After nine years as a civil engineer with Bechtel in the United States, Tarek Tawfik decided it was time for a change. In 1988, he returned to Egypt armed with an MBA from San Francisco State University and established Farm Frites, the largest and most successful french-fry-processing facility in the Middle East.
"Upon my return, I was hired by the Americana Group, which was investing heavily in the Egyptian foods sector, and given the blue prints for several projects that they wanted to work on. I chose Farm Frites and that's how it all started. Our production began in 1990 with a clear vision to become a supply source for the entire region," says Tawfik.
Sixteen years, later Farm Frites has become the largest food exporter in Egypt, selling in over 30 countries in the Gulf, Africa, Europe, North America and Southeast Asia with product portfolios that include french fries, frozen vegetables and fresh produce.
"French fries have thus far been our biggest export, but the growth rate in the frozen vegetables market, which we have entered into fairly recently, is increasing dramatically at more than 30% year on year," says Tawfik.
Farm Frites had been processing vegetables at a third-party facility for over three years. Once Tawfik felt that they had established a solid market, he ordered construction on his own factory, which has been operating for just over a year.
The company is actually made up of three separate entities that operate in five different sectors: french-fry processing, potato farming (to supply its own operation and for export), vegetable processing, fruit and vegetable cultivation, and warehousing. "We have the largest warehousing facilities in Egypt with a capacity in excess of 45,000 tons, which services both our business and the market at large," says Tawfik.
"When we first started, the ingredients for export were non-existent. There was no infrastructure or logistics in place, and ports and transportation were so underdeveloped that it was really a struggle for pioneering companies like ourselves. There was no such thing as containers, so we would have to hire ships to transport our products in bulk. Fortunately, things have picked up since the early 1990's. For the past 10 years, the government has been slowly building up the infrastructure for export. Year after year, the bureaucracy has become smoother and the mechanisms made easier," says Tawfik.
Today, 65-70% of Farm Frites' total production is exported.
"I believe that our presence and the presence of other large exporters have stimulated the growth of services which were previously not there. This is very typical of an infant or growing economy. Once the demand is there, the facilities or services follow and not the other way around," says Tawfik.
"The headway that has thus far been made by the Nazif government has been tremendous. Last year, Egypt exported somewhere close to $700 million worth of processed food. Compared to where we were a few years ago, it is remarkable growth, but it still does not represent the full potential of Egypt. We should be exporting at least $3-4 billion a year worth of food products and I truly believe that we are going to get there."
Tawfik and other Egyptian food manufacturers have been working in close partnership with the Ministry of Trade and Industry (MTI) to develop concrete strategies that will help them reach their goal.
But according to Tawfik, who is chairman of MTI's Food Export Council, there are still several obstacles that stand in the way. "Human resources are always a challenge. The burden of developing and training people is still up to individual companies. The market does not provide you with ready-made candidates."
Noting that most farming for export is done on reclaimed desert land, Tawfik feels it is imperative for the government to change its land-use policy.
"Egypt is now identified as an area that has the ability to supply a lot of processed agri-based foods. In the newly reclaimed desert areas, you can control pesticides and receive all the international certifications necessary to enter foreign markets. We have an incredible opportunity, but the challenge here is that we might be running out of land. We are now pushing the government to give us more land on a long-term lease basis -- 40-50 years. We would then pay for all the development costs ourselves. If we had more land available to us, we could double or even quadruple our exports, but we are still suffering from the remnants of the old land policy.
"The government is now listening to our concerns and they are open to the ideas in principle," says Tawfik.
"There is a lot of money in the Gulf that is just waiting to be invested in our agricultural sector. We have the technical know-how for desert farming, the potential markets and the funds to finance our growth. Now all we need is the policy formulation. For each feddan that we reclaim, we can employ five people. Food processing is a very labor-intensive industry, and it is very easy to qualify workers, unlike in electronics and IT," says Tawfik, who notes that all of the successful agribusiness investors in Egypt today have no agricultural background.
"They are not farmers. The industry is attracting a lot of qualified business people. They see the potential and are very eager to invest."
Tawfik strongly believes that current economic growth rates of around 6% will be maintained in the coming two to three years. "If we look at the food industry in particular, we will see that total investments in 2005 were an unprecedented LE 4 billion. We had 117 new factories open up. If we go back three or four years, we will find that cumulative investments during that period are probably only 50-60 % of that figure. We have yet to reap the benefits of this new wave of investment. So I definitely foresee remarkable growth in the future at least in the foods sector.
"Even if we look beyond to the general economy, it is encouraging. The most recent stats available on FDI [Foreign Direct Investment] from the Ministry of Investment indicate that between July and December of 2005, we have had $3.3 billion in new investments, so we can also expect the benefits of that to materialize. If we leave the social and political aspects aside for the time being and look at the figures, the mood is buoyant. We are committing more funds and opening more factories.
"Three years ago no one was doing anything. Today, it's like we have carte blanche and we are pushing ahead very aggressively."
Tawfik says the ascendance of business leaders in Cabinet means Egypt is finally righting some of the many wrongs of the past 40 years.
"We had a very protectionist society, no one was even thinking about exports, there was inefficiency, overpricing -- the list can go on and on. But when the market opened up and the pound was devalued, a sort of filtration process took place. A lot of businesses fell, while others seized the opportunity, modernized and sold or merged with larger entities. It was a game of survival.
"We have to continue liberalizing the economy and pushing privatization more aggressively," says Tawfik. He calls the Omar Effendi fiasco "false propaganda" on the part of its detractors. "I think the rules of the game are very different now and this is annoying a lot of people who have a different formula. The name of the game has become much more competitive and very aggressive which is very disturbing to a lot of traditional business people. We are talking about a generational change, which is not easy. People who accept the new facts are thrusting ahead and those who are still crying out foul and thinking of the past are losing ground. We are at a transitional stage and we have to face the fact that allegations of corruption are the byproduct of any transforming economy."
Tawfik says that the media has also become much more vocal, which has helped thrust corruption cases into the spotlight.
"Just like everything else, the media is liberalizing. Tabloids currently characterize much of the new landscape and they have found a very receptive audience. This is a natural phase that will pass. People will eventually tire of reading the tabloids and become more objective. Just like everything else that we are trying to reform we have to take it step by step. We can not jump the gun, but I will say that our expectations are high and the potential is huge."
Tarek Tawfik (50)
Managing Director, Farm Frites
Education: BSc Civil Engineering (Cairo University) MS Engineering (California State Polytechnic University) MBA (San Francisco State University)
Past experience: Civil engineer, Bechtel.
Brand Egypt: In order to brand something, you need all the necessary ingredients. If you don't, it will backfire on you. In the case of Egypt, we have to look at our strong points and start there. You have to choose one to three vehicles that can pull the entire brand so that you can ultimately reach a Brand Egypt. We are currently embarking on a plan to brand Egyptian food exports, and we will brand those food products that are synonymous with our environment. bt
By Hadia Mostafa
© Business Today Egypt 2006
