CABLES & WIRES

Saudi Arabia 2020 | INDUSTRY & DEFENSE | B2B

Taking a business global is as much about embracing uncomfortable paradigms as it is about competing with global giants.

Nabil H. Al-Amir
NABIL H. AL-AMIR
CEO
United Wire Factories Company
Mohammed Rafea
MOHAMMED RAFEA
CEO
Riyadh Cables Group Company

What is your company's strategy going forward in light of recent economic reforms?

NABIL H. AL-AMIR The company has a well-established market presence in its business fields and an outstanding reputation. Our main effort has been maintaining a competitive edge in the steel market and adding value to our operations through optimization and consolidation. Moreover, the company will explore new business opportunities that are in line with Vision 2030 in order to grow its operation in related activities and green field projects. That includes investing in different segments that encourage local content, boosting export activity to neighboring countries within the GCC such as Oman and Kuwait, and looking for opportunities in other markets in Africa and Europe. The company will also focus on increasing its Saudization, boosting its efficiency and optimization, and improving the overall work environment and compliance record.

Mohammed Rafea We have expanded our operations in Sharjah and will use that as a base to become the first cable company to penetrate the African market, as well as South and Central America, the Far East, Australia, and New Zealand. With regard to the type of investments, we are keen on opening new factories with smaller operations in various parts of Africa, including South Africa, Botswana, Mozambique, and Egypt. If you have a factory in Egypt, for example, you can export anywhere in the world, even Europe, with zero duties. These are all the factors we are keeping in mind before entering a market, just as we are looking into the existing demand for our higher quality products to ensure they attain market share, despite higher costs. Around 20-30% of the companies in Saudi Arabia have the right price and quality and are well equipped to compete internationally, but the rest are sadly not.

How is the current economic environment impacting the country's manufacturing sector?

NHAA There is no doubt that the current situation is quite exceptional given the multi-dimensional factors that include geopolitical, economical, and internal reforms and new regulations. However, this is a good time to make use of good opportunities that are becoming affordable in various business sectors. It also requires businesses to explore areas they might not have considered before: new business lines, horizontal or vertical integration, acquisitions, or international alliances, among others. In addition, there should be lots of opportunities to reinvest in automation that will make operations more efficient and provide a competitive edge. In 2018, we had a serious situation where the local supply capacity was estimated at 12 million tons, while demand was only around 5.5 million. This sizable gap is expected to remain at this level or slightly increase in 2019. However, with the new budget announcement of 2019, it will shrink once projects start to be visible in the latter half of the year. Another major factor to consider are the imports from neighboring countries like the UAE or Egypt, who are traditionally a potential threat to local suppliers. China is a major supplier to the region and might be another cause of competition if their market conditions force them to seek opportunities in the region. The China-US tariff situation and the slowing construction industry in China has indeed put pressure on supply levels.

MR Most manufacturers in Saudi Arabia rarely try to expand globally because they prefer operating chiefly in their local market. Traditionally, expansion happens just within the GCC, which gives the company a regional profile. Following the drop in oil prices and consequently reduced government spending, most of the companies are trying to get outside of the circle and are trying to export, both to neighboring countries and on a global scale. Thus, as part of our new strategy, we will consider the whole world as our market unless there is a barrier of transportation or duties. The only problem we have in Saudi Arabia is that most of the major industries are located in Riyadh, which is a landlocked area; it is better to invest in Jeddah or Dammam because the availability of a seaport facilitates exports. Both cities have a great deal of potential: most of the investment done in Dammam, for example, serves the oil and gas sector, with services for Saudi Aramco or SABIC, while Jeddah is still highly dependent on people who come for Hajj and Umrah.