Sawiris Dynasty: Pharaohs of the Boardroom

From nationalisation to relocation and revolution, the group now known as Orascom has faced its fair share of obstacles over the years. Yet, a challenge that typically blights business dynasties – that of handing over the reins to the second generation – has instead brought only greater fortune for the Sawirises – today the wealthiest family in Egypt, and one of the richest in the African continent. Sarah Pursey reports.

Rising high from the banks of the Nile in Cairo, the majestic Nile City Towers, two of the tallest buildings in Egypt, are headquarters to the mighty Orascom Group. Dwarfing even the great pyramid of Giza, the 142 metre-high structures – two of the first intelligent buildings in the country – are modern day monuments to Egypt’s kings of capitalism.

Three Sawiris sons sit at the helm of the Orascom Group – a business empire built by their father Onsi over nearly six decades, and one that has made all four billionaires, with an estimated collective wealth of over US18 billion.

With companies in Construction, Real Estate and Telecommunications, Orascom Group is currently Egypt’s biggest private sector employer, with the largest market capitalisation on the Cairo & Alexandria Stock Exchange. The family’s business interests today stretch far beyond their home country’s borders, to encompass everything from a Swiss alpine holiday resort to a Nigerian cement plant, an airbase in Afghanistan and North Korea's first mobile phone company.

The early days

Born in 1930 and raised in Sohag – a city on the west bank of the Nile – Onsi's early years, by his own reckoning, were unremarkable, and gave no inkling as to the extraordinary success that would follow. While his older brother was encouraged to practice law, their lawyer-landowner father had hoped that Onsi would tend to the family’s land – a role traditionally reserved for the youngest son. Onsi amicably followed the path as set out for him by his father, and spent four years studying at agricultural college. Not long after graduation, Onsi met Youssriya – the cousin of a family friend – whom he would marry at the tender age of 23.

Yet, the young man soon became weary of pastoral life and, emanating from a middle class family, felt ostracised from the 'fellahin' (peasant farmers). Moreover, his lack of affinity with the land, by his own summation, came through in the quality of his work. "In view of the deplorable results achieved, [father] became convinced that my place was elsewhere, as I was rapidly turning into a liability," he would later joke.

Leaving the farming behind, Onsi, together with a few friends, set up a small contracting firm in Upper Egypt, later relocating to Cairo, as the business began to expand and win contracts around the Delta province.

It was in 1956 – two years after the birth of Onsi and Youssriya’s first son, Naguib – when Egypt's first Socialist leader took to the helm: having led the 1952 Egyptian Revolution to overthrow the monarchy in both Egypt and Sudan, Gamal Abdel Nasser had become a hero in the Arab world and Africa. On the domestic front, he was determined to modernise, and less than a year into his presidency – the birth year of the Sawiris’s second son, Samih – President Nasser set about seizing key private assets, implementing a wave of nationalisations across a range of industries, from tobacco to cement and pharmaceuticals. The early 1960s saw the arrival of the third Sawiris boy, Nassef (1961), while Onsi’s business began to thrive, winning several major contracts from the Ministry of Irrigation to dig waterways and basins.

Nationalisation

However, the commercial success of Onsi’s business soon made it a government target for nationalisation. Oldest son Naguib would later reflect on the dreadful day that the family business was seized: “It was heartbreaking for my father... he woke up one morning to go to his office, he goes there and it is totally red-taped with the police and everything there. By the time he grasped what was happening, there were other guys in our house, searching the house.” Not only was Onsi’s business seized, but his passport too, leaving him little choice but to accept the position of employee in his own business, working on the government pay-roll as director of the company.

When his passport was returned six years later, Onsi left Egypt disenchanted and set about rebuilding his construction business in Libya. While the move was logical from a commercial point of view, it meant significant personal sacrifice, with his wife left at home in Egypt, alone after their three sons had flown the nest to enroll in colleges abroad – Naguib to study engineering in Zurich, Nassef economics in Chicago and Samih engineering in Berlin. However, as Onsi himself points out, had he not made the difficult move to rebuild his business in Libya, there would have been no money to fund his sons’ expensive international educations. Meanwhile, Nasser's reign had largely brought economic ruin to his home country, alongside humiliation in the 1967 Six-Day War with Israel.

While Onsi remained in Libya for 12 long years, with such strong ties to Egypt the entrepreneur was clearly keen to come home. In 1970, the sudden death of President Nasser from a heart attack, and succession by the more business-friendly Anwar El Sadat, paved the way for the Egyptian entrepreneur to return to his roots.

Rebuilding the empire

Onsi returned to Egypt in August 1977 and set about rebuilding his contracting business, starting out with a small office of just five employees. Over the next two decades, with his sons back by his side, and under the liberal business policies of Sadat (1970-1981) and successor Hosni Mubarak (1981-2011), the Sawiris business – now known as Orascom Group – would thrive.

Oldest son Naguib joined his father in the family business in 1979 and, with his training in Engineering, the oldest son established and built up the railway, IT and telecommunications sectors of Orascom. Middle son Samih, upon graduation from Berlin, founded his first company, National Marine Boat Factory, in the 1980s, followed by Orascom Projects for Touristic Development in 1996.  Meanwhile, youngest son, Nassef would oversee the core construction activities of the family business from 1990 onwards.

In 1997, 20 years after his return to Egypt, and buoyed by the success of all of the ventures within the Orascom Group, Onsi decided to split the conglomerate into separate operating companies, giving each son control of one of the major business segment, according to their experience and strengths. Oldest son Naguib became CEO of Orascom Telecom Holding (OTH), middle son Naguib headed up the tourism and real estate activities through Orascom Development and Hotels (ODH), and youngest son Nassef took charge of Orascom Construction Industries (OCI). The strategies of the various Orascom businesses, it is said, reflect the different personalities of the Sawiris brothers. “Nassef is like a slow-moving tank, Naguib is a racing car and I am coming on my donkey,” admits Samih Sawiris.

Upon dividing the business between its three heirs, Orascom’s founding father stepped away from the day to day operations, to become the Group’s chairman, although it could scarce be said that Onsi was entirely content with the realities of taking a back seat in the business. “The new generation has its own methods and ideas and I have to practice consummate diplomacy when I want to make them see it my way,” he remarked. “That is not to say that I am never overruled!"

Born to build

With Construction the founding pillar of the business empire, Orascom Construction Industries – under the leadership of youngest son Nassef – has gone on to become one of Egypt’s largest corporations, employing more than 72,000 people in 35 countries around the globe.

The cement side of the business would grow to encompass operations spanning Egypt, Algeria, northern Iraq, Pakistan, the UAE, Turkey and Spain, and become among the top 15 largest cement producers in the world. In 2008, OCI sold off its cement operations to Lafarge – the world’s largest cement manufacturer – netting OCI €8.8 billion (US$10.8 billion), and allowing the company to focus on expanding its core contracting business around the world.

Nassef’s grounded image – the ‘slow-moving tank’ – has proven a distinct asset in navigating an industry as notoriously cyclical as construction. Moreover, his Western style of management has been key to securing investment and lucrative partnerships – perhaps most notably, the Group’s 50 per cent ownership of BESIX group (builders of Dubai’s Burj Khalifa) and a JV with major Swiss cement manufacturer Holcim. It also owns Contrack International – a leading, US-based EPC contractor, with a firm focus on institutional and infrastructure projects throughout the Middle East and Central Asia. Through its contract with the US Army, the company is currently one of the largest contractors operating in Afghanistan, employing over 1,400 full time staff.

One of Nassef’s more recent ventures has been OCI Fertilizer Group, with plants in Egypt, the Netherlands, the US, and Algeria. Today it ranks among the world’s top fertiliser producers, and works in partnership with technology leaders such as ThyssenKrupp Uhde and Kellogg Brown & Root. Through these successful ventures, OCI has generated for Nassef the greatest wealth of all three of the Sawiris sons: in March 2012, Forbes estimated his net worth to be $5.1 billion, making him the 182nd richest person in the world.

Global developments

Meanwhile, the real estate and tourism side of the group – controlled by middle son, Samih Sawiris, through operating companies such as Orascom Hotels & Development (OHD) – has become a successful developer of fully-integrated towns, today operating a total of 28 hotels with 6,589 rooms and controlling a land bank of more than 116 million square metres, across Europe. With 19 per cent of that land already fully developed, the company’s projects include flagship project El Gouna – a town with 22,000 residents, located on the Red Sea Coast in Egypt, and Taba Heights resort, situated in the picturesque Sinai Peninsula, Egypt. In addition to its six operating destinations, the Group has eight sites under development in Egypt, Morocco, Montenegro, Switzerland and the UK.

The €1.1 billion Lustica Bay luxury resort on the island of Montenegro – of which Samih Sawiris became a citizen last year – is now finally getting off the drawing board, while in Andermatt, Switzerland, OHD is developing a self-sustainable resort nestled high in the Alps. Meanwhile, with the Eco Bos development in Cornwall, UK, Samih plans to build “one of the most sustainable integrated town developments in Europe”. Three more destinations are in the pipeline in Oman and Romania – the latter is set to be the company’s first budget housing development outside of Egypt.

Connections in the right places

In 1998, oldest son Naguib, in control of the Group’s telecommunications segment, Orascom Telecom Holding (OTH), would make history with the launch of Egypt’s first mobile operator – Mobinil. OTH has gone on to become a leading international telecommunications company with a population under licence of approximately 517 million, an average mobile telephony penetration of approximately 48 per cent, and more than 101 million subscribers (figures accurate as of December 2010). The company’s strategy has been entry into emerging markets, with large populations and low market penetration (the exception being Canada). The company has launched GSM networks in Algeria, Pakistan, Bangladesh, Burundi, DR Congo, Namibia, Central African Republic, and also North Korea – significantly, the sovereign state’s only commercial 3G cell phone network, which hit the landmark one million subscriber mark in February 2012.

Having transformed Orascom Telecom Holdings (OTH) into one of the largest mobile phone operators in North Africa, Naguib merged the business with Russian telecom giant Vimpelcom in April this year. The widely publicised $6.5 billion deal gave the Egyptian tycoon a 30.06 per cent stake in the Russian firm, making him the largest individual shareholder; he was also made Executive Chairman of the company. Yet, just weeks after the merger – and spurred by the Egypt’s rapidly evolving political landscape following last year’s revolution and ousting of President Hosni Mubarak – Naguib made the shock announcement that he was giving up his new chairmanship in order to pursue his political ambitions. A year previous to this, Naguib had co-founded the liberal Free Egyptians Party (FEP), which became part of the so-called Egyptian Bloc – a broad electoral alliance in opposition to the Muslim Brotherhood. A Coptic Christian, Naguib favoured a steady transition of power from the Mubarak regime to a secular, democratic society.

Turbulent times

For the Sawiris clan, much like most businesses based in the country, revolution has been a bumpy ride. Not only are the tourists staying away (many of OHD’s Egyptian hotels were left half empty in the aftermath of the uprising), but the country has been struggling to draw back investors who fled last year when the sparks of the uprising started to fly, and which culminated in the closure of the Egyptian stock market for nearly two months at the height of the protests around Tahrir square in Spring 2011. Nassef’s OCI recently moved to secure a US$100 million loan from the World Bank's investment arm IFC, to help it expand across the region and rebuild confidence in the country's private sector. “By supporting a group like Orascom Construction, we want to send the signal that Egypt has long-term potential. This investment fits with our strategy of boosting confidence in Egypt's private sector, a major contributor to employment,” confirmed Mr Mouayed Makhlouf, IFC Director for the MENA region. And indeed, in the longer term, OCI’s prospects seem good – with operations in over 25 countries and only one-fifth of its revenue from Egypt, the company is diverse enough to absorb the volatility, and is now looking at opportunities in Iraq, Saudi and Morocco.

Moreover, following the election of the country's new president – the Muslim Brotherhood’s Mohammed Morsi – Egypt's stocks rose significantly, with investors further reassured by the sight of Egypt’s new cabinet sworn into office on 2nd August. While not the result that Naguib had wanted, his party having boycotted the run-off elections for the upper chamber back in January, the FEP has since shown some signs of willingness to co-operate in the future that Egypt’s citizens have chosen. In June, FEP’s Party Chief, Ahmed Saeed, called on all political forces to fully respect the election results and to give the President-elect the chance to fulfil his duties as president in an atmosphere of reconciliation and mutual confidence.

This can only bode well from a business perspective, although it will no doubt take some time for the dust to settle and investor confidence to fully return to Egypt’s market. It was back in the early 1950s, with an earlier Egyptian revolution still in the air, that Onsi Sawiris embarked upon his odyssey into the business world – now, 60 years on, and in equally dynamic times, it is his sons that must choose the right path for his business empire.