Family-owned Al Sharqi Shipping is investing in technology through the downturn with a view to gaining a competitive edge.
SME profile: Dubai shipping firm hopes investment will steer it through choppy waters
Transport and logistics looks to be a fairly grim market to be involved in at the moment.
Last month, one of the world’s biggest shipping lines, Maersk, reported an 84 per cent decline in profits with its chief executive Nils Anderson stating that conditions were worse than after the 2008 financial crisis as a drop in trade from China has slowed growth, causing rates charged by the industry to plummet.
At the other end of the chain, smaller family-owned firms are also feeling the pinch, but Dubai’s Al Sharqi Shipping believes that tough markets such as this are the best time in which to make investments in its business.
“We have always bought the most number of trucks when the recession is here. In 2009, when the whole market was going down, we were buying trucks because prices were cheaper,” says the general manager Kashif Rafiq, 31.
Al Sharqi Shipping was started by Kashif’s father, 66 year-old Muhammed Rafiq, in 1989. He arrived in the UAE in 1974 and worked for a rival firm until 1989 when a recession hit and he lost his job.
Al Sharqi was borne out of necessity, says Kashif’s brother, Atif Rafiq, 30, who is the company’s business development director.
“He had two options when he was let go from his old job – either go back to his hometown or to stay in the country and set up on his own,” says Atif.
The company has survived several recessions since, and is still making investments in tough times.
“Even right now, we are investing in IT infrastructure,” says Kashif.
He is overseeing the installation of a new, US$60,000 enterprise resource planning (ERP) software system from the US-based Netsuite, which the company plans to use as part of an ongoing drive to digitise most of its activities and provide customers with real-time information over deliveries.
“The whole industry is changing,” says Atif.
For instance, the company equips all of its drivers with a tablet and a printer.
“These are not educated people - they don’t really know how to operate a smartphone,” says Atif. “But we found out that once you trusted them and gave them certain privileges, you could give them a tablet and they started working from it,” he adds.
These are used for a range of tasks from producing delivery notes and securing signatures to dealing with problems over deliveries or vehicles.
“They use Google Talk and WhatsApp. Any issue they have on the container, they can immediately take a picture and send it to us. We don’t need to send a guy all the way over to inspect,” says Atif.
“If a lorry breaks down, they can show the problem over Skype or on WhatsApp. We have a mechanic who can see what is happening and can troubleshoot on the spot.”
The company has grown from a handful of clients for whom Muhammed used to work at the old Deira port into a company with offices in Dubai, Sharjah, Faisalabad, Karachi and Dar es Salaam.
“From a small office in Deira with one chair and a secretary, we are now in three countries with five offices and a workforce of 100-plus,” says Atif. “We have about 50 [staff] in the UAE, 22-25 in Tanzania and about 30 in Pakistan.”
The pair declined to give sales figures for the business, but say that the company had to double in size each year from 2010-14, before consolidating in 2015, when turnover was flat. Its recent growth meant it has made the SME100 – a biennial ranking of Dubai’s fast-growing companies organised by the Government’s Department of Economic Development – at number 83.
Three younger brothers, Asif, 25, Wasif, 24, and Sadaf, 22, also work at the firm and are at various points in the completion of a two-year rotational training programme aimed at ensuring they completely understand the business.
Kashif says that he believes the company’s investment in technology will help it to bridge the gap between it and some of the industry giants. “If we are able to take technology, and give a service that is equal to one of the big logistics companies like Kuehne & Nagel or Ceva Logistics, does size matter really? It’s all web-based now.
“If you are able to lock in and see exactly where your shipment is, you’re going to know this is something you can trust.”
The company also believes there are further opportunities in Africa. Kashif says that although the continent throws up challenges, many of these are issues it faced in the GCC years ago. “Africa is all about manual paperwork and is tribal – it’s about who you know. We still know how to deal with it.”
Moreover, despite the slump in freight rates, the volume of goods being shipped to Africa is expected to increase, partly through major investments in ports and roads infrastructure, but also because GDP growth is expected to continue across most of the continent. The IMF is predicting growth above 5 per cent for sub-Saharan Africa in 2016, and a recent Knight Frank report stated that of the 20 countries expected to be the fastest-growing in the world over the next five years, 13 are in Africa.
Trade volumes between Africa and markets such as Russia and China have also helped the DP World, Dubai’s ports operator, to maintain traffic growth in 2015.
DP World reported an increase in volumes of 3 per cent last year, or 2.4 per cent on a like-for-like basis. Speaking at the recent CIS Global Business Forum in Dubai, DP World’s deputy chairman, Jamal Majid bin Thaniah, said growth in global shipping volumes was more likely to come from new north-south routes than trans-Pacific or Europe-Asia traffic.
“In my own opinion, the [opportunities] will only come with the North-South. East-West is saturated,” said Mr bin Thaniah.
“When it comes to cargo, either by shipping lines or air freight, Dubai will play a major role in connecting African countries with the CIS, the Russians, the Chinese etc.”
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