As domestic oil demand threatens to pose a fiscal challenge for Saudi Arabia in the coming years, one of the kingdom’s top executives, Abdulla Al Zamil, argues the case for making the most of the country’s most precious asset
Abdulla Mohammed Al Zamil is something of a visionary. He represents a younger generation of Saudis looking to shake things up and in many ways symbolises the changing dynamics of family businesses in the Gulf that have made the transition from traditional merchant houses rooted back in the 1970s to companies that have had to adapt and evolve in tandem with the changing global economy.
At 47, an upbeat and energetic Al Zamil heads Zamil Industrial Investment Co (ZIIC), the fourth-largest Saudi industrial company by market capitalisation and one of the fastest-growing companies in Saudi Arabia. After earning a bachelor’s degree in Industrial Engineering from the University of Washington in Seattle, Al Zamil returned to the kingdom in 1987 to join the family business while completing his MBA. He worked his way up from an industrial engineer on the assembly line, to then being part of the purchasing department, before going on to sales and marketing and eventually operations.
“My father was the best silent teacher,” he says. “His actions spoke volumes.”
He's helped the company transform in line with the expanding economy of Saudi Arabia and realised, along with other family members, that moving beyond the traditional markets in the Gulf and wider Arab world would provide opportunities for growth. And, the company realised, a catalyst to expansion would be by becoming a publicly traded entity.
“To be public, you need to have economies of scale; you cannot be a small trading firm that would want to go public,” Al Zamil says. “There are certain prerequisites and back in the mid 1990s we thought we had those prerequisites. The government was very much encouraging family companies to start going public, especially the ones that employ a lot of locals.”
About 23 percent of Middle Eastern family businesses plan to grow quickly and aggressively in the next five years, according to a recent PwC survey. A further 69 percent in the region expect steady growth, and only two percent expect to contract, according to the consultancy.
Today, Zamil Industrial sells its products in more than 90 countries with manufacturing facilities in Saudi Arabia, the United Arab Emirates, Egypt, Austria, India, Vietnam and Italy, employing more than 10,000 people in 55 countries. The company sells about 1 million air-conditioning units a year and in the last ten years almost doubled its production. ZIIC derives 40 percent of its revenue from outside the kingdom and despite the challenges of the past few years, ZIIC continues to be one of the Gulf’s best performing companies.
“Usually when you’re a publicly traded company governance becomes an integral part of your overall process and it makes it much more institutionalised... You tend to separate management from ownership clearly when you have other partners in the business,” Zamil says.
For ZIIC, diversifying its portfolio was key to its future and it needed to monetise. Going public on the Saudi Tadawul stock exchange, the Arab world’s largest bourse, meant a greater level of flexibility in terms of how ZIIC would finance its growth down the road. It meant being able to go to lending institutions without having to put on the table personal guarantees, and carrying out debt restructuring.
“When we decided to go public one of the reasons to monetise was partly to deploy those funds into parallel investments and that’s exactly what we did,” Al Zamil says. “When 30 or 40 percent was sold, those funds were immediately deployed into two other companies which we created from scratch; those were in the petrochemicals field. We always wanted to enter into the petrochemicals field but we lacked the proper funds to do so and that was partly the reason why we wanted to go public.”
“When you’re a public company, banks and financial institutions look at you differently,” Al Zamil says. “You can be in the capital market a lot more because of the transparency that you put forward.”
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