Discussing Elevator Engineering Trends in Ghana with Roni Gaby Mattouk of ARG 1 Africa

Interview with Roni Gaby Mattouk, CEO of ARG 1 Africa

Can you give some background on ARG 1 Africa?

ARG 1 is now in its 12th year. We started it with $3,000 start-up capital on a plastic chair and plastic table in a borrowed warehouse. We were blessed with our first job with a successful businessman to install an elevator, and that was the steppingstone. Along the way, we decided to invest in human capital and today we have 250 staff and we turnover close to $12 million. Our offices have grown, but our principles are still the same. We only invest in people. We do not acquire land; we have not built a head office. We invest in the market and so far, it is working. The banks do not like it, but it is working.

Why don’t the banks like it?

They do not consider a track record with human capital as an asset. To them, an asset is a piece of land, a piece of a building, and unfortunately as much as we explain to them that it is not the land or the building that delivers the job, sadly, they still have the mindset that rather than focusing on the business model and the story of the business, they focus on what the business has as assets. I believe that has led to 50% of the banks being closed and that has led to a lot of difficulties and bad debt the banks have been faced with. But they are making exuberant profits, so I do not believe their mindset will change any time soon. When you are able to sell to the government at 40% or 50%, why would you bother to invest in a start-up or medium-term business?

Are you looking for investors to partner with, or do you want to maintain sole ownership?

I still own 100% of the company myself and we have no partners even though for the first six or seven years we were exploring opportunities to invite investors to join. Unfortunately, in the environment in which we live in Ghana, we are not an appetizing entity for the larger companies. So how do we grow it? We basically have kept the little profit we are making in the business. I did not take out any dividend, I did not have any savings account, we did not syphon any funds to an overseas country like a lot of foreigners who come in do when they make a dollar, they take it back. Ghana is home, so everything has stayed in the company and that is how we grew an internal cash flow. We have been able to guarantee all of our agreements, we have not defaulted in payments; salaries are 100% paid. Even during COVID, ARG1 paid 100% salaries during lockdown. At the end of the day, if the rewards of ARG are not used in times like the pandemic, then what is the sense in that? We would be interested in exploring what we refer to as strategic investors. We are not looking for cash injections, we are looking to partner with experience. We are looking to partner knowledge, exposure to other markets and to learn more. Not specifically financing, no. Maybe an engineering entity, maybe an entity that can provide ARG 1 Africa with financial instruments. We have opened all of our letters of credit in Ghana, all of our financial bonds are from Ghana and the fees the banks charge are very high. They average 2% to 3%, whereas in Europe to open a letter of credit you are looking at 0.2%, so just having a strategic partner to offer financial documents, we immediately save 2% to 2.5% per document. If you are turning over €5 million or €6 million times 2% to 3%, that is the sort of partner we are looking for to grow further.

What products do you offer and what clients do you have?

We started off with a simple elevator and after the first two or three years, we thought we could sell them, but we made a lot of mistakes. That is when we stopped selling elevators and started to follow the business plan of selling solutions. If you call us and say you want to buy an elevator, we tell you we do not sell elevators so tell us what you need. Do you need to take people up and down? No problem. We will visit you and communicate with you to understand what your need is whether it is for apartments, businesses, hospitals, or a hotel. Based on that need, we can design a solution for you. It may be up and down, it may be an escalator, or you may not even need an elevator, it may be that you need a hydraulic lift. We specialize in providing clients with solutions to move people. We have reached as far as the international airport in Ghana where we did all the moving equipment, so now we also move people from a building to an airplane. Those bridges at the airport were designed and built by us. We also do baggage moving systems. This idea evolved from elevators to escalators to moving walkways to dumb waiters to move food to move baggage and to move passengers from a terminal building to planes. That is how we have evolved, and these are the products we specialize in. As for clients, we have private and public clients. Public being the governmental institutions that own certain buildings and private being the banking sector, hotels, investors building apartments.

What is your competitive advantage and what is the competition?

Unfortunately, even though we are Ghanaian, and we believe the client should appreciate that we have a competitive advantage, it is not seen that way. Only international clients see it that way. Big banks and international hotel companies emphasize what brand you represent. Second is local content. For the formal sector we do have a competitive advantage because in reality we are the largest wholly owned Ghanaian company that specializes in the industry. In the informal sector, which is the very successful Ghanaian man who runs a one-man show, the culture does not allow him to be comfortable working with a Ghanaian company. This can be for a number of reasons; 1) maybe they have burnt their fingers too many times working with a Ghanaian company, 2) maybe they do not want a Ghanaian company to know how much money they have because if they are putting up a $20 million building, immediately they will be known as a successful businessman. The culture in Ghana for successful people has always been a hidden culture, and we all know why. What somehow started to evolve in this country was when other neighboring countries like Nigeria and foreigners who came in would expose their success, but Ghana is still of the culture that a successful man does not expose his success. That is why on the local level it is challenging sometimes to convince people that they can get the same service, the same product and the same privacy and confidentiality that they get from a foreign company.

As for competition, there are 25 elevator companies. Some are suitcase companies, some are medium size, and some are large. We treat them all as competition. For us scientifically we wish to believe there are only three competitors in Ghana. When the formal sector comes in, they only invite those three companies to tender because of various reasons. Maybe it is certifications, maybe a track record, maybe human capital. In reality, we do not believe we have competition because if you want to measure capacity, the second company after us probably has 12 employees. We have stocks of spare parts worth €250,000 and the second probably has €20,000, so how do you measure competition? In construction, you have Classes A, B and C and for certain tenders you need to fulfill a certain requirement before you can tender. In elevators there are no prerequisites. If there were prerequisites like there are in Europe or advanced economies, I doubt anybody in Ghana would qualify because one is that you need to have installed more than 500 elevators. It is like pilots. You are qualified to fly certain planes depending on how many hours you have flown. Or in hospitals when you want to do your medical degree you need to clock a certain number of hours under internship to qualify for a certain position. It is the same with engineering, it is all about how many hours you have clocked. We have clocked over 700 elevators and each one was around 88 hours, so you can easily calculate the number of hours.

What are some of the trends related to elevators and moving people?

The elevator business is still in what we believe is its incubation period. Ghana is not even at 5% of its capacity for urbanization. Just look at Ivory Coast and you can see that 60 years ago they had more buildings than Ghana, so that gives you an idea of how much more capacity Ghana has to grow. With the trend of land becoming so much more expensive and our city (Accra) is now at more than 7 million and projected to be at 10 million in the next five years, we have no choice but to go vertical. Elevators are not just about going up and down, there is a lot more engineering involved, and we have exposed only 5% of the market to that engineering. For 95% of the market, they are getting the most basic up, down, press the button type of elevator, however, for example the Standard Chartered Bank head office has one of the high-end engineering models. There are no buttons in it, so people decide at reception where they are going, they get access, and the computer tells them which elevator to use. Before they enter the door opens, they get in and it takes them with AI intelligence to their floor. We have that sort of technology in Ghana, but it is only at 5% of the market.

What are some of the challenges you are facing?

As much as human capital is the most important priority for us, the main challenge is how to grow it. The culture of the new generation in Ghana is not as efficient and concentrated as the previous generation. They are more into paper pushing jobs, blue collar jobs, IT and technology, and it is not very common for them to go into multi-tasking type of work. In our type of work, you need at least three to five years to learn. You cannot come out of university with that knowledge. Unfortunately, they do not have the patience to stick with one job for three to five years, so for us, our priority challenge is how to grow this human capital. We have more work than we have capacity. That is where we are today. Our industry is delicate and sensitive. Elevators are not bought off shelves, we design and engineer them. It is like going to a tailor who measures your shoulders, your chest and asks you a few questions about what kind of material makes you hot, etc. An elevator comes in 2,800 pieces so you can imagine it is not easy to assemble them. There are two challenges in the market; 1) the business culture in Ghana is challenging in terms of encouraging clients to follow the contract in the informal sector, and the market comprises 70% informal and 30% formal. Trying to do that without coming across as arrogant is the Coca Cola recipe. Our clients are successful businesspeople in Ghana, and they do not like to be told what to do. And 2) are the banks. They really need to step up their game in helping start-ups and medium size companies. The companies that work well are suffering the consequences of a few large companies that are not compliant. It is unfair for good companies to bear the consequences of errors made by larger companies.

What are some of ARG’s key projects?

Of the largest hospitals built in the last five years, we did four of them including Ridge, Legon, Tamale, and Kumasi. We have done around 70% of all the major banking offices in Ghana such as Standard Chartered, Fidelity, PNC, GCB and Barclay’s. On the apartment side, the Signature Apartments, the new Kass Towers, the Greenview project behind the Ministry of Foreign Affairs, and all of the Trasacco projects are done by us, including the tallest building in Ghana, the yellow building with the skybar at the top. And in hotels, the Holiday Inn, the new Novotel coming up at the airport, Airport View Hotel, and Ebi’s Hotel just to name a few. We have been blessed with a lot of work and as much as these are big names, all the other names are equally important. The new shopping mall of Orca is also one of our projects. On Spintex Road (Accra), ICGC Church and Action Chapel Church are our clients.

To what do you attribute your capacity to do business in Ghana?

Being born and schooled in Ghana. It helps when you are rooted and when you believe that your success is growing people, not growing money. The rest becomes easy, the rest just happens by itself. This growth was not planned. We wake up every morning hungry to do more, to learn more, to grow more. We all have to leave here, and we are not taking anything with us. Because I grew the business in the very tiny circle of the richest of the richest in Ghana, I realized there is more to be done apart from just the funding itself. There is much, much more to be done.

Do you plan to expand to other countries?

We experimented five years ago in 11 other African countries and realized that we were not ready. Our capacity knowledge-wise and financial-wise was not ready, so we pulled out of those markets as we did not want to make any mistakes and did not want to overrun ourselves, so we concentrated on Ghana. Now we are in Togo and Benin, but they are very small markets and we do not intend to grow in new markets. Our challenges will not reduce if we go to other markets, they will only grow, and I do not have solutions. The human capital growth solution is not a one-day job. Until our capacity is able to do more, we are staying in Ghana.

What is your vision for the next five years?

We are hoping we can grow innovation and to get involved with some universities to grow new talent. We are hoping to add some technology into the products that we offer. We are hoping we can keep this growth steady to possibly hit two to three thousand units. We are hoping to reach a point where we can collate statistics from our clients and these statistics could be used to create new products to give the specific clientele of ours. That is the hope, that is the vision. The elevator business is going to continue as it is, and we are growing gradually with it. More work will come, but we are not going to diversify into other things. We want to concentrate on our core business. Maybe we will open a training college because our artisans are very limited, our skilled technicians are limited and because the market is evolving and we are still at the early stages, there are more challenges coming up if the market wants to grow. Drive around and you will see nine out of ten big jobs under construction are by foreigners. Why? Before we opened, the number 1 company was CFAO from France. Why? Where were the Ghanaians? Our focus is how we can train more so we can do more. That is what we believe our operation is.

What inspires you and what is your philosophy?

Grow more people. It excites me. It creates more stress, but the challenge in dealing with the stress keeps me moving. I know that the more I train, the more I can handle stress and challenges. That is why I wake up every morning. Who can I grow today, what challenge can we solve today? It is all about teamwork and that is what encourages us every single day. And to create a happy working environment. We have to enjoy our work or else it is not worth it.

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