SiBiC_Case_Study

Establishing SiBiC as a Sustainable Business Model in the Egyptian Market
Ahmed
Hassanein1

and
Dina
H.
Sherif2

April 2011

1
Dr. Ahmed Hassanein is a senior consultant with the Gerhart Centre on issues related to sustainable construction,
teaching executive education courses and conducting research. He is also the founder and CEO of Mabani
Sustainable Solutions, and is an adjunct Assistant Professor at Nile University, Cairo, Egypt
2
Dina Sherif is Associate Director, John D. Gerhart Center for Philanthropy and Civic Engagement at the American
University in Cairo

Establishing SiBiC as a Sustainable Business Model in the Egyptian Market 2

Establishing SiBiC as a Sustainable Business Model in the Egyptian Market
Hearing Sameh El-Taweel, SiBiC CEO, talk about his joys and woes with the company is like
hearing a father talk about his first-born taking his first steps in a Chinaware store; there’s the
excitement in his voice over the few steps that have been taken, frustration associated with the
falls and yet unrealized dreams, concern over any bruises caused by falls and bumps, hope that
the many more steps will come, a sense of responsibility towards both the child and its
environment, and determination to see a rise follow each fall. What makes the Sameh – SiBiC
relation unique is that, unlike most companies operating in Egypt, he is not a partner in the
company, nor does he sit on the company’s advisory board. What makes it even more unique is
that Sameh neither knew much about the industry in which SiBiC was to take its first steps, nor
was he familiar with the economic dynamics in Egypt at the time he joined; he had been living in
Switzerland. Over the last few months, he witnessed SiBiC become the employer of over a
hundred employees. Oh yes; and there’s pride in his eyes.
Company Background
The idea to start a company providing innovative and alternative construction materials and
solutions originated in the summer of 2008. To turn that idea into a reality, four partners (led by
Executive Chairman of SiBiC, Mohamed G. Nassrat) invested EGP 10 million to establish SiBiC
Integrated Building Industries Co. (SiBiC) in January, 2009. The first step taken by the
shareholders to turn their dream into a reality was to identify a unique and dynamic individual
with a strong management background to act as CEO. The person identified was Sameh El
Taweel who – being exposed to and believing in the ACME Sustainability philosophy and notion
– immediately called for its adoption. Led by Dr. Mostafa Higazy, the ACME Model, which
focuses on: 1) corporate governance; 2) human capital development; and 3) strategic direction,
was applied and continues to provide the backbone to the current SiBiC business model.
What makes SiBiC unique amongst other startup companies in Egypt is that it is trying to de-
mystify the myth that small startups cannot afford the luxury of applying sustainability
management principles. This is mainly due to the belief that startups should primarily be
concerned with realizing immediate financial gains to ensure that they remain afloat and
continue to grow in a competitive market. The typical approach of a startup company in Egypt –
should its management be interested in applying sustainability management principles – is to
consider applying them only after financial gains have been realized and the company can spare
the resources requested to render their operation sustainable. The approach – as mapped through
the ACME Model – adopted by SiBiC has been quite different; this has left the CEO, along with
the shareholders, believing that sustainability management should be at the core of what they do
from the company’s inception.
The first line of construction material provided by SiBiC’s subsidiary “ConcreMix” was ready-
mix concrete. Production in the first plant, based in New Cairo, Egypt, commenced in March


2010. This was the first baby step taken by SiBiC to reach its vision of becoming the leading
developer, manufacturer and provider of economic, innovative, high quality building materials,
systems and solutions in Egypt and the MENA region.
The following Sections will shed light on how SiBiC is attempting to apply the various
principles of sustainability management in its operation, what additional demands that has placed
on its limited resources and how that is reflected in its strategy and operation.
Building a Sustainable Model
The strong belief in the ACME Model has left the CEO, Sameh El Taweel, at the start up of
SiBiC with a mixture of feelings; a lot of effort was invested in the planning and strategizing of
SiBiC. Additionally, a systematic and organized approach was developed led by ACME Corp in
the capacity of strategic advisor and institutional mentor to facilitate the realization of SiBiC’s
growth potential. This meant that ACME’s guiding philosophy was adopted and embraced by the
human resource and technical consultants who were involved in the development of the company
from its inception. Additionally, a market study was prepared by Nielson Media Research
(NMR), and was available to SiBiC by May 2009; four months after its establishment. The
purpose of this study was to identify gaps in the market and to verify the validity of assumptions
made by the shareholders regarding current and future demand for building materials. The
development of SiBiC also came in the midst of a global financial crisis and a real estate
development sector in Egypt that was showing signs of slowing down in terms of growth. This
was cause for the initial excitement felt by Sameh to be mixed with turmoil. Regardless of
potential financial liquidity issues, SiBiC has remained dedicated to investing in a sustainable
business model. The key question to be asked here is whether or not this was a sound business
decision to make after taking all factors into consideration.
Corporate Governance
One of the biggest problems faced by small and medium enterprises (SMEs) in Egypt is their
ability to cope with external business conditions and internal operational problems that may
threaten their ability to survive. Often times, SMEs fail to grow and remain sustainable because
of a weak or non-existent corporate governance structure. The general guidelines of corporate
governance aim to achieve greater transparency and fairness as well as hold executive
management of any given organization accountable to its shareholders. Acknowledging the
importance of a strong corporate governance structure to sustainability, SiBiC worked closely
with their strategic advisor (ACME) to reach an optimum framework and test it in accordance
with ACME’s mandate as institutional mentor which dictates that the culture is first established,
then practiced and finally documented. The Executive Chairman, by definition of his function,
plays a crucial and sensitive role; on the one hand, he offers strong support to the CEO on the
operational strategy level. On the other hand, he is permanently challenged to separate ownership
from management.


The company currently has 3 board members, which includes the majority of the shareholders (4
shareholders). While this may lead to the board of directors being unable to at times separate
ownership from management, active steps have been taken to heavily involve both the CEO and
the ACME Advisory in its capacity as Institutional Mentor in that respect, in addition to recently
involving key members of the management team in board discussions. SiBiC has also included
in its plan the incorporation of Sameh El Taweel, the CEO onto its board and is open to the
inclusion of independent board members in addition to other senior managers. Dedication to
achieving an appropriate governance structure, while not common among Egyptian SMEs, is
testimony to SiBiC’s dedication to achieving a sustainable business model.
Investing in Human Capital
At the core of SiBiC’s culture – as per the ACME Approach – is regarding employees as human
capital. This is reflected in the company’s hiring and retention strategies, as manifested in its
dedication to their human capital’s development and training. The Egyptian revolution of
January 25th
, 2011, and the ensuing demonstrations by employees of various sections of the
economy against low salaries, job instability and lack of benefits, illustrated that very few
companies adopt the ideology of regarding their employees as human capital. Much like all
companies operating in the supply of ready-mix concrete, there are mainly two groups of
employees in SiBiC; management and workers.
Regarding the workers, despite the fact that SiBiC operates in an environment where most of the
workforce employed in construction is informal, approximately 85% of SiBiC’s labor is formally
employed on a full-time basis, with all the benefits that come with such employment terms,
including social security insurance. Decent workers’ accommodations are provided in El
Shorouk, which is a few km away from SiBiC’s plant, with company-provided transportation to
and from the plant, stopping along the way to pick up workers who reside in relatively remote
areas such as Dar El-Salam, which is at least a 45-minute drive from the plant. Further to the
above, SiBiC has also developed a clear employee feedback mechanism that enables all
employees to submit concerns and grievances to SiBiC management, albeit not anonymously.
Grievances, however, remain confidential between the employee and Human Resources.
Management personnel receive above-average compensation packages; including competitive
salaries, which are considered in the upper middle range, compared to international employers
operating locally. This helped SiBiC attract a high caliber management team with approximately
40 years of collective experience in the industry of supplying ready mix concrete in the Egyptian
market. Most of this experience was gained with one of the bigger international players in the
field. Another aspect of the package offered to SiBiC employees is health, accident and life
insurance coverage. This is typically not part of packages offered by local companies, especially
among small start-ups. Furthermore, SiBiC invests in its employees to reap long-term rewards
through training and development. Such a training-oriented culture, coupled with continuous
research and development (R&D) - following the guidelines of the institutional emergence model
delineated by ACME Advisory, will enable SiBiC to be aware of new technological advances,
new applications of sustainable products and management procedures that would be suitable to
the local market and their operation.


Economic Performance
Like all enterprises, SiBiC was established to realize profits. While adopting the triple bottom
line approach to evaluating growth and success, which considers financial, environmental and
social aspects, the former remains a major concern for most shareholders. Typical financial key
performance indicators (KPI’s), such as earnings before interest, taxes, depreciation and
amortization (EBITDA) and net profit, fall short of accurately assessing a company’s
sustainability, as they only consider immediate gains, while financial sustainability is all about
making wise long-term investments. As such, while SiBiC’s EBITDA might not be the highest
among its peers, the company will reap its rewards for investing in its human capital through
reduced turnover rates, as well as higher productivity.
While ConcreMix’s client base comprises twenty-four clients, the top three constitute
approximately 90% of the sales’ revenues. This lack of diversity in the market indicates a
dependence of SiBiC on the survival and continuous demand of its top three clients, and is
clearly an unhealthy situation. The currently operating batch plant is located in New Cairo, with
major infrastructure, residential and commercial construction projects spurting nearby. On the
other hand, the location also poses the following challenge: it is on the outskirts of Cairo, a city
of deteriorating infrastructure and severely congested traffic. This limits the geographic client
base that ConcreMix can serve. Another factor limiting ConcreMix’s client base is the plant’s
current operation, which is mainly during the day, while trucks are only allowed in many of
Cairo’s neighborhoods from midnight to 6:00 am. With other plants planned for other locations
such as mid and West Cairo, ConcreMix will be able to widen its client base and diversify their
interests (residential, commercial, industrial, etc.). Such diversification would reduce SiBiC’s
exposure to risks related to a slowdown in one segment of construction.
In order to become a leader in a field, and provide services that meet or exceed clients’
expectations, it is imperative that a company invests resources in R & D. SiBiC’s plan outlined
in the Strategic Framework issued by ACME, the strategic advisor, is to provide cost-efficient
alternative building solutions, providing a plethora of potential areas for research and
improvement. The impact of their business practices on employer morale and job satisfaction as
reflected in increased productivity and lower turnover resulting in overall cost savings could
itself serve as a model for other businesses to learn from.
Environment, Health and Safety
In their operation, SiBiC has been attempting to focus on reducing both waste generated and
water and energy consumed on their plant. In their plans, alternative and more environmentally-
friendly concrete will be provided. Use of industrial and agricultural by-products, such as fly ash,
silica fumes and rice straw bales as partial cement replacement have been identified as potential
alternatives.
Concrete batch plants can emit airborne pollutants; primarily dust resulting from concrete mixing
operation, or from vehicles driving on unpaved grounds within or without the plant. Given the
remote location of their operating batch plant, noise and dust control have not been a major
concern for SiBiC. Installed filters at the plant satisfy international codes, which are significantly
more demanding than local code demands. Informal attempts have been made at the plant,


mainly aimed at reducing waste generated, as well as reduction in water consumption. While
there are no signs of alternative energy sources at the plant, responsible energy use is definitely a
culture within the plant.
In their New Cairo plant, safety measures match those of concrete batch plants of developed
countries. An OSHA certified engineer is present on site. Logistics for safe entry, loading,
washing and exit of concrete mixers have been established and communicated to the drivers.
Since the operation of the batch plant is based on one shift – with overtime hours worked on
need basis – each driver has been assigned a concrete truck mixer, so he becomes familiar with
its maintenance history, and sensitive to mild fluctuations in its performance which could also
act as an early warning system regarding maintenance requirements. Safety is promoted as a
company culture, and all abide by the yet unwritten safety manuals. Clear, large signs are placed
at strategic spots throughout the site to promote safety and specify what is to be done in cases of
emergency. Maintenance and operations personnel are given manuals, with easily-understood
illustrations to reduce the possibility of errors and ensure compliance with maintenance
procedures. Management leads by example, explaining to workers why the safety gear –
regarded as an inconvenience by most Egyptian workers – is there for their safety and wellbeing.
The plant operates from 8 am to 8 pm, and as such most of its operation since March 2010 has
been conducted during daylight. With winter around the corner, a floodlight has been installed.
While the installed light causes no glare, the shadows it would cast have not yet been studied by
a lighting expert to ensure adequate and uniform coverage.
Operation Monitoring and Control
An example of an indirect but welcome result of having invested in internal audit systems and
control procedures is the performance of SiBiC’s billing system. Since SiBiC started operation,
not a single case of discrepancy in billing any of their clients has been recorded. Such an
achievement would result in SiBiC’s reputation being built as a reliable operation with efficient
accounting systems. Such gain in client confidence could prove to be an excellent marketing tool
in a competitive market mostly dominated by international players, which could lead to SiBiC’s
growth and expansion. On another front, reports generated by SiBiC have been praised for their
organization and attention to detail by their Marketing Advisor. Clearly, such detailed reports
could not be generated if SiBiC had not been diligently recording and analyzing relevant data,
and issuing monthly performance analysis reports to monitor key variables such as raw material
costs, scrap, selling price by category and project with the aim to continuously enhance
performance.


The Future
Currently, SiBiC’s only product is ConcreMix; its ready mix concrete supply arm. SiBiC’s plan
is to expand to other alternative construction materials and systems, such as masonry units,
asphalt concrete and environmentally-friendly products are not yet provided. Other than
providing construction material, SiBiC sees itself as becoming the regional leader at providing
consulting and one-stop shopping services to clients who wish to construct and operate their own
batch plants, without having the necessary expertise to perform all these functions in-house. The
lack of availability of such a service was first realized by SiBiC during the planning and
procurement phases of their plant. The demand for such a one-stop shopping service was
perceived by board members to be on the rise, considering the number of large projects that will
be ongoing and limited capacities of ready-mix concrete suppliers. Will this kind of product
diversification serve to enhance the overall sustainability of SiBiC in the long-run or are they
aiming to achieve too much?
From its inception, the plans for SiBiC have been to operate in the MENA region, and not be
limited to Egypt. To that end, SiBiC’s growth plans illustrate a desire to expand its operations in
the region, which has been supported by actual measures taken to facilitate that move. As an
example, SiBiC’s benchmarking criteria, researched and developed by ACME, the Strategic
Advisor, are based on international standards, not local ones. While attempting to adhere to
international standards places more demands on the operators and company resources, the return
on such investments will be realized once SiBiC goes regional, as there will be no additional
training required for their human capital or additional investments in compliant equipment to
adhere to stricter standards. Was it wise for SiBiC to integrate expansion plans into their business
model so early in the game or should they have focused completely on functioning within the
Egyptian market? In the wake of the Egyptian revolution of 2011, most businesses will have to
reassess their governance structures, employment strategies, human resource policies and salary
structures, among other issues. This will necessitate the review of their business models in order
to ensure profitability despite the increased operation costs. In this regard, SiBiC is one of the
few exceptions and is already operating as a responsible business. It seems that Sameh’s toddler
is better prepared to manage his way through the crowded Chinaware store than many of the
more experienced players.


About the program
The Corporate Sustainability Capacity Building Program (CSCB) is designed to help corporations acquire
the relevant knowledge and skill set to integrate sustainability management effectively into their bottom-
line operations as well as assess its value for their business. The CSCB program is based at the American
University in Cairo’s John D. Gerhart Center for philanthropy and Civic Engagement and is a partnership
between;
Case Study production is one of the program’s key components whereas we aim at establishing a
knowledge database on corporate sustainability through the development and publication of company
case studies from the MENASA region. All case studies are produced in partnership with the American
University in Cairo’s El-Khazindar Business Research and Case Center.
Corporate Sustainability Capacity Building
Program
John D. Gerhart Center for Philanthropy and
Civic Engagement
The American University in Cairo
Tel: (202) 2615-1340
E-mail: cscb@aucegypt.edu
http://www.aucegypt.edu/research/gerhart/corpo
rate
El-Khazindar Business Research and Case
Center
School of Business
The American University in Cairo
Tel: (202) 2615-3413
E-mail: kcc@aucegypt.edu
http://www.aucegypt.edu/business/kcc

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