personally attend at least a one-week training session delivered by an Egyptian consultant around the themes of strategic planning and human resources management.”

His biggest preoccupation is recruitment. This is true at all levels, but especially at the managerial level. “In the furniture industry, a lot of workers don’t know how to read and write. And the situation is crazy when it comes to finding managers to whom you can delegate, especially here in Damietta.” The reason, Mohamed says, “is both cultural and educational. We have a problem with management in all Arab countries.” In Mobeliana’s case, he compensates by doing a lot of in-house training. “We give

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special courses to all our new employees whether they work in carpentry or finishing.” The same stands true for the managers. “We take young people and train them from zero.”

Apart from recruitment, El Behaay is also

very much concerned about rising labour costs. “In the last two years, wage costs have doubled. If it keeps on rising, Egypt will loose its competitive advantage in the furniture industry.”

Because of the more challenging competitive conditions and the problems in finding experienced managers, Mobeliana’s owner is cautious when it comes time to speak of future projects, although he is projecting sales to reach 1 million Euros by 2009. He plans to achieve this 33 percent increase over 2007 figures by rationalizing production and increasing productivity.

“We will narrow our product lines to concentrate on the highest added value ones and this will necessitate specific efforts to master the unit costs.”

Mobeliana is a model example of how the application of innovation approaches to the modernization of traditional industries can lead to increased competitiveness and growth in both domestic and international markets.

Business: Mobeliana Furniture Company Manufacturer of furniture; interior design and decor Year started: 1997 Location: Industrial Zone, New Damietta – Piece 11 Employees: 75 Turnover: 750,000 Euro (about LE 6 million) Growth rate: Sales have grown by 7.5 times in last 3 years Ph: (20 57) 240 0466 Fx: (20 57) 240 4466 Email: mobelianaco@hotmail.com Website: www.mobeliana.com

The entrepreneur’s advice

“The keys to success are good planning and quality. This is what has worked for Mobeliana.”

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Special Foods Industry International Co. (SFII) Yomna El Sheridy, Managing Director 

Egypt boasts an annual production of 450,000 tons of olives grown on more than 15 million olive trees over 125,000 fed-dans of land. When Yomna El Sheridy needed to find a new business idea in 2000, she saw

olives as a product with a huge market potential. There are only a handful of women in this industry and Yomna El-Sheridy, now Managing Director of Special Foods Industry International (SFII), is one of them! Since the start-up of her company in 2000, Yomna, a single parent with two teenage daughters, has grown the company to 80 employees with turnover of over EGP 20 million!

“To me an entrepreneur is someone who has vision, objectives, and the courage to take risks in pursuing opportunities that no one else can see. As tough as it is to take risks and explore opportunities, especially for women, an entrepreneur has to take extra steps to realize her vision.” Yomna El-Sheridy

Today, SFII is the leading Egyptian manufacturer and exporter of olives, olive oil and pickles in bulk or retail packing. It prepares all varieties of green and black olives using natural fermentation and Spanish style processes, as well as produces pepperoni and macedonian green peppers, gardenera, onions, lemons, artichokes, cucumbers and grape leaves. Its products are shipped to customers in the USA, Spain, Italy, Australia, Greece, Morocco, Armenia, France, Saudi Arabia, Kuwait, Japan, and Holland, mostly to big manufacturers or co-packers. SFII’s mission is to place Egyptian olives in the world olive consumption markets by offering the quality and price to meet international standards.

SFII is not Yomna’s first entrepreneurial venture. She graduated from the University of Alexandria with a degree in pharmacy and pharmaceutical sciences and later from the

University of Iowa with a Masters in Pharmaceutical Socio-economics. During the next ten years she gained invaluable experience working for large multinationals, the likes of Procter & Gamble and Bristol Myers, in the brand management, marketing, and distribution of nutritional products in both domestic and international markets. In 1993, she saw an opportunity to open up the Egyptian market for Gerber Baby Foods and started the Child Care Business Center to import, distribute and market Gerber Products. This was the beginning of her entrepreneurial career.

Things progressed very well until 2000 when the Egyptian pound devalued and according to Yomna, “ruined my business”. After barely escaping bankruptcy, she decided she had to find a better opportunity for both herself and Egypt – by exporting, rather than importing! She decided to look at agricultural products and conducted extensive research on several agricultural crops, using all available tools including the internet to gather data on production and market dimensions. She was seeking a product where Egypt had a good reputation, it was not too expensive to get into exporting, and it could be exported to Europe. She settled on olives, a product where she felt there was an opportunity for quality improvements.

“I started trading in a field I knew very little about. I knew nothing about fruit and vegetables and had to learn a lot about how to do business in this industry.”

“Bank financing was then, and still is, my major problem”, Yomna stresses. In 2000, the banks were not prepared to lend so she started small and was creative in finding the money to finance the business. “I liquidated some personal assets and convinced buyers to give me advances for their orders.” At first, she basically acted as a “trader”, buying from olive producers and selling to customers.

Not being able to afford a factory of her own, she rented a line from another factory and

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did the manufacturing under license from others. She started with a dozen full-time and part-time workers, hiring what she needed to help with technical and administrative matters, and managed her cash flow very carefully. During her second year in business, Yomna was able to develop new markets and to secure buyers in the US and Greece. In year three, she started participating in international food shows which led to a doubling of her sales. By this time, Yomna had decided she needed her own factory to better control the quality of the products she was selling. So she leveraged some land she already owned, took the profits she had earned, and invested in building a factory, step-by-step, as she was able to secure financing to take it to the next phase. A lucrative contract to sell a large quantity of strawberries to a foreign customer helped a lot, but it still took over a year to finish construction.

Her state-of-the-art, fully-equipped factory opened in 2005 in 6th of October City. “This was a challenging period for me and my business. I had to change the whole structure of what I was doing and become an off-shore company in the Free Zone. I bought machinery I knew nothing

about and had to hire consultants who did know about these things. All of my life I had been in trading, but manu-facturing was a totally new career for me and I had to learn a lot of new skills.” She almost tripled her staff when she hired 40 new workers with the technical skills she needed for the processing of olives.

Yomna is the first to admit that growing a company is not an easy thing to do. “I had to find qualified and trained staff who were willing to work hard. I was new in the business with a lot of competitors and had to earn the trust of

suppliers. Often this meant paying them more “cash” than anybody else had to because they didn’t trust me. And I had problems with shipping, products not arriving to customers on time, and of course, my customers didn’t always pay me. Let’s just say, I learned a lot from making mistakes.”

So what have been the keys to her growth strategy? Speaking an international language regarding quality standards and efficiency and striving to be superior in a volatile market where the client wants the best quality and the market is full of competitors. “There are new competitors entering the market everyday and I have to be on top of the game all the time,” Yomna adds. She also gives a lot of credit to her technical staff, all young people with the education and skills to grow with the company.

But many other things have helped a lot. Participating in trade shows helped her in making new customer contacts and expanding her knowledge base. “ExpoLink was a tremendous support to me. It sponsored 80 percent of my trade shows, helping me to organize for them, and arranged all the logistics around shipping my products.” The Industrial Modernization Centre (IMC) provided much needed technical support in helping her choose the right machinery to achieve the product quality results she demanded, and included her on many of their study visits to other countries. Quality is very important to Yomna, whose company has already obtained Kosher certification and is working towards ISO 9001.

Where is her business today after just six years of operation? “I am becoming one of the three largest exporters of olives in Egypt. I am exporting to 19 countries, including Spain, Greece, and the United States, I have 80 employees, and my turnover has grown from EGP 3 million to over EGP 20 million. Basically I have doubled the size of my business every year.”

What’s in the future? The keys to future growth lie in finding new international customers and securing financing, two areas of the company where Yomna assumes the lead role. “I delegate the technical details to my excellent staff and hire consultants when I need

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them.” She is currently negotiating with a Spanish company on a joint venture which will allow her to upgrade her factory as well as expand horizontally. This will be another milestone in the growth of Special Foods Industry International Co.

Yomna is adamant that the environment in Egypt is not as supportive of entrepreneurs as it might be. At the same time as the local market is becoming more difficult, the culture for exporting is missing, she says. “Banks are willing to lend you money to buy a car but they won’t lend you money to build a factory.” There’s not enough market and production data – on how much production there is in certain sectors and where the markets are. And finally, she says, “there is too much bureaucracy in the government system – too many steps, too many procedures, too many people to deal with”.

However, a lot of what contributes to Yomna’s business success is her own internal motivation. “My happiness comes from doing difficult things. It’s how I achieve. I want a share of the world market – to be able to work and achieve in this field.”

The entrepreneur’s advice

“Always upgrade and improve. Compare yourself to competitors in other countries and stay updated on world markets. You can’t be content to sit still; if you do, you may lose it all.”

Business: Special Foods Industry International Co. Manufacturer and processor of olives for the export market Year started: 2000 Location: 6th October City, Wahat Road, Private Free Zone Area, Giza Employees: 80 Turnover: LE 20 million (2007) Growth rate: 100% annually

Ph: (20 2)761 9813 – 338 9934 – 762 5291 Fx: (20 2) 760 0214 Email : sfiyom@sfi-egypt.com Website: www. sfi-egypt.com Affiliations: Founder and President, Business Women of Egypt 21; Founder of the Arab Business Women Council in the Arab League; Board Member, Olive Products Council

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About the Small and Medium Enterprise Policy Development Project (SMEPoL) 

 

The Small & Medium Enterprise Policy Development Project is a partnership between the Egyptian Ministry of Finance, the Canadian International Development Agency (CIDA) and the International Development Research Center (IDRC). The project’s purpose is to support the Government of Egypt, through the Ministry of Finance and other partners, in the development of improved collaborative implementation mechanisms for policies, legislation, and regulations supporting micro, small and medium enterprise (M/SME) development. It commenced as a four-year project in June 2000 and was later extended to July 2006. Another extension to January 2008 was intended to implement policies developed throughout the first phases of the project.

The overall impact of the project was to be “an improved and gender-sensitive policy environment for M/SME development”, achieved through the following outcomes:

1. The Ministry of Finance and its partners have supported the implementation of gender sensitive policies, legislation and regulations that facilitate M/SME development.

2. Improved gender-sensitive knowledge and information made available to stakeholders on M/SME development issues.

3. More participatory and inclusive measures of consultation established to refine and implement specific M/SME policies, regulations and legislation.

The priority policy areas to be addressed through the Project included regulatory reform to reduce barriers to business establishment and growth, accessibility of SMEs to financing and government procurement, and improved access to non-financial supports.

To achieve its objectives, the SMEPol Project consisted of four components: 1) policy development; 2) research; 3) capacity-building and training; and 4) networking and dissemination. As an outcome, the Project has influenced many areas of policy within the Government of Egypt; produced over 50 research studies as well as reports on the outcome of consultation workshops and roundtables; invested in training and study tours to build capacity of Ministry staff and other governmental and non-governmental stakeholders; consulted with MSME stakeholders on a wide range of SME-related policy issues through workshops, seminars and roundtables; and created more awareness of SME issues and needs through regional workshops and events. In addition, the Project website: www.sme.gov.eg is a useful mechanism for communicating information about the Project and its activities and knowledge creation.

For more information, please contact Ministry of Finance

SME Unit 1 Bostan St., Tahrir Square, Cairo, Egypt

Tel.: (202) 5789443 – 5789129 Fax: (202) 7730139

E-mail: info@sme.gov.eg Website: www.sme.gov.eg