Thank you very much for receiving us today. The State of Kuwait has been blessed with two natural resources – its oil and its people. None of them has been developed to its full potential, as the country relies too much on the first resource while not that much on the second resource. Could you please share your opinion on what Kuwait needs to do to fully develop its potential?
Thank you for your interest in Kuwait, in Kharafi Group and the Americana Company.
People are the most important resource of Kuwait. Indeed, Human Resources Development is the foundation for the development and prosperity of any country.
Taking the example of Japan, the country does not have any natural resources but it still manages to be on top because of its people. The country takes good care of the people and develops them mainly through education among other things.
In the early stages before the discovery of oil, I think Kuwaitis did a very good job in developing people. At this time, families had the time and interest in educating their children so they would educate them either within the family or by sending them to other countries for education. I think this played a major role in the development of Kuwait so far, which is why many Kuwaitis became entrepreneurs and good traders because of their education starting from the values they learned from within the family and continued through education in neighboring countries or further.
Unfortunately, after the discovery of oil, people started relying on it; they began to relax. Situations also became complicated, as family quality time was reduced because parents would go out to work and return tired. The family values are very important and must be revived because it is important for developing human resources.
We used to rely on good educators in the past. Back then, we had the best. However, the present education system must be reviewed. We must work on the building of quality human resources rather than focusing on just the costs, as it always pays off in the end if we focus on the right aspects
Kuwaitis are aware about the importance of education and its contribution to the development of the country. Before the discovery of oil, Kuwait depended on its people and that’s why our ancestors were pioneers in good trading businesses. It is because of the education they received from their families and other sources. Therefore, I really feel that we have to give more attention to developing the education system and human resources in Kuwait because this is the foundation for the development of the country.
Regarding the other resource i.e. oil, we have not developed it to its full potential and there are several areas that we should have started working on earlier. We are doing it now but it is a slow process of producing its byproducts and petrochemicals, and developing the natural gas resources, which is also a big contributor to the economy of Kuwait. These are important projects for Kuwait; some of them were planned but unfortunately delayed for many reasons. We should now plan them out again and enforce its implementation.
A number of popular uprisings had erupted across the Arab World in 2011 in what is known as the Arab Spring. This led to a decline in investor appetite for the region; however, the MENA region experienced strong economic growth and is forecasted at 4.1 percent for the next five years. You are a businessman with a global reach and presence in the whole region. What is your impression regarding the potential of the MENA region?
Every opportunity comes with some risks. The higher the opportunities, the higher the risks! There were some turbulences such as uprisings and Arab Spring but Kuwait was immune to the Arab Spring because we have good democracy and freedom; people can express themselves freely in the country. We are lucky that this democratic system was implemented earlier in the country, which made us immune to what happened around us in the region.
However, we have investments in the whole region, which were affected. I am sure the investors are shying away because they are worried of these disturbances, but if they want real opportunities with good rewards, then this is the place to be. Huge amounts of money will be put in for developing this region. In the places where the uprisings occurred, the infrastructures were destroyed while some of the places didn’t even have proper infrastructure in the first place. Considering this, investors have huge opportunities to rebuild these areas. The pioneers will get the best of the projects in this aspect. So I encourage the investors to study this region despite being skeptical and worried. Things are stabilizing and are bound to improve further.
HH the Amir of Kuwait Sheikh Sabah Al-Ahmad Al-Sabah has expressed his vision of transforming Kuwait into an international financial and commercial hub. However, Kuwait’s private sector faces huge challenges to thrive and grow. What is your impression about the possible steps that could improve the business environment or competitiveness in this country?
To be honest, it is easier said than done. A lot of work, openness, and rules, which have not yet been implemented, have to be put in place for Kuwait to be a financial center. We have to work hard in this aspect.
Openness is important for a country to be a financial center. The country has to be open, ensuring ease of transport and ease of entry and exit for business purposes. Since we are in a difficult spot because of our geographical positioning, we cannot be very open because we need to safeguard our interests and the safety of Kuwait. This will always be a hurdle in the implementation of the vision. Despite being a free democratic country, we have conservative groups with loud voices in the Parliament of Kuwait. The openness in Kuwait is not like how it is in other countries such as Dubai and Bahrain. To be a financial center, the country has to be that open to attract investors.
We have to look at the big picture and figure out if we can do it or not. The country can be a hub for anything related to the oil sector but to be a financial center a lot of hard work is required. Of course, we will work on the vision of HH the Amir but it is difficult at this stage. This is my viewpoint.
What are the challenges you face as a private investor in Kuwait?
The challenges we face in the private sector are challenges related to interference of politics in the business. Other than that, there aren’t many challenges because the country, the government and the leadership have the will to develop Kuwait and implement the mega projects, which are important for the private sector too. We see there is real genuine interest to proceed with these projects but the interference of the politicians is what really hinders the developmental process. This is mainly the real challenge that we are facing in the private sector.
Five years ago, the world suffered under an unprecedented financial crisis that put most economies in a very delicate situation that tested their adaptability. In another crisis, the Kharafi Group had made laudable efforts during the Iraqi invasion in Kuwait. Your father late Nasser Kharafi had continued paying salaries to his employees. What conclusions do you draw from how both Americana and Kharafi Group had faced crises time and time again?
I think the strategies put in place earlier by my late father really proved to be accurate strategies of diversity whether in industries or the countries where we work. We managed to expand in many countries and in different industries. This strategy of not putting all your eggs in one basket; if something falls, you have the rest of your eggs- this helped us quite well in times of financial crisis and during the Iraqi invasion.
We have also chosen industries that are diversified and resilient to crises such as the Americana Food Group. People have to eat irrespective of financial crisis or not; they might go out less or pay less. On the other hand, the cost of raw material falls in times of financial crisis. Therefore, even though sales are less, the average margins are balanced for us to stay afloat due to cheaper raw materials, rent and other requirements. Therefore, having businesses such as Americana helps in such difficult times.
The invasion was a very tough time for us since we are a Kuwaiti company, but we had adopted the strategy of expansion as we had branches in Saudi Arabia, Emirates, Egypt, Bahrain and rest of the MENA region. So when the invasion occurred, we managed to shift our head office from Kuwait to the UAE and Egypt. Many of our employees moved to these countries. Even though some of them went back home, we kept our teams intact. This was my father’s call and it was a lesson for everybody. He insisted on paying the monthly salaries to all the employees, irrespective of whether they were working or not, and the money used to go to their homes. The CFOs tried to convince my father that it was not necessary to pay full salaries to the employees during the crisis and just half of it was enough, which the employees will understand. However, my father insisted on paying the full salaries. He had the vision that everything will be restored; he wanted the teams to be intact when that happened and to be the first to come back to Kuwait and operate. That’s exactly what happened. After seven months, on the second day of liberation, I was in Kuwait. I waited for the teams to arrive in Kuwait from different parts of the world and we were the first to open our restaurants in the country as Americana.
Regarding Kharafi, we were the first contracting company to be up and ready to work after the liberation. We worked with the US Corp of engineers and were awarded thegold Medal award for working with the US Corp of engineers for rebuilding Kuwait.
We realized that if we take care of our people, they will take care of us. Strong loyalty from our employees is one of the strengths of Americana. The employees have a high sense of ownership, loyalty and belonging towards the company. When people work in a place and treat it as their own, success is bound to happen as we can expect the best from the employees. And that’s what happened.
Americana today has a network of about 1,500 outlets. It has the largest chain of restaurants in the MENA region. This group embodies the pride of private companies here in Kuwait with its success. What have been the key factors for the company’s sustainability, growth and success, which definitely were not easy to achieve due to the strong competition in the market?
The main asset of Americana is its people. Ensuring they feel a sense of belonging in the company in turn ensures complete loyalty and commitment from them. I think this is the main contributor to our success.
The vision of the founders of the company, the management of the company, what they did to implement this vision and their values contributed to the success of the company.
To be a pioneer is also a very important factor because my father opened the first restaurant in 1968, which was Wimpy. Many people opposed the idea and questioned him about selling a piece of meat between two pieces of bread. Back in 1968, nobody understood what a burger was. My father had studied in Liverpool in the United Kingdom, which was why he knew Wimpy. He was certain that it would be liked and appreciated here. People initially opposed it, as they were used to eating rice and curry.
Nevertheless, he took the risk and opened the first restaurant. When he opened it, there was a long queue and he had to close the restaurant once a week to carry out the maintenance and cleanup activities because it was difficult job at that time and they did not have all the equipment. My father was a pioneer; he took the risk and believed it would work. Other restaurant chains followed such as KFC, Hardees, and TGIF and so on.
Therefore, being a pioneer, sticking to your values, and believing in your people and treating them well are the main contributors to the success of Americana.
We also created some of our own brands that we thought suited the local tastes such as Chicken Tikka, and other food outlets, which have all also done very well.
You are now celebrating your golden jubilee. What are your goals for the future?
We hope to celebrate our 100th year of success. We will not be alive but our successors will hopefully achieve that dream.
We encourage our people to be innovative, to speak out and give us ideas because this helps the company in its sustainability. We have been pioneers in a lot of areas. For example, we introduced home delivery service to the region, which proved to be a very successful turning point for the company. We do a lot of sales through home delivery. We had pioneered it and we have now mastered it.
We created the sandwich line in KFC, as they only had chicken on the bone. Our team realized there was a good interest in the region for sandwiches and decided to introduce it in KFC as chicken fillets with same herbs and spices in the boned chicken but put it in a sandwich. Some people like eating sandwiches, as they don’t want to get their hands messy. That was a successful move and a turning point for KFC not only in Kuwait but also worldwide. We also introduced the Zinger, which is the spicy version of the chicken fillet, and it was also a success. We push our teams to their limits because we know that creativity is the secret to continuity and success of the business.
We know you play a very important role in the Kharafi Group, which ranks among the top largest companies in the region with interests in several economic sectors. In the future, into which industries and in which regions would you like to see the group expand further?
With respect to industries, I think utilities development and infrastructure B.O.T.s (Build, Operate & Transfer) would be the main area of interest for the group because there is a lot of fierce competition now for traditional EPC (Engineering, Procurement and Construction) contracts. In such a competitive environment, it is difficult to stick to the values you uphold. We do not underpay laborers; some people take advantage by underpaying their laborers and placing them in terrible conditions but we cannot do that. It is not humane to do that even though it cuts costs. Therefore, that is an area that we are not focusing much on.
On the other hand, for utilities development and B.O.T.s, we have the know- how, which is not available in many companies. It is apt for us to be competitive in this area, and it is rewarding. With B.O.T. projects, we do the construction and financing, and accordingly we get the rewards. We also get the know-how; sometimes there is technology sharing when we do the projects with joint venture companies. So I think this would be the future for the group. We were successful in our first attempt, which was when we did the Sulaibiya Wastewater Treatment Plant, which was the first B.O.T. project in Kuwait and the largest R.O. (Reverse Osmosis) plant in the world. The Kuwaiti government saved over $11 billion compared to what it would have cost if the government and the Ministry of Public Works treated the water through the R.O. method. It was a good experience for us and very rewarding; we competed against some international companies and in the end the difference in price was less than 1 percent between us and the French.
We did a similar project of establishing two water treatment plants in UAE. I see the future of the company in such projects whether it is water treatment or power generation as we have good expertise and know-how.
We built three power plants in Egypt during the revolution time. We worked three shifts 24 hours of a day and delivered the projects on time. It’s now up and running and it was all implemented during the revolution time.
Regarding regions, we are present throughout the MENA region. Knowledge of the market in places where we have our people is very important to be more competitive. We can take up projects outside MENA region but there are more opportunities within this region. Moreover, it is better and easier for us to be in this region to capitalize on our existing Infrastructure.
You emphasized earlier about the pioneering aspect, which is one of the seven elements of distinction of Americana, while another one is social responsibility. I would like you to share with us Americana’s pledge and dedication to CSR aspects.
We take it very seriously; being a part of the community, we have to contribute as much as we can, as part of our social responsibilities. We have organized several activities to ensure we carry out our social responsibility and play our part in supporting environmental issues, youth development, hospitals and educational programs.
We have received awards for our programs. I received a medal and a certificate a month ago for being in first place for fulfillment of social responsibility in the region. It was given to us in Dubai by His Excellency Sultan bin Saeed Al- Mansouri. It reflects our commitment to social responsibility, that we are part of these countries and we have an important role to play. We support most of the initiatives that are presented to Americana. We take it seriously, as we think it is important and allows our customers to feel more connected to the company. This leads to them giving us more priority in several situations. For example, when they go to supermarkets and see the Americana brand products, they link it to a certain event that we sponsored and give us priority, which makes a difference.
We started a restaurant in Egypt that is totally run by people with hearing or speaking Disability. We developed a special system for them to run that outlet where the machines work through display of lights instead of noises as notifications so that they can see instead of hear. The menus are all pictorial so the customers can choose by pointing at the picture.
Such endeavors give us the satisfaction that we are doing something for the community.
‘My Word is my Bond’ is a moral value upheld by every trader from day one. Honesty among other values earns every person a good reputation. How would you define the Kharafi values that are applied to your business and what do you consider are the foundations set by your late father Mr. Nasser Al-Kharafi in this aspect?
I have never seen anybody like my father who is really committed to his values. His word was truly his bond. I have seen it in a number of different situations where there were no agreements or contracts but just his word. Even if it meant losses, he would stick to his word no matter what happened. Sometimes that worked against us but in the end, things work out for the good if our intentions are good.
To be honest, we have been hurt and unfortunately one of those times was here in Kuwait when we were involved in a very important project in the power sector known as Subbiya Power Project.
At that time, the country was experiencing a shortage of power and it was desperately needed. We won the tender of the project fair and square. While waiting for some important signatures that were pending in the routine process, the government and the minister at that time nearly begged my father to go ahead with the execution of the project and not wait for the routine process to finish due to the importance of the project. At the time, there was shortage of turbines in the world while there were many projects; so if we missed this slot, we would have to wait for two years, which was not possible. Either we had to place our orders for turbines immediately or wait for minimum two years to start getting the turbines we ordered. It was a very difficult call. On one hand, there was power shortage in the country and we were responsible for the project to rectify the situation. The delay was only the routine work of getting all the necessary signatures. On the other hand, it was a big commitment about getting 20 GE (General Electric) turbines that cost over Euro 600 million, which is a lot of money. Because the government and the minister were really insisting due to the severity of the consequences if this project doesn’t go through, my father took the decision of buying the turbines. The government also gave us the land to start working. Two and a half months after we started our work, the routine procedure had completed. Due to some political interference however, they decided to cancel the project. To cancel such a project proved disastrous for us especially since we had already bought the turbines. This is what happens when we make a commitment by word while the government unfortunately did not recognize the mistake. We were hurt for a while but when we look back, we realized that everything works out for the best. We usually put our money in assets and these assets were in stores where they were maintained and stored in a good condition, and certified by GE. That was the time of financial crisis but we were also aggressively investing in the stock market, shares, etc. The fund we spent for the turbines could have been invested in the markets and shares. However, when the market went down, people lost more than 50 percent of their capital while we still had our money saved as assets in stores.
We used these turbines in the three Egyptian projects. Therefore, eventually we had saved our money and our assets. We had a great experience building the three Egyptian power plants. We received immense appreciation from the Egyptian government for our commitment. Therefore, doing the right thing always reaps good returns. It was a test; we had stressed for a couple of years and it was a difficult time, as we felt we were carrying the whole world on our back. But it all worked back in a good way and we learnt this good lesson. However, we also learnt never to trust anyone again. We would not like to be in this situation again especially since we were really sincere and focusing on doing the right thing.
When we started this interview, you emphasized about the need for education in Kuwait. HH the Amir of State of Kuwait Sheikh Sabah Al-Ahmad Al-Sabah has a strong belief in your sector and its incredible potential. This led to the creation of the Ministry of Youth and also the National Youth Project. Do you see a shift towards youth empowerment in Kuwait?
I really do, there is now much more interest in youth, its development and its contribution in the decision- making process. We see this quite evidently in a number of situations. We believe in it.
Everything has a curve that goes up and then comes down. Our aim is for the curve of our business to go up one way and not fall back down. Before it falls, we must get new blood into the business and allow them to mingle with the experienced. The energy of the youth with the experience of the old is what really sustains businesses for a long time. We believe that and we see there is now a big interest for including the youths in several matters. Our ancestors had started when they were really young and they succeeded with their energy and their will. We need to involve the youth in everything because they are the future of the country.
During his last visit to Kuwait, the US Secretary of State John Kerry said the relations between the US and Kuwait is really strong and evergreen. However, we now see NATO forces and US Army pulling out of Iraq and Afghanistan, which decreases the security relation. How do you think the US-Kuwait or US-Middle East relations will evolve?
I think the decision taken by the West to pull out of Iraq, Afghanistan and other countries will relax the animosity that some people might hold against the West because they feel the West is occupying these countries. The decision could make the relations among these countries easier and comfortable, easing doing business with them.
On the other hand, with these forces pulling out of the countries, those countries and the countries around them will have to develop their defense capabilities, for which they will need to cooperate with United States especially since they are the militant power in defense and weaponry.
I also think this will help in doing business with the United States irrespective of whether it is with the defense capabilities, weaponry or any other business aspects because it relaxes the relationship between the West and the region. It gives the Western companies opportunities to come in without the fear of being viewed as occupiers. I think the niche for the American companies will be to get into projects with high engineering capabilities and know-how.
As I told you, the regular EPC projects are very competitive for which the Far Eastern companies and Turks show extreme aggressiveness. But for projects that require high-value engineering, design capabilities and know-how, this is where the American companies will fit in. In retail especially, the American brands are appreciated in all sectors such as clothes, food, etc. This is how I think the relation will develop in the future.
Your father once said, ‘I am motivated by achievements. I want to leave a legacy and contribute to the wellbeing of humanity’. It’s a beautiful statement. What are your motivations? What drives you on a personal level?
Like I said before, I had the best teacher I could have ever asked for in this world that’s how I was brought up - to be driven by achievements. And that is also what we want – to see our achievements and projects see the light. That gives us the motivation to work on similar projects and achievements. It helps in raising the name of the company and the country, as it is very important for us to see Kuwait among the Leaders in the market. We want to see the country well developed and pioneering in different areas.
We hope we continue the legacy of my father and his brothers.