Egypt Agriculture: Hesham ElNaggar Gives an Overview of Leading Agricultural Company Daltex Corporation

Interview with Hesham ElNaggar, CEO of Daltex Corporation

What is the history of the company?

The company was established in 1964. The founder is my father Dr. A. Samir El Naggar. He is an agronomist and he started in the business of exporting fresh produce. At that time the farming business in Egypt was very fragmented and there were a lot of small farmers. My father was collecting the produce from farmers in the field, packing in the field, shipping into the port or to the airport. By the late 60s, the only packing houses were controlled by the government. There were no private sector packing houses for fresh produce. So, he started establishing a packing house in the middle of the old road to Alexandria from Cairo exactly halfway so he would be able to collect the produce from the farmers and pack it in the packing house and send it over for export. We were the first privately owned business in the agriculture sector in Egypt at that time. Everything was nationalized during the 60s. In the early 70s, we started having a more open door policy, more freedom in trades, export, and import. Egypt was not getting any imports coming in from Europe or the US or China or Asia. At that time, my father established his export import business importing agricultural machinery and equipment. He went to India and Japan and he started getting agencies of equipment from those countries in the agricultural sector. We started at the same time exporting fresh produce. Both arms of the business continued to grow. We started to find that we needed to be more involved with the retailers. We changed the structure and the retailers were asked for traceability, quality, safety, etc. In terms of the farmers and small farmers, it was very hard to work with them and trying to change the mindset of how they can control their operation, what kind of food safety they were doing, etc. In the late 80s, we started doing our own farming. We started renting land and we started to grow potatoes and oranges. We started from scratch and we built farms from roads, pumping station, irrigation equipment, bringing in teams of people, even working out of tents. We started establishing farms in different locations in Egypt and we are still expanding our farms in this area. Potatoes were our main produce and we started doing other products such as oranges, grapes, grapefruit, lemons, mangoes, pomegranates, field crops like wheat, corn, barley, and onions and spring onions. The market also started to grow in the 80s and the 90s. We have our company established in Europe in Germany and the UK for exports to be directly relayed to the customer. We have a company in Dubai that was established by my sister. My brother was involved mainly in the infrastructure and the farming side. He was the one doing all the setup of the farms from scratch. We started expanding our produce not only to the European market but also into Russia, China, India, last year, New Zealand, Australia, and this year we were the first exporters of oranges to Japan. In short, the company has been expanding in different ways from being a small collection of farms. We work with about 1,000 farmers and we supply them with machines, seeds, pesticides, we buy produce from them to export, and we have our own farms. We are expanding our business as we go on. We are shipping to more than 70 countries globally.

How do you differentiate yourself from your competitors?

I do not like to say competition. To me, we are all working in one direction. Fresh produce has become a very small item for our plates so we have to improve and increase that percentage. We need to increase the number of people eating fresh produce every day. I do not want to take the share of my Spanish or Moroccan or Greek counterpart; rather, I want to increase the size of the cake so I would increase myself as well. Also, we understand the customers. We try to understand what the customer needs and we try to understand where their concerns come from: whether as a housewife, as a producer, as a business producing french fries or chips. These are also our clients. We are B2B. We are retailers and retailers also serve our clients. We do not over promise. This is a key factor as a business. As a country, human power is the most important thing we have. This is where we can excel and this is a competitive advantage. It is not cheap labor as people put it all the time. They are dedicated, they voted into the business, they understand what they want to do and how to do things. My team and my colleagues are the most powerful tool I have in the business. Without them I would not have been able to reach where I am today. I did not do this on my own. My father did not do it on his own. We had the vision, we had an idea, we had the ways to do this. My father is a visionary. But I, my brother and my sister have been working very hard together. I cannot do this without the people I had with me. This is a real competitive advantage. I have the team with me and the people that I trust and I believe they do the job very well. In Egypt we are importing everything: seeds, machinery, even the water that we are using. So, the only thing I have is the land, the people and the sun.

What are the main challenges you face in the sector as well as doing business in Egypt?

We have our farms in 12 locations in Egypt. We have a total of around 45,000 hectares of land that we own and operate on. We are the largest exporter of potatoes globally, by far.

The most challenging issue is the people because agriculture is not a sexy operation. People do not see you as the future. There are very few people who say they want to be an agronomist. So, we have a challenge to get the people to be involved in our business even though it is a business that involves people, involves feeding the world, creating job opportunities for the underprivileged in rural areas, and providing better lifestyle and better social standards for our people in our country. As an organization, we have a challenge on how to create a business where people will be very linked and people will be happy to be involved, not only inside the company itself but attracting people outside the company as well. There is also an issue with logistics even though the country has in the past four or five years invested greatly in infrastructure and roads. The port’s structure is completely changing and there are infrastructural changes in the port’s expansion using more modern technology in export and import. Because we are working in very remote areas, drivers are not available all the time, they do not stick to the rules of farming, and they are not very efficient in the way they run their own operation. The equipment is quite old. The structure of logistics and the shipping lines present a lot of challenges. We are working with the government very closely to make sure that it is working. There are also financial issues with the banks and financial institutions. Investors do not believe that agriculture is very lucrative or high return. It is high risk, very low return, and the return is a long term, seven or eight years. So, a bank or financial institution is not willing to go through a process of seven or eight years of investing, expecting to get possibly some results. We have a very fluctuating operation. We have years which are very good and three or four years which are average or below average, and then one very excellent year. Agricultural investment in Egypt in financial institutions is less than 2%. It is a challenge to change the mindset of our financial institutions to see that there is a potential in the business. Over the last four or five years, the government has done a lot to reduce the interest rates on businesses including agriculture or renewable energy. The number of regulatory changes and regulations helping exporters and helping supporting farming and agriculture is growing. There is a lot of land being added into the farming business. There will be around one and a half million acres of new land in Egypt in the coming two to three years.

What are some recent success stories that you are proud of?

Japan is one of the most difficult countries to penetrate in fresh produce. They are very strict in the way they handle produce. It took us about 15 years working with government officials in Egypt to get approvals from Japan. The success of that business is completely on the credit of my team. They have done a great job. I respect the amount of work and dedication they have done to make this happen. Picking up the right fruits and going through every farm was very difficult. Only 1% to 2% of our total volume is accepted in Japan. I dedicate whatever success stories I have done in Japan to my team. I really give them all the credit. I did nothing without them.

What is your vision for the medium term, three to five years? What would you like to achieve?

Five years from today I hope that my team and my people are really comfortable doing what they are doing. I want them to feel proud. I want them to feel part of something and feel the ownership in the organization. This is my highest goal with everyone in the organization from the small worker in the field to the directors and the VPs in the company. I want them to feel that they are part of a big place and they are cooperating and getting gains from that. For the company itself, I want it to be hopefully sustainable in its way of operation. The organization does not depend on my presence, my policies, my ideas that I share with my team and my people, my brother and sister, my father. I want the company to try to do the best that a company can do, realizing the best potential of the organization, and getting the best out of it.

Are you interested in attracting investors?

We are open to strategic investors and simply investors with money. I have a vision of the company to be involved in agriculture and developing agriculture in Egypt far more than they are, developing the people we have, and developing as a society. The most powerful thing we have in the country is the people and I want to have an investor that understands and is willing to invest in these people and is willing to invest in an organization that is creating a better life for our society, be it gender equality, women empowerment, creating jobs for the underprivileged, creating social standards. All these people need the right education, the right lifestyle, they should feel proud of themselves being part of this country and this company. I need the company that believes that in order to earn money and to have money in their pockets, they also have to earn money for the people they work with. The investor must be willing to understand the idea, understand the vision that we have here, and know that our company is a very progressively growing organization. We grow every year within two digit numbers in every province. So, we need this continual operation everywhere. I do not want to find an investor who thinks this business is too risky because the only way to improve our industry is through taking risk. This is a risky business by nature.

What are some of your major accomplishments and products?

We have our farms in 12 locations in Egypt. We have a total of around 45,000 hectares of land that we own and operate on. We are the largest exporter of potatoes globally, by far. We export close to 200,000 tons of potatoes. We handle around 400,000 tons of potatoes. We are one of the biggest producers of oranges. We have close to 3,000 hectares of oranges. We do grapes as well. The company is around 2,600 employees fully employed but we employ on a daily basis close to 5,000 people to work in the fields across the country. It can go up to 6,000 sometimes and go down to 3,000 depending on the season. We provide transportation, food, accommodation, everything. We have many product lines and we export to over 60 countries around the globe. We are in every continent including in Canada, the US, Europe, North America, South America, Australia. We have customers and partners everywhere in the world from very small, taking two or three pallets, to people taking vessel sized volumes. As a business, we are the biggest mover of reefer containers in Egypt. We move close to 15,000 teus. We are using every shipping line and port in Egypt.

For more information, please visit: www.daltexcorp.com.

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