Amount of money pledged to Egypt by Saudi Arabia for oil and gas supplies:20 billion
Change on the horizonAugust 19, 2016
TOGY talks to Yasser Zahreddine, the general manager of Aramex Egypt, about the level of competition among logistics companies operating in Egypt and areas for growth in the logistics sector. Established in 1982, Aramex is a shipping company that provides services such as freight forwarding, warehousing, shipping and express delivery.
Recently, Saudi Arabia’s King Salman has committed USD 20 billion to Egypt in oil and gas supplies. Have you seen some push from GCC countries to move into Egypt?
It still needs some time. Companies are very shaky about the oil and gas industry in the GCC and in Egypt as well. During the last visit by the French president, they were talking about making some deals with Total here. I think we will have to wait and see.
The problem that Egypt faces now with foreign currency is making every big company worried about its investments here. The government is very committed, it has already paid some dividends to oil and gas companies, but things are moving very slowly.
The biggest challenge you face with any oil and gas company is the level of security, governance and compliance that they are requesting. For a long time, we didn’t face any issues with such demands and business has been growing. We gained new business not only with the same companies that we are dealing with here, but also with new companies here and in Eastern Europe, among others.
With Egypt’s increase in power generation investments and offshore oil and gas operations, do you see any shift in the near term in the demand for services in the market?
So far, not that much. The biggest challenge is the Egyptian oil and gas companies going into Algeria. Algeria is not a place where you can operate smoothly. You have to adapt your operations.
Compared to other countries you work in such as the GCC, what are the challenges and advantages in working in Egypt?
If you are specifically talking about oil and gas, you can feel that the government is eager to build the business and boost exploration, while in other countries you feel they are decreasing the level of exploration. However, in the end you need to see something happening on the ground.
We have a feeling that things are moving. Two years ago, the oil and gas companies were suffering due to arrears. Currently, they have ameliorated and normalised their situation.
Do you find that a high oil price leads companies to become inefficient and lose out on profit margins?
It is a challenge for everyone to keep costs down and be efficient. You have to make sure the cost of your investments are saleable to the company. You have to make sure your costs are adaptable and flexible to be acceptable. There is still the old challenge regarding availability of the dollar in Egypt. So, all this makes the business very challenging. What the GCC faces now is high competition in other places with oil production.
What is your share in the market and what services do you provide that you see growing in Egypt?
It depends on the service. In freight, we have a large volume of business but we do not have that big of a margin. Compared to a sea liner, the percentage is definitely lower. For domestic transportation, we control more than 35% of the market share.
In express shipping, we also have a good margin. We work a lot on the costs of import, especially in e-commerce. Online shopping is growing by double digits. We have unique services such as shop and ship now. These things are growing.
Let’s say we have dozens of companies that deal with oil and gas. We are not the leader of the market, but we have a good position. A lot of oil and gas business is not generated from this region. So, we focus on the companies that have deals in this region, meaning the GCC and Egypt. Most of our relations here are with the GCC companies. We provide them with land freight and sea freight services and Customs clearance and delivery.
In terms of Egypt’s location, bridging two continents and being very close to Europe, do you see it as a springboard to expand into other African countries?
With the lack of freezones here, there are no plans to move. People depend on Dubai more than Egypt for being a logistics centre.
However, with the Suez Canal Area Development project, things might change. So far Egypt has a population of almost 90 million people, so what is produced here is consumed here. It’s the biggest population in the Arabic world. Exports have been raised recently. What we are facing now, the foreign currency shortage, is restricting imports.
How is your company structured to deal with Egypt’s oil and gas industry?
It is not the best timing for oil and gas this year, as you know. We are in contact with many regional accounts. Most of the deals in oil and gas are done through a regional account. This team is based in Dubai and has arms at every branch.
When we approach someone, we approach them for a solution covering the whole area. We have a couple of regional teams and we are approaching some Egyptian oil and gas companies so that they can starting going abroad and investing outside of Egypt. We are providing those solutions.
Building a regional team in oil and gas is about security, standards, compliance and governance, and you have to have your file ready when you approach any of the companies. Things are moving very well and we have made progress with a couple of things that will be announced this year. We have reached deals with some newcomers in Egypt.
You aim to become a regional services provider. Would that more beneficial to the client rather than using multiple providers?
When you deal in oil and gas, all of the companies are very big. They like someone to handle this business. We are a big company that complies with standards. We have been doing this for almost 10 years now. We do also third-party logistics in Dubai and we are ready to implement this in a copy-paste fashion for every big company that needs solutions.
What is the importance of Egypt in Aramex’s regional portfolio?
If you are talking about business in general, Egypt is generating high revenue for the network, so we are representing a remarkable percentage for the network.
We have more than 500 employees here, many projects and a turnover of USD 35 million. We have big plans now for startups besides oil and gas and freight in general.
We provide solutions for big freighters in terms of shipping in and out. We have express shipping and we do a lot of e-commerce. It is important to have standalone services dealing directly with companies. We are very flexible and adapt our arrangements to the market needs.
For more information on Egypt’s oil and gas industry, click here.