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Syrian refugee entrepreneur gets vital support to sustain manufacturing business

When Basil Qassab fled from Syria to Jordan to ensure the safety of his family, he was left unemployed for nearly two years. It was 2011, and only the beginning of the crippling conflict that still drags on today. A decade later, nearly 670,000 registered Syrian refugees still reside in Jordan. Most still live under the poverty line, according to the UNCHR.

As Syrians were not yet granted work permits when Basil arrived in the country, he knew he had to become an entrepreneur if he were to survive. Ala’a Sabha, a Jordanian who was to become Basil’s business partner, first introduced him to the world of paper cup manufacturing. Ala’a and his brother were already running a successful printing business and recognised the opportunity to start manufacturing paper cups in Jordan.

“He had studied the market and I found the opportunity very promising. I decided to take on the challenge – especially since I didn’t have any other job opportunity at the time,” Basil says. 

The partners started producing paper cups with two machines in 2013. Today the business, Al Haramein, produces a wide range of paper cups for hot and cold beverages at a facility with 32 production machines. Last year, the Nomou Jordan Fund (NJF) provided Al Haramein with financing to expand even further. The business was growing rapidly, sales were increasing, and it started exporting to neighbouring Saudi Arabia. Then COVID-19 struck.  

Strict domestic lockdowns, the global economic slowdown, trade disruptions, and the suspension of international travel have placed severe pressure on Jordan’s economy and businesses like Al Haramein. According to the country’s Department of Statistics, GDP growth slowed to 1.3% in annual terms during the first quarter and then contracted by 3.6% in the second. The manufacturing sector also contracted by 5.3% in the second quarter.  

Lockdown measures forced Al Haramein to close its factory for two weeks and it could only operate at minimal production capacity for almost three months. Coupled with border closures which affected exports, these measures severely impacted Al Haramein’s sales. The business also struggled to collect outstanding payments from its clients.

“The pandemic affected us in many ways including reduced mobility of employees and production halts. Sales and exports declined, while expenses associated with shipping and maintenance increased,” Basil explains. 

The NJF granted Al Haramein a 3-month concession on its loan repayments to overcome the gap in its cashflow.

“This concession helped us balance our cash inflows and outflows more effectively in these difficult market conditions and to return to near-normal cash flow management in a shorter period,” Basil says.   

GroFin Jordan’s advice to Al Haramein, in combination with the payment concession, helped the partners to better manage their cashflow. The business could maintain sufficient inventory levels without falling behind on its commitments to others. GroFin advised Al Haramein to switch to online transactions wherever possible online and to improve its ESG practices and health and safety measures amidst the pandemic.  

Despite their challenges, it was important for the entrepreneurs to maintain their 75 employees. Ahmad Hamdan has been working as warehouse keeper at Al Haramein for two years. He supports seven people including his young children, mother, and sisters and says many people in his community have lost their jobs.

I am very thankful that I was able to continue working and receive my salary especially as I have many commitments and I am the sole provider for my family.” 

Basil says the emotional support GroFin provided them was also invaluable.“I was overwhelmed with feelings of anxiety and stress. GroFin followed up with us regularly to make sure we are addressing all key issues. We felt we had a real partner and not just a financier. We felt that we were not alone in our fight against the tough economic conditions.”  

Kenya client Watervale Investments receives intensive COVID-19 support

The COVID-19 pandemic has wreaked havoc on economies around the globe – and the small business sector is taking the biggest hit by far. As a result, small businesses have seen their income all but disappear, while also facing increased input costs. Many have been left struggling to cover operational costs, including salaries. Businesses had to innovate to survive.

GroFin’s response to the pandemic was to provide intensive business support to its clients, including Watervale Investments in Kenya which employs 215 people. Watervale Investments, trading as Moko Home and Living, manufactures mattresses and furniture. Watervale offerings include low-cost, zero-waste cushions made from by-products of European foam factories. These are distributed through Moko’s partner network of over 150 micro-enterprises operating across Kenya which in turn retail Moko products to serve the end customers.

GroFin’s investment in Watervale goes back to 2017 when the company needed funds to meet working capital needs to purchase raw materials required to expand its operations.

GroFin Kenya assisted the business by giving cash flow management and social media training, as well as training and implementation of COVID-19 infection control measures. Training in COVID-19 infection control measures and implementation of ESG policies have improved the company’s workplace safety for all employees. Watervale shifted all B2C sales and marketing activities to digital channels to make up for reduced retail showroom activity. Its digital sales grew from 50% pre-COVID to 70% of all sales during the COVID period.

COVID-19 has also affected the cost of raw materials which was on the high. Luckily, the company had diversified its supplier base before COVID, especially for imported raw materials, to ensure that Watervale is not dependent on a single country or supplier. This has been extremely beneficial for Watervale and it has been able to adjust its sourcing dynamically and minimise supply interruptions during the lockdown.

In an effort to reduce cost and improve performance, Watervale has innovated to use steam as a utility.

The rationale was that this would reduce the steam cost of our factory since we would only pay for steam used and that an expert service provider would have the responsibility for maintaining the boiler to avoid downtimes. – Eric Kouskalis, Director of Watervale Investments

By switching from diesel-powered boiler to biofuel, Watervale is making a huge step toward reducing its carbon footprint.

GroFin introduced Watervale to the Challenge Fund for Youth Employment that is seeking to co-invest in innovative private sector-led initiatives. Watervale’s application has been submitted and is being reviewed by the investors. With this new investment in perspective, the business wants to launch new products soon.

We have grown the business successfully over the past two years providing sofas and mattresses. We have developed concepts for dozens of new home furniture products, and we are working to secure the financing and build our internal capabilities to bring them to market at scale. – Eric Kouskalis

Enabling innovation at Uganda manufacturing client Bestever Paper

As a start-up, it is often challenging to start and grow a business. With a solid own contribution, Abuhbaker Luzinda – the Managing Director and founder of Bestever Paper Industries approached GroFin Uganda in 2014 for working capital needs to start production. The company manufactures quality eco-friendly polypropylene (PP) products.

The business was performing well and there was a need to expand, therefore Abuhbaker solicited GroFin’s help again in 2017 for another round of financing to purchase a third production line. This significantly improved the business’ capacity and enabled Bestever to innovate by adding the production of ropes using waste from bag production.

Initially, Bestever used to pack ropes in bags, and this was quite bulky. As a result, the ropes occupied a lot of storage space and made transportation expensive. Bestever became the first to introduce new packaging for ropes in Uganda where it packs the ropes in rolls. This made them significantly less bulky which freed up some storage space as well as reduced transportation costs for Bestever and its clients.

“Our ropes are stronger and preferred in the market. We initially used to buy sewing yarns, but we started making them for both our consumption and sale to our competitors. This too has increased our revenue streams and improved our profit margins,” – Abuhbaker Luzinda, Managing Director and founder of Bestever Paper Industries

By the time of GroFin’s second investment, Bestever has further diversified their product line from two to six products which include laminated bags, shopping bags, sewing yarns, among others. As part of GroFin’s support to the business, we recommended to Bestever to open regional distribution centres to increase local demand. Upon advice of  its GroFin Uganda Investment Manager, Bestever installed a management system to link production to the inventory and its financial accounts. This has, subsequently, increased the productivity and efficiency of the business. With no revenue in 2014 when GroFin first invested in the business, it had achieved a turnover of USD 6.8m in 2019.

However, with the impact of COVID-19, Bestever Paper has seen its turnover decline by USD 1m in 2020. The ban on public transport, as a measure to curb the spread of COVID-19, has made it difficult for manufacturing businesses like Bestever Paper to continue production. One of the conditions imposed by the government to manufacturing company owners was to accommodate all their staff at the factory premises since public and private transports were banned. Given the fact that Bestever Paper employs 363 permanent staff, it could not accommodate all the employees at the factory. Consequently, Abuhbaker decided to completely close its operations.

Abuhbaker explained that this has resulted in a decline in demand.

“We export about 30% of our production but due to closure of borders with neighbouring countries, especially Burundi which is the destination for over 80% of our exports, we saw a sharp decline in revenue for April and May. Local demand also significantly reduced.”

Despite these challenges, the future still looks bright for Bestever. “Our dream is to be the largest preferred producer of quality polypropylene products. Our target is to hit USD 10m turnover by 2022,” says a proud Abuhbaker.

Stop panicking, and start transforming instead

Applying the five lean manufacturing principles.

Measures to curb the spread of COVID-19 has not only directly impacted the ability of businesses to operate, but has infected them with something even more deadly: uncertainty.

Small and medium-sized businesses are the most vulnerable segment to uncertainty, and manufacturing has been one of the worst-affected industries. Although it can be difficult to stay positive during uncertain times, those business that hope to survive must look beyond the current crisis and focus on those things that do remain in their control. “SMEs should use this time to build more efficient and effective organisations. One way to do this is to apply the five lean manufacturing principles,” says Marten Stavast, Senior Industry Expert in Manufacturing at GroFin, an impact-driven SME financier. He reminds manufacturers of these principles:

1. Define value

Any entrepreneur will agree that the customer always comes first. Lean manufacturing takes this idea beyond customer relations to also put the customer first in the production process. The true value of any product or service is defined by what your customers are willing to pay for it. Your product may seem valuable to you because of the time and resources that went into creating, but its value is determined from the point of view of the customer.

Lean manufacturing begins by determining the needs of the customer. Interviews, surveys, demographic information, and web analytics are some of the tools you can use to determine what your customers want and at what price they can afford it.

2. Map your value stream

Once you know what your customers want and value, you can map your value stream. Use your customer’s value as a starting point and identify all the activities that help to create this value. The goal is to ensure that every activity in your production process adds value to your customer and can be delivered at the price point they want. If an activity does not add value to your customer, it is a waste. If you cut out any unnecessary processes that do not add value, you can reduce production cost while ensuring your customers still get what they want.

3. Create flow

Now that only necessary and value-adding activities remain in your value stream, you should ensure that each step flows smoothly to the next. Interruption and delays in production are no different to waste. A delay is more than just a bottleneck when one production step waits on another – it is any step that takes longer than it has to. You can improve the flow of value-adding activities by breaking down every step of the process and reconfiguring it as efficiently as possible, levelling out the workload, and training your employees to be multi-skilled and adaptive.

4. Establish pull

Stock sitting on your shelves or raw materials piled up in your warehouse is one of the biggest forms of waste in any production system and often places a big drag on cashflow for smaller businesses. This is even more true in the current environment.

A pull-based production system means that you only produce products based on the needs of your customers and only at the time and the quantities needed. Strive to limit your inventory and work in process items to only the materials needed for a smooth workflow. This approach requires ensuring some flexibility in your production process and the current environment, it might just give you the edge as a small business.

Stock sitting on your shelves or raw materials piled up in your warehouse is one of the biggest forms of waste in any production system, and often places a big drag on cashflow for smaller businesses.

5. Pursue perfection

The final step in implementing lean manufacturing is by far the most important. Lean thinking should not be a once-off exercise that you complete now, while times are tough. It should become part of the culture of your company in such a way that every employee strives toward perfection and constantly getting better at meeting customer needs and reducing waste. This will not only set your business apart during times when customers are themselves under financial pressure but also when things improve.

Mend your nets

When this pandemic and the uncertainty it brings have passed, those business owners who spent this time wisely will have built businesses that can remain competitive by increasing the value they deliver to customers. There is a saying that goes “when fishermen cannot go to sea, they mend their nets.” Now is the time for business owners to do this same by using their time to transform their businesses, not just to survive the current storm, but also to look to the future.

This article was first published in the August/September 2020 issue of Your Business Magazine.

Jordan SME grows while rebuilding lives of Syrian refugees

Arabella for Aluminium provides employment opportunities to refugees in one of Jordan’s poorest governates.

Former lawyer, Mohamed Darwish, is lucky to have a job on Arabella’s factory floor. Darwish is one of the estimated 1.5 million Syrian refugees presently living in Jordan. His family may have escaped the death and destruction of war when they fled from Aleppo in Syria, but building a new life is not easy.

With close to a third of Jordan’s private sector labour force employed by SMEs, the sector has a crucial role to play in addressing the refugee crisis. And with Arabella located just a few kilometres away from the Zaatari Refugee Camp in the Governate or Irbid, this SME offers a rare employment opportunity at a decent wage to both Syrians and local workers.

Under the Nomou Programme, Arabella is a GroFin Jordan SME client that specialises in aluminum extrusion, fabrication, decoration, and surface treatment & coating. In 2015, GroFin provided the company with financing to purchase equipment and complete infrastructure work at its new production site. But only a few months after it started operations, an unexpected halt in production could easily have seen the business fail.

When cracks appeared in three of the company’s extrusion press containers – which are crucial to its production process – it had no choice but to halt operations. Two of the containers were shipped to Thailand for repairs and while the third was repaired locally, the process still took several months.

Arabella was soon unable to meet its obligations to GroFin and would have defaulted under a traditional financing framework – likely forfeiting its assets and going under. However, GroFin’s model provides room to adapt its financing to the needs of the client and was able to devise an alternative payment plan to allow Arabella to overcome this difficult period.

“Not all business support is about increasing sales and revenue. It is also about helping the client to survive and overcome tough times.”

Wael Sunna, Investment Manager at GroFin Jordan, says small and medium-sized businesses are extremely vulnerable to shocks and the ability to overcome such unexpected setbacks is key to their survival. “Not all business support is about increasing sales and revenue. It is also about helping the client to survive and overcome tough times,” Sunna explains.

GroFin has also provided Arabella with further advice to improve its cash flow through negotiating better payment terms with suppliers and improving collections from clients through shorter payment terms. In 2017, GroFin provided the company with additional funding needed to boost its stock of aluminum pellets to meet higher demand for its products.

With GroFin’s support, Arabella has been able to continuously increase its production and sales. At the end of 2018, the company employed 84 workers, compared to 49 a year before, 20% of whom are Syrians. Arabella continues to grow and is expanding its production facilities even further through the addition of a new furnace for processing scrap aluminum.

“GroFin became our partner when banks refused our loan applications. In the beginning we were short of experience, but we found all the support we needed in GroFin.”

Mr. Sobhi Al Zubi, the entrepreneur behind Arabella, says he will never forget GroFin’s support and loyalty to his business. “GroFin became our partner when banks refused our loan applications. In the beginning we were short of experience, but we found all the support we needed in GroFin. They were there to help us with everything from planning to marketing and sales,” he says.

Sobhi says perseverance and determination were crucial to his success.

“I am always positive, despite the setbacks. I always keep looking forward – never back. You have to feel successful on the inside, then even people who start from nothing can become successful.”

Learn more about the The Nomou Programme and GroFin funding and business support for entrepreneurs and SMEs in the Middle East.