INTERVIEW: Tarek Sultan, vice chairman & MD, Agility
Since starting up in 1979 as a small state-owned warehousing provider in Kuwait, Agility has carved out an enviable position as an integrated logistics powerhouse and become the largest logistics company in the Gulf.
Operating in more than 100 countries, Agility has two main lines of business: its global integrated logistics (GIL) business works with companies to move, manage, and distribute goods; and its infrastructure portfolio of companies provides logistics-related services in emerging markets to facilitate trade and create access to opportunities.
Former investment banker and Kuwait national Tarek Sultan has been instrumental in generating Agility’s good fortunes, having assumed leadership when it was privatised in 1997. Sultan has spearheaded the organisation’s determined expansion.
Under his guidance, Agility’s revenue has grown from $30m to nearly $6bn, providing a stellar example of a highly successful privatisation model.
Speaking to Logistics Middle East on the side-lines of the INSEAD Global Business Leaders Conference 2015 in Abu Dhabi last month, where Sultan was a guest speaker, the industry veteran begins our interview by making the case for Kuwait – which has faced tough economic times in recent years – to privatise state assets.
“Primarily if you step back and you look at the problems facing the government of Kuwait or the governments of the MENA region, the number one problem is the issue of job creation,” he observes.
“When you have a country like Kuwait where 95% of the citizens work for the government, it’s very easy to see that the government cannot afford to hire any more people.
“So, the only way to create new jobs is by privatising and Agility, when the government first privatised it, had 300 employees and now it has 30,000 employees.
“It gives you an idea of what kind of growth can be unlocked by a well-designed and aggressive privatisation programme. That’s really it – the government can create a lot of opportunity for citizens by continuing to privatise parts of the economy that have historically been only in the public domain,” Sultan continues, referencing the positives he has witnessed first-hand leading one of Kuwait’s corporate success stories.
He also believes that opportunity can also be created as a result of the tumbling oil prices seen this year, despite the turmoil inherently caused.
“Clearly, falling oil price is going to limit the government’s ability to spend and in all honesty that’s probably a good thing because in the long-run we need, as a country [Kuwait] to figure how to operate without spending,” Sultan explains.
“Sometimes the best ideas for innovation come from times of need and right now we need a privatisation programme because the government doesn’t have the budgets to carry out all the programmes that it wants to carry out and I think the next logical choice for them is to embrace privatisation as a way to create more opportunity for the countries,” he adds.
Sultan believes there is no better time than now to privatise. “Low oil prices create the opportunity to move subsidies and other entitlements that are negatively impacting the government’s expenditure,” he outlines.
Indeed, there is one particular state-owned asset that Agility has had its eye on for some time, so I ask where the company stands at present with regards to Sultan’s previously expressed interest in securing a stake in beleaguered flag-carrier Kuwait Airways – once the government gets around to privatising the loss-making airline that is.
“As of yet, the government has not privatised Kuwait Airways. As far as we know the government is re-financing and re-structuring Kuwait Airways.
“We would hope that at some stage it will privatise the airline – at which stage we would be interested in that,” Sultan confirms.
The country’s parliament first approved a plan in 2008 to privatise the struggling airline by offloading 35% of it to specialised firms. The process has repeatedly been held up and earlier in the year it was reported that Kuwait’s parliament was considering keeping Kuwait Airways in state hands by reducing the proportion of shares on offer for sale to 25%.
Of course, only time will tell though it is it’s clear to see Agility will move quickly to capitalise on the opportunity when it arises.
In the meantime, Agility has plenty to focus on, namely a planned $100 million spend on expansion, in 2015. The company made this announcement back in February and cited Africa as the main focus for this investment, specifically Ghana, Mozambique, Angola and Nigeria. These countries have benefited from an improved performance in their oil and gas sectors, as well as growing populations and rising incomes of consumers boosting consumer spending.
Africa on the whole has been billed as ‘the one to watch’ in the media frequently this year, and Agility has been ahead of the game.
Knight Frank’s UAE Industrial and Logistics Research Report Q3 2015 said the African continent’s economies will grow, on average, 4.5% in 2015 and 5% in 2016 – with excellent growth prospects over the next ten years – and cited the annual African Economic Outlook report by the Organisation for Economic Cooperation and Development, the African Development Bank and the United Nations Development Program.
In addition, a 2015 report by yStats.com2 revealed that despite Africa lagging behind other regions when it comes to the development of online infrastructure, business-to-consumer (B2C) sales are set to grow to double-digit numbers in the next three years due to the development and accessibility of technology, and the rising popularity of e-commerce, on the continent.
While markets within Africa offer numerous opportunities, there are also challenges. But its infrastructure and supply chain challenges are part of Agility’s value proposition.
Considering the appeal of the African continent, Sultan reveals: “Primarily our businesses are very heavily focused on emerging markets and emerging markets are growing faster than the developed economics, so the combination of that focus and continuing to invest in the emerging markets is paying dividends for our shareholders.”
He confirms that the $100m investment plans are in full swing, stating: “We have had a very aggressive capital expansion programme and we are investing heavily throughout the emerging markets, particularly in Africa – we are growing businesses there.
Going into more detail, Sultan says: “Recently we invested in the airport in Ivory Coast – this is a major programme for us – and there are many others to follow, or are in process. We also have a series of logistics villages that we’re building throughout Africa. Africa is a major focus for Agility.”
Emerging markets are an important part of Agility’s operation and strategy, and the company is highly experienced in this type of work. Sultan told news agency Reuters last month (see p8) that he expects Agility’s revenue to more than double in the next five years as it focuses on emerging markets, hitting figures between $10 billion and $15 billion, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $1 billion.
As part of working extensively in emerging markets, Agility is experienced in operating in regions that pose security issues, through political unrest and conflict, for example.
Addressing how Agility copes with difficult environments, Sultan concedes that while “it is always a challenge”, he has complete confidence that the company is well placed to handle it.
“We started in the Middle East and the Middle East from time to time has issues. Having started from a country in this region, we feel it gives us an advantage globally – and it shows: we’re the only top ten logistics company whose roots are from the emerging markets, so it makes it easier somehow for us to look at making commitments to other markets that are traditionally considered risky markets,” he explains.
Continuing, Sultan elaborates: “If you look at Africa or the other emerging markets, it’s easier for us to invest in those countries because we see them as not being significantly different than our home markets.”
Another market of interest has to be Iran, I venture, which Agility does not operate in currently as a result of ongoing complications due to sanctions imposed by the European Union and the US.
Sultan tells me: “The sanctions have not been lifted yet and we are waiting for them to be officially lifted. Of course, at that stage, we will be very interested in investing there.
“It is a large country with well-developed infrastructure, an educated workforce and a growing market – and it is right here in our backyard.”
With the conversation turning to how Agility can leverage its consistent growth and success to further its development as it embarks on new ventures, Logistics Middle East turns the spotlight on the man at the helm.
While discussing his leadership style – and, in turn, Agility’s strengths – Sultan comments: “I would say that we empower people but hold them accountable.
“It’s a mix between empowering and accountability, but also leading by example: working hard and letting the results do the talking more than the talking.”
In terms of any advice he has to offer for anyone seeking to follow in his footsteps by forging a thriving career in logistics and supply chain, Sultan’s advice is to look at the key trends of tomorrow: “I would focus today on the intersection of logistics and e-commerce, and look at the opportunities that will arise [therein] because more and more is being purchased online,” he shares.
“There are some fundamental changes with the way the cloud will operate; it is going to empower more and more small to medium sized enterprises to potentially be competitors and sources of business for the company going forward, and we have to be ready and be prepared for those challenges,” he adds.
Sultan, who is due to commemorate his 20th anniversary at the helm of Agility in 2017, concludes our interview with simple words of advice that I suspect belie the ingenuity and audacity it takes to propel a company like Agility forward in the way he has.
“Just keeping working hard, that’s all,” he says, with a smile.