Interview: Hassan Allam
Which sectors offer the greatest opportunities for contractors in the near term?
HASSAN ALLAM: We currently see the greatest potential in the energy, infrastructure and industry sectors. The government’s recent push to add generation capacity and its implementation of a feed-in tariff for renewable projects have made the power sector especially promising. For example, we recently qualified to develop 50 MW of solar energy and are looking to co-invest in a number of conventional power plants, which is the future for contractors in this sector.
Indeed, since the 1990s, Hassan Allam Construction has been a central player in all government programmes to expand power generation in Egypt. Infrastructure also offers considerable potential, and we are delivering numerous large-scale projects such as the raw water transmission line in 6th October City, the Gabal Al Asfar water treatment plant, the largest of its kind in Africa, and the New Capital International Airport. We are also participating in government plans to add 3500 km of new roads, and in 2015 we established a Roads and Bridges division to capture further opportunities in this sector.
Industrial projects are equally attractive: we are building fertiliser plants, fast-moving consumer goods factories, and oil and gas projects. For example, we were recently awarded the engineering procurement construction (EPC) contract on the National Chemical Industries Fertiliser complex in partnership with a leading Spanish EPC contractor. This will be the largest phosphate fertiliser plant of its kind to be built in Egypt and one of the largest in the region. As an indication of the amount of potential work being planned, we have a backlog of projects worth $2bn.
To what extent is there enough capacity in the market to meet all of these construction needs?
ALLAM: In Egypt, very few contractors possess the necessary capabilities and the financial depth to deliver on such complex, technical projects. In fact, there are probably only three or four players that currently have the necessary skills to compete for such difficult work. However, we believe this is gradually changing. Greater government investment in the country’s economic infrastructure, and more planned projects, hold significant promise, as the growth of larger players will stimulate their suppliers and subcontractors. Accordingly, developing the capacities of small and medium-sized contractors should be a fundamental priority going forward.
As for the largest players, we are looking to build up capacity and keep up with growing demand in Egypt and the region. For instance, Hassan Allam Construction’s top line growth was 130% year-on-year. Like all businesses in Egypt, we must address challenges such as the availability of qualified labour.
However, over the past few decades, the Egyptian construction sector has witnessed a brain drain as both skilled and unskilled workers have left for regional markets, such as the GCC. This has benefitted our large regional subsidiaries in Algeria and the Saudi Arabia. In Egypt, however, there remains a segment of the labour market that has yet to return.
How can the legal and regulatory framework be updated to assist construction companies?
ALLAM: There is a great deal that can be done to support the sector. For instance, an obscure law prevents contractors from claiming price fluctuations in foreign materials for overruns even when these are due to legislative changes. Greater clarity on tax and foreign currency availability would also be welcome, as contractors can have a difficult time sourcing the hard currency needed to import essential items such as machinery, pipes, cranes, pumps, air conditioning units, turbines and fire-fighting systems. For companies like ours that work overseas, foreign revenues mitigate such risks, but smaller, local firms can suffer.
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