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El Sewedy shows how Egyptian companies can beat the odds

By Borzou Daragahi

 

For decades, one Egyptian company slowly built up its brand and bucked the odds, exporting its products across the world and growing while contemporaries languished.

Now El Sewedy Electrometer, a maker of sophisticated consumer and commercial electrical power metering technologies, is about to undertake its biggest challenge yet: making a play for the US market after successfully establishing itself in Africa, Asia, Europe and Latin America.


“The US market is huge and they are taking the smart metering as a policy and a strategy,” says Khaled Fouad Homssi, chief executive.

“The meter standards in America are not satisfying the demand, so utilities are getting supplies from outside,” he says. “We are very close to making it into the US.”

El Sewedy was established as a mere distributor of imported electrical products decades ago but has evolved into a significant international player in what is now considered a cutting-edge “green” technology.

The private holding company employs 2,250 people at research, manufacturing and sales offices across the globe and distributes nearly 3mn units internationally each year. More than 200 of the employees are engineers coming up with new designs and concepts.

Last year the company fended off offers from a large European technology firm for a large stake in the company; it plans to go public itself in the next few years. This year it is aiming for $600m revenues.

Mr Homssi, 46, joined the company in 2002. He says El Sewedy shows how ambition, patience and strategy – as well as investment in human resources – can make an Egyptian company a global player. Its sales in Egypt now account for only 15 per cent of its business.

Established in 1938, El Sewedy was for decades an importer and distributor of electrical equipment, engaged in the kind of buy-low, sell-high wheeling and dealing that accounts for much of business activity in the Arab world.

It accumulated serious capital as a contractor for a power generation plant in Mecca and Egypt’s Aswan Dam in the 1950s and 1960s. El Sewedy Cables, later renamed El Sewedy Electric, launched in the 1970s, becoming one of the largest producers of cable and electrical products in the Middle East and Africa.

El Sewedy Electrometer launched as a separate entity in 1997, operating under a licence from an American firm it later bought outright.

By 2003, the company, building on the US design, began assembling its own research and development team, investing in Egyptian talent to design and mass-produce ever more sophisticated “smart” meters that encourage responsible consumption. The next year, it opened a factory in Ghana to serve west Africa, followed by plants in Zambia and Ethiopia. Soon after it opened factories in India and Brazil and bought a company in the Czech Republic, ZBA Smart Energy.

It created Mexican beachhead in 2009 in part as a backdoor to the US market. “We said, ‘Why don’t we establish a factory in Mexico where we can utilise the North American Free Trade Agreement?’” he says.

Among the dozens of meters produced, sub-Saharan Africa utilities favour a pre-paid electrical meter that requires consumers to purchase credits and swipe cards or punch in a code via telephone or the internet.

Mr Homssi cited a study in Canada that showed that pre-paid meters reduced consumption by 26 per cent. Meanwhile meters that depended solely on consumer awareness, such as an email or text message alerting users to high usage, reduced consumption by only 7 per cent.

“Smart metering is the future,” says Mr Homssi. “If you pay in advance, you will calculate your budget wisely. Every time you buy, you will ask if you really need it.”

El Sewedy Electrometer has also begun to propose enterprise-wide metering systems to utilities that not only charge consumers higher rates for usage during peak times but ration power to prevent brownouts during hot summer months.

“Nowadays, if you have a smart metering infrastructure, you can easily give everybody enough electricity to allow them to use one air-condition in the house but not every air-condition in the house,” he says. “And after those two or three hours you can bring it back to normal. Because, in the end, as a utility, it is not in your benefit to have extra power and not to sell it to the consumers.”

Mr Homssi says the company is moving toward offering solutions more than gadgets; it foresees the day when even the most sophisticated meters it produces, albeit assembled with cheap Asian-made components, will be little more than commodities. “What’s happening in the metering business is the same as what happened in the mobile phone business,” he says. “You don’t care really about the brand so much as the service.”

Why don’t more Egyptian companies emulate El Sewedy Electrometer’s successes?

“I think a lack of vision, a lack of finances and a lack of strategies,” Mr Homssi says. “To become a global company you need to have a structure. We believe that if we don’t have our own plan, we will be part of someone else’s plan

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El Sewedy Electrometer Egypt acquires 100% shareholding in ZPA Smart Energy a.s.

ZPA Smart Energy, the Czech leader in electricity metering, has been acquired by the world's fifth largest electrometers producer El Sewedy Electrometer Egypt, for an undisclosed consideration from Kilcullen Kapital Partners, a Czech-based private equity investor.

Established in late 1950s, ZPA Smart Energy is today the largest producer of electrometers and ripple control receivers in the Czech Republic. Most recently, the Company has been substantially focusing on "smart metering" which is a leading trend in future electricity metering business.

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