Descon plans to venture into South Africa market

Will acquire a small plant in Secunda town by January in a $10m deal

LAHORE: Design Engineering Services and Construction Limited (Descon), which is one of Pakistan’s biggest conglomerates, has planned to expand its footprint into South Africa by January 2018.

It will acquire a small plant in Secunda, a coalfield town in South Africa, in a $10-million deal which Descon Chairman Abdul Razak Dawood considers a strategic move to test the business group’s expertise in global markets.

The group has its presence in Middle Eastern countries since 1982 and until 2010-11 it generated 70% of income from regional markets, which turned Descon into a billion-dollar conglomerate.

However, the percentage has now reversed and the share of regional income has dropped to 30% primarily due to low oil prices. However, it is still a billion-dollar company, which was once struggling to get finances to initiate its journey.

“I had started the company with Rs3.2 million in 1977,” recalled Dawood in an interview with The Express Tribune. “Arranging finances is one of the toughest tasks for any start-up for two to three years, however, I was lucky enough to get bank finances due to my family background and did small jobs which kept our newly formed company running for about nine months with only six engineers.”

Apart from arranging finances, setting the direction for the company was another challenge.

“It was the biggest challenge in early stages; we never wanted to become a consultancy firm only; we wanted to become an integrated engineering company,” Dawood said. “There was not a single engineering company at that time which could provide the entire engineering solutions, so the ground was clear for me.”

Descon got its first contract in 1978 – a small one for Pakarab Fertilizers and then received another contract for Attock Refinery in 1979.

“We were lucky that Attock was putting up a small refinery and we got a sub-contract from an American company; soon after, Attock started another refinery of a bigger scale and we once again got the contract; this helped us to strengthen,” he said.

Though the company was set up in 1977, Dawood joined as a full-time executive in 1981. Meanwhile, he served as managing director of Dawood Hercules Chemicals.

“I had to leave Dawood Hercules one day; I knew that, but that did not restrict my vision, so I founded Descon simultaneously,” he said, adding before Zia’s regime engineering was in the public sector and after that it was opened for the private sector too.

Soon after his joining, the company got a gigantic expansion project in National Refinery in September 1981, which looked much difficult keeping in view the size of the company at that time.

“Everyone advised me not to take on the project, fearing the company could collapse after undertaking the job, however, I decided to go for it, which was a four-year contract.”

He asked his staff to go to the Fauji Fertilizer plant and hire as much staff as they could. “That staff was trained by the Italians and we had the opportunity to get expert engineers and other skilled people to execute our upcoming project,” he added.

From there, the company started its success journey. In 1982, Dawood decided to test regional markets and helped a Saudi Arabian company by offering local manpower for a particular project. Afterwards, Descon won a small project in Abu Dhabi by offering a bid at 30% lower rates. “That was a small project of 16 days; I didn’t make any money, but that project paved the way for winning other projects,” he said.

With this project, the company started expanding and entered power and chemical businesses at later stages, but initially the company found it difficult to run and transform a power company.

Now, things have settled except for outstanding payables on the part of the government.

Separately, the group’s chemical business recorded a tremendous growth of 356% in profit in financial year 2016-17.

Though the conglomerate has implemented some landmark projects in Pakistan, at this point in time it is not interested in bidding for any China-Pakistan Economic Corridor (CPEC) projects.

“Chinese are financing these projects,” he said while pointing out that the company had changed its strategy and was bidding for World Bank or Asian Development Bank-funded projects.

“They have their own rules and we have won four bids against Chinese companies; the government is not providing a level playing field to local companies under CPEC and has leaned too much in favour of the Chinese,” he added.

“We have to be very competitive. With our recent decision to enter South Africa, we have shifted from a regional to a global company where a huge petrochemical complex is waiting for our expertise.”

the writer is a staff correspondent

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