Osama Bishai, CEO, Orascom Construction: Interview

Interview: Osama Bishai

How crucial are the ongoing large-scale infrastructure projects for local contractors?

OSAMA BISHAI: Current projects have stimulated the market directly, creating opportunities for investment and job creation. More importantly, they have also created new expertise. For example, the tunnels under the Suez Canal are the first time this type of project was done by a fully Egyptian labour force, after the decision to prioritise local companies. Proficiency generated in the power sector will be beneficial when bidding for contracts in Iraq, Libya or the rest of Africa later on. These projects have given us an edge in doing business abroad and have provided Egyptians with much-needed infrastructure upgrades.

What short-term effect has the currency flotation had on cash flow and input access?

BISHAI: The discussion about currency flotation started even before 2011. The trade imbalance meant the country needed to devalue its currency, and the longer we waited, the greater the depreciation would be. As Orascom, we have been planning for a soft landing, limiting our exposure to foreign currency and watching dollar-sensitive inputs to avoid taking on unnecessary risk. We included provisions for foreign currency rates, devaluation and inflation in contracts. It will take more pounds to buy the same amount of material, but we cannot defy the law of supply and demand, so this was the right move. It will also limit excessive spending, which is healthy, as we should not be buying resources at prices that encourage waste.

How concerned are you about price volatility for key building materials in Egypt?

BISHAI: Proper contract terms can shield contractors from danger, but it will also be important for the government to help create protections. The construction sector employs a large spectrum of labour, from the most basic blue collar jobs to the highest-paying white collar jobs, and supports 20-25% of the country’s workforce. If it is hurt, all Egyptians suffer. Egypt has the best edge in exporting services, including construction services. We are the largest market in the Middle East, which means we should be the hub for construction services. More than 60% of the Arab world is under 25 years of age, so there is a lot of work to be done, especially in Saudi Arabia, Iraq, Algeria and soon Syria. The government should act swiftly and proactively, helping contractors deal with price volatility and making on-time payments so we will be ready to serve the wider market. President Abdel Fattah El Sisi is focused on creating strong infrastructure, and this will help foster demand for contractors in the country.

What is Egypt’s current procurement framework?

BISHAI: The government is launching projects and is particularly prioritising infrastructure. The government opted for direct negotiations on urgent and fast-track requirements, and this was essential to achieve the quick results they were looking for.

How challenging is it to hire qualified labour?

BISHAI: The labour pool always requires additional training, but due to our size we are able to train enough to match the growth rate, importing labour only in specific short-term instances. There is a crunch in oil and gas capabilities, but this will cool, while demand for infrastructural expertise is set to continue growing in the medium term. This gives an opportunity for small and medium-sized enterprises to step in as specialised subcontractors or suppliers. We also want more cooperation with academic institutions on the higher-skilled side; and for simple skills like carpentry and welding, standard certifications would help both local companies and individual workers, should they choose to seek work abroad.