From the smallest of islands to one of the greatest expanses on Earth, Egypt’s Mansour Group has become a $6bn-plus international empire in just two generations.
The Egyptian family firm, now the country’s second largest by revenues, has operations in 120 countries, with 60,000 staff, and is growing at 10-20 percent annually. Not bad for a company operating in some of the harshest places and amid plenty of geopolitical turmoil.
Middle son Mohamed Mansour says growth has been in the company’s DNA since his father Loutfy founded it in the 1950s. At his office in London, Mansour illustrates his point with a story about a lunch meeting in 1996 with Don Fites, the then-chairman of earth moving supplier Caterpillar, a brand the Mansour Group had acquired the Egyptian distribution rights to 20 years earlier.
“In 1996 we had a market share in Egypt of about 60 percent, so of every 10 machines that were sold, six were Caterpillar. I had lunch with the chairman Don Fites and told him, ‘if I want to grow with Caterpillar, okay I’m 60 percent today, what can I expect to be, 70 percent?’” Mansour begins. “I said: ‘listen, we’re very liquid in cash, what I can do with this money is either start to invest in other businesses or I can invest in your business’.”
Six months later he was offered Caterpillar’s Unilever business in Sub-Saharan Africa — a remote area of which the Mansours had no knowledge. But in they went.
“A lot of people in my company said ‘but Mr Mansour we know very little about Sub-Saharan Africa’. Egyptians by nature have always stuck to the Delta, around the Nile, we don’t travel much… [But] I said ‘no, we’ll do it’ and we did it and we’ve grown that business from $170m turnover for Caterpillar in Africa in 1996 to $2bn today. You can see how phenomenal the growth has been.”
Mansour’s appetite for expansion was whetted. A short time later a second dicey contract was signed, this time for the rights to distribute Caterpillar equipment across Russia’s freezing and barely hospitable Siberian landscape.
“I pestered Caterpillar again,” he says. “I said ‘what other territories do you have’, he came back and said, ‘okay, how about Russia?’”
At the time, Russia was still emerging from the oppressive Communist era and the Mansour Group was more accustomed to 40-degree Celsius temperatures than the -40 degrees in Siberia. Again, advisors warned against the investment.
“When we went into Russia they were projecting we would lose $5m each year for five years… because at that time, they didn’t buy Caterpillar equipment, they only bought Russian and cheap Chinese,” Mansour recalls.
“I said ‘okay, we’ll do it’. Why? Because they have 30 percent of the world’s gas reserves, if it’s not happening now, it will happen. And the first year we started selling equipment and then we started making money.
“The area that we cover in Russia is… actually bigger than the continent of Europe but the potential is also huge,” he adds, extending his index finger across a large swathe of a giant map on the wall behind his desk. Flags representing the company’s operations are pinned from the tiny Pacific island of Fiji to remote Africa and the centre of American and European cities.
The company is now the fifth-largest distributor of Caterpillar products worldwide and the largest GM Motors dealer (it obtained the Egyptian sales rights in 1975). It also has lucrative contracts for McDonald’s (signed in 1994), Chevrolet, Red Bull, UBS and Imperial Tobacco, among others, in Egypt, a country of 90 million consumers.
While the group made its name on the back of established brands, it also created Egypt’s largest supermarket chain, Metro, in 1998, and has in recent years built up its own private equity firm, Man
Capital, of which Mansour is chairman. Using the family’s cash dividends, the firm invests in sectors as diverse as real estate development, hotels, banks, education, health, logistics, oil and gas, and telecommunications.
Its presence is global, but there is one region Mansour sees the greatest potential.
“Where we are weak, is Africa. Africa is one continent that is growing and will continue to grow,” he says. “In Asia, things are tough today, if you look at the emerging markets… in Brazil it’s tough, Europe’s growth is expected [to be] 1-1.5 percent… the US is one of the few economies I believe this year will continue to have some kind of acceptable growth.
“Africa, you’re talking 7 percent-plus, because there’s nothing there. I always say anybody who does it successfully in New York can make it anywhere in the world, because it’s so competitive, you have to really come up with something very special to be able to make a bid there. But in Africa, they need infrastructure, they need health, they need education, they need electricity, they need everything, and a lot of these countries now are having a 6, 7, 8 percent growth.
“We have an edge in that we have been in Africa since 1996, so we know it well. We’re in a lot of very difficult countries by the way; Africa is not easy from the security standpoint; you had Ebola this year; the price of oil has dropped so the GDP will be affected in Nigeria…”
The group’s African investments are particularly centred on health and education – two areas Mansour says will “be the last to be affected” in any economic downturn.
The first priority is opening magnetic resonance imaging (MRI) centres in Nigeria.
“Nigeria has three MRI machines; can you imagine the country with the highest GDP in Africa has three MRI machines, so the need is enormous,” Mansour says.
His vision is to create a truly global company, “that crosses borders, boundaries and religions”. But doing so is not easy. At any given time there is some sort of economic or political effect on the firm.
“We’ve always got challenges. We take country by country; some countries the challenge is security for our people, another country the challenge is the foreign exchange devaluation, [another country], the mining industry is hurting,” he says.
“But what does this give us versus somebody who’s sitting comfortably in his comfort zone? A balance: if I’m in 100 countries, not all 100 are going to go through a difficult time, so some are going to have difficulty, some are going to be up, some down and it’s a balance. But we just need to be prudent and wise about how we invest.”
Egypt – the company’s “heart and soul” — still makes up about 50 percent of the group’s business. Mansour Group was significantly affected during the unrest that following the 2011 revolution but it is now experiencing record figures.
Its automotive sales, under the GM Motors brand, have been higher in the past six months than in the last 30-plus years, while the conglomerate as a whole is on track to record its highest ever annual revenues from real estate development.
“People are buying real estate like hot cakes in Egypt, especially in this past summer. We’ve never seen these figures, ever,” Mansour says.
Mansour Group’s Palm Hills, the country’s second-largest developer, is working on 14 projects covering 13 million sq m. Its 30,000 investors are led by Abu Dhabi’s Aabar Investments, as well as several from Saudi Arabia.
Foreign developers, including leaders in the UAE, also are taking advantage of the new surge in real estate development in Egypt. A new capital project spanning 700 sq km has been announced for east of Cairo, while several other master developments are planned east and west, as city residents look to move out to more secure areas.
Mansour’s brother Yasseen, who runs Palm Hills, says while he welcomes outside developers, it will add pressure to costs.
“It will be very difficult to find contractors [and] prices of cement, steel, all of this will go up,” he says. “I [also] don’t think we have a sufficient workforce. Realistically, [all the proposed developments] cannot happen, [although] now they’re talking about the Chinese coming in.”
Under Egyptian law, foreign workers can account for a maximum 10 percent of a company’s employees. Yasseen Mansour says the government may be forced to introduce a special economic zone for the new capital to allow more workers to help meet the project’s timeline.
The new inflow of foreign direct investment (FDI) reflects the increasing stability under president Abdel Fattah Al Sisi, who was elected in June 2014. The World Bank earlier this month said Egypt would grow at about 4 percent in 2015, well above the 2.4 percent average for the Middle East and North Africa.
“It’s much more stable,” Mansour says. “President Sisi and the Prime Minister [Ibrahim Mahlab] have done a very good job in bringing back security to where it was, because it was a nightmare [during 2011-14]. Now [the challenge is] how to bring back tourism, because tourism is about 15 percent of the GDP, so that is very important.
“I think the country is on the right track but the challenge will be economically how to give the confidence for FDI, whether from the Gulf or elsewhere, to invest in Egypt, because it’s key to our growth. Egypt needs FDI and investment coming from the Gulf is a very positive thing, because the Gulf and Saudi, these investors are not short-term investors, they’re not in it to flip it and sell it and move on. And there’s a lot of the same language; we understand each other’s culture.”
Mansour, who served as transport minister for four years in former dictator Hosni Mubarak’s government, between 2005-2009, ruled out giving politics a second run.
“No, I’ve done it,” he says. “It was a fantastic experience, a hard experience, for me but I think I’ve paid my dues.
“I learnt a lot about my country that I didn’t know because as minister of transport, your job [included] going to small villages… so I saw all the sides of Egypt I’d never seen before by sticking myself in Cairo or Alexandria. So I saw the poor people, I saw how life was. I met a lot of very interesting people, but I think that was a phase in my life and now it’s another phase in my life to grow the Mansour Group to be a major multinational global company.”
For now, the company will be remaining in family hands, with previous initial public offering considerations ruled out.
“We don’t need the cash. Our businesses are very liquid, our debt to equity in the group is about 0.6-1 percent, which is nothing,” Mansour says.
That is probably just how Loutfy Mansour would have wanted it. From his early days as a pioneer in the Egyptian cotton industry, contributing to its still famed reputation, the visionary may well have foreseen the 120 flags dotted across his son’s enormous world map.
“We had a great father,” Mansour says. “I worked with him for two years when I came back from [studying in] America and I think I learnt more from him in two years than I did in college.
“Families are key, it’s very important, this bonding and learning from them, because they’re people that love you and tell you the truth.”
Those same lessons also are being instilled in the next generation. With seven of Loutfy’s grandsons already in the business, the Mansour family has many more flags to raise yet.
By Courtney Trenwith
Arabian Business
