Arega Yirdaw (PhD)

“Business Has to be Human Centred”

With over 60 companies, Mohammed International Development Research and Organisation Companies (MIDROC), which is owned by Mohammed Hussein Al-Amoudi, is the biggest private investment conglomerate in Ethiopia. Five of the companies were grouped as ‘MIDROC Technology Group’ under the leadership of Arega Yirdaw (PhD) in 2000. The number of companies in the Group has since increased to 24, employing over 8,000 Ethiopians. Last year, these companies, mainly MIDROC Gold, exported USD300 million, over 10Pct of the total export revenue the country received.
Having lived, worked and been educated in Ethiopia, the UK and the US, Arega says business has to be human centred. At MIDROC, he has established a culture of lifelong learning, which he has done himself, attaining two PhDs, the latest in educational leadership two years ago. Even though he says people retire only upon death, he seems to be preparing to leave business leadership and teach at Unity University, where he has been serving as President since the acquisition of the institution as the 16th company in the Group seven years ago.
Arega, a father of nine and grandfather of 10, began his career with the famed Ethiopian Airlines in 1970. Later, while raising a family in the US, the engineer took on management and leadership roles until he returned to Ethiopia in 2000.
EBR’s Amanyehun Sisay sat down with the busy CEO to learn about the Technology Group and his leadership philosophy. The following is an excerpt.

EBR: There are 24 companies under MIDROC Ethiopia Technology Group. Tell me about their contribution to Ethiopia’s growth.

Arega (PhD): Well, those companies are involved in agriculture, education, real estate, construction, mining, manufacturing and numerous other areas. The biggest gold mining company, the first and biggest private university and biggest agro-processing companies are in the Group. There are more than 8,000 permanent employees. Our annual sales volume is also over ETB5 billion.

How much foreign currency do these companies generate annually?
It is around USD300 million. A bulk of it comes from MIDROC Gold. The other companies are also contributing significantly through import substitution and stabilising the local market by supplying a huge volume of agricultural [and industrial] products.

How is the return on investments of these companies?
Some of the companies, like ELFORA Agro Industry, joined the Group right after they were privatised by the government. Such companies took huge investments to become profitable. One of the good things about MIDROC is the culture of reinvesting revenues to develop the companies.

For example, right after we bought Legedembi Gold Mining from the government, we invested in exploration and found Sakaro, another mining area, four years later. We also did another exploration in the Benishangul-Gumuz [regional state], which took us 10 years and ETB300 million to develop. Now, the Metekel mining in Benishangul has already become our third largest mining site and we intend to invest ETB4.2 billion in it.

We are also involved in training human resource because we have to create new mining engineers. Five years ago, Unity University launched a new programme in Mining Engineering sponsored by the Technology Group. The first class graduated recently.

As you may recall, we unveiled a ETB8 billion company-wide expansion project that includes ELFORA’s Forage Production Project that will be taking up an investment of ETB1.6 billion, a dairy and meat production project taking up an investment of ETB1.1 billion as well as an expansion of ELFORA’s poultry meat and egg production with an investment of ETB870 million. The expansion will open up new jobs for an additional 3,000 people and it will be completed in five years. The poultry farm under ELFORA will begin exporting to Djibouti, using the railway that is under construction.

Is there a legal entity known as ‘MIDROC Ethiopia Technology Group’?
No. Since there is no holding company law in Ethiopia, we created a company called MIDROC CEO Management Services, which is one of the 24 companies in the Group. The 23 companies entered a contract with it for management services. It supports each company in budgeting and other areas. But if the proclamation that governs holding companies is ratified, everything will change.

Since 2005, investments by MIDROC have become capital intensive, like Derba Cement, but these investments are not in the Technology Group.
Every one of us at MIDROC is given assignments. I started my assignment with five companies 16 years ago and now reached 24. Derba started with the cement, and expanded into transport, drilling and chemicals. There are also other companies like Horizon, Moha, National Oil Ethiopia and different hotels. I think it is good if they are under one group, but they have to expand in their respective areas.

In the construction sector, there is MIDROC Ethiopia Project Office, which is constructing the African Union Grand Hotel. There is also Huda Construction in the Technology Group, which built our stadium in Woldia. There is also the MIDROC Foundation, which does excavation works. It would be better if these companies were grouped as one. But now they operate in different groups.

What are the contributions of the Group in business leadership, especially in the private sector in Ethiopia?
When we first started the Technology Group, we created a leadership philosophy for ourselves because creating a system is the biggest task. We created our own human resource and material supplies manuals.

We also signed an agreement with our employees’ labour union to create a [peaceful] working environment. I would say our biggest success was creating a system, organisation, structure, and implementing that consistently. The philosophy of the Technology Group is human centred. There is hardware and software in the Group. There are materials in an organisation, which is the hardware. There is also the human resource, which is the software in the organisation. At the Technology Group, we focus more on the software. So we train, educate and develop the employees from the lower level.

MIDROC is a huge company, with the finance, technology and human resource to invest in the structural sectors of the Ethiopian economy, such as manufacturing and agriculture. But we see MIDROC engaging in security, garage and trading services that small local businesses can do. Why hasn’t the Group left these sectors for small local companies?
You are very wrong. First of all, it is you that says MIDROC is huge, we do not say that. In fact there is nothing called MIDROC Company. There are over 60 individual companies.

Secondly, there is no problem with engaging in security or garage services. We want to be the leader in security. This security company has absorbed many unemployed youth and trained them. I believe we have to do anything to develop this country.

You will be surprised if I tell you that I have opened a bakery here. With your premise, this business is small. I want a mother to buy bread for her child. We also have a grocery and tennis court. We rent it out. Business has to be human centred. You have to collect money and direct it to employees’ pocket. It creates synergy.

So our strategy is not wrong. Why does Boeing buy companies that produce small component parts? The difference is that Boeing is a holding company and you do not know about these small companies under it. If MIDROC Group was a holding company, you would not have learned about these small companies because they would be inside the Group.

Let us talk about your business management philosophy.
Firstly, when you come up in the management ladder, you have to change yourself from a manager to a leader. When you lead managers, you have to create a system, sustain it, and update it. I manage people who take care of both the hardware and software of the company. If the software is weak, we give leadership classes.
Creating a system in which all employees get a fair benefit according to their contribution is another issue.

The other thing is competition. Before we start a business, we study the players in that industry. Another philosophy is continuous monitoring. We have [regular] reviews sessions.

Managers must also be compassionate. When an employee comes to your office, you have to think and be prepared for two things. The first is to solve any problem the employee might face in his work and the other is what the employee might face just because he is a human being, which requires compassion.

There must also be lifelong education. You must get another degree every five or ten years. I myself got another [PhD] two years ago. Because everything is dynamic and if you do not grow it will be no good.

My other philosophy is sacrifice. You should sacrifice to become a good leader. If I am a leader, I have to come to office before the employees and leave after them, so I can welcome them in the morning and say good-bye after work.

Another thing is when you operate in a developing country there is no need to argue with the government. You must be able to work with the government constructively. If there are things you need to be changed, you must show that constructively.

Finally, serve your customers and the country to the fullest. At the same time, you must sustain the company, develop and empower the employees so that they can take care of the company and replace you in the end.

What are you doing to prepare your successor?
When we first started, there were only five companies in the Technology Group, all of which had their own principal officers led by me. But there is limited time to manage each of them. However, after the number of companies became larger, I created a cluster system for these principal officers in each of their sectors.
Now, there are 24 general managers, including me. We are refining those principal officers, general managers and deputies in their respective sectors; therefore, if anything happens to me, one of them will step in.

You are General Manager of MIDROC Gold, which is the biggest of all the companies in the Group. Why haven’t you handed over your responsibilities there?
Because there are no competent people in the country in that area.

Are you saying that there are no competent professionals in the mining sector?
Yes, there are none.

Just like you have to prepare a successor for your position at the Group, don’t you have to prepare one for gold mining?
We are doing that. But I am not tired of serving in both capacities. I am at MIDROC Gold because the company has to improve many things. When I came to MIDROC Gold, there were 36 foreigners managing the company but I replaced all of them with Ethiopians. I believe that I have better energy and exposure to do that. There are three deputy general managers at MIDROC Gold, one for mining and others in finance and research. I deal only with these three people.

I am the leader of MIDROC Group, General Manager of MIDROC Gold and President of Unity University. I created a university that is totally different from others. I am putting all my efforts there. You cannot create a private university while letting it be led by academicians. That is why I am there.

You are the CEO of the Technology Group, General Manager of MIDROC Gold, President of Unity University, Chairman of the private higher education institutions association and a father of a big family. How do you juggle your responsibilities?
Some people are unique and can handle many things. I am one of them. I married when I was in grade 12. First, I am a lifelong student. Second, I am a highly disciplined person. I have never had a drink, smoked or eaten raw meat. It is not a matter of religion but it is a matter of discipline. First, I married early, but that did not hinder me from my education. When I graduated from Addis Ababa University (AAU), I already had five children, each born every year I was [a student there].

Was it tough for you financially to raise the children, especially when you were a student?
It was very hard when I was a student. I used to earn only ETB15 per month when I got married. I worked at Ethiopian Airlines for 10 years, and while there, I was teaching at night because I had to make money to raise the children.

Let me tell you my philosophy. We all have 24 hours in a day: eight hours for sleep, eight for work, and the remaining eight hours is the time which decides whether you become successful or a loser. I was using those eight hours effectively.

Usually business networking and relations are established at cocktails and events. Do you appear in such places often?
The networking you know and the one I know are not the same. You do not have to spend the night at [bars] or hotels to network. You can create a network while working. I respect and award my customers, create relationships with their families and my employees. I go to many countries with my employees. These are my ambassadors. I create relationships with people through associations. You have to be able to network without going to [bars]. The other thing is to empower the people around you. I do not have to be known to sell my product. Somebody else can be known and I delegate them.

Tell me about your relationship with Mohammed Hussein Ali Al-Amoudi. How does he monitor the activities of the Group?
Reports about the companies in the Technology Group are always submitted to his office every six months.

As there is shortage of capital in Ethiopia, do you influence him to bring his wealth and investment from other countries to Ethiopia?
I do not know anybody who has invested in Ethiopia like he has. He is the top investor. I always tell him to maintain this rank. He is doing all he can do and is more than an investor for Ethiopia. You would be surprised if I told you that he has repatriated no single dollar from the revenues of MIDROC Gold, even though he could take all of his properties out of the country.

Let us talk about Unity. Can you tell me the status of the institution before and after the acquisition?
Before it joined MIDROC Group, I used to visit Unity for a few days to give lectures. I did not know much about the company at the time. One day, the owner told me that he has no money to cover a semester’s expenses. He just told me that he is about to close it. So I called my boss and told him the situation. Then he said let us save the institution.

We therefore bought and transferred it to the Group. The idea was not to make money, it was to save it from closure. Then it took me a lot of energy to put it back on track. I reduced some courses and kept the necessary ones.

We bought it for ETB100 million and had to repay ETB60 million of its loan to a bank. We have also made additional investments worth ETB300 million since the acquisition to establish new campuses and facilities in Addis Ababa, Burayu, and Dessie [and also] established a K-12 school. We opened new faculties like engineering, mining and horticulture. .

The other thing we did was staff development. Based on the agreement we signed with Addis Ababa University, 38 faculties are currently pursuing their PhDs at AAU. We will also build a hospital and open a medical faculty.

How is the return?
What we really want is to keep Unity as an optional institution. When you pass away, you will be remembered for two things – your children and your work. Al-Amoudi will get both, even if he does not get the financial return on the investment he made at Unity.

When I asked some of the people I know who worked at Unity in the immediate aftermath of the acquisition, some of them joke about staffing changes. They even coined a term, Woldianisation, to describe the fact that you have replaced several positions with people you know from your birth place.

It just surprises me. First of all, I would have been happy had there been more educated people from Woldia and I could hire all of them in this University. But there are only a few of us who survived and became educated. There were only two from Woldia in the University. Are these people not Ethiopians? Should I refrain from hiring someone just because I know him?

If you are asking me about nepotism, I would say you have misunderstood nepotism. It would have been nepotism had I [hired] my relatives, who have no capacity, in higher positions and ruin the institution. If I could, I would have built Sheraton in Woldia. Everyone has a place that has contributed to his success. A person that brought me to this position is from Woldia. I married a woman from Woldia. For me, there is no place other than Woldia. That is why I built a first-class stadium there.

Yet, I have to give equal opportunity; but if you are my relative, I expect more from you, to excel more than others. I did not bring my friends from Ethiopian Airlines, when I established Trans National Airways. But I did bring a pensioned employee of the Airlines. I have promoted some of my former students to management positions because they deserve it. They do a good job, they respect me and I respect them. When I buy a company, I do not touch the existing employees. I want to work with them if they are willing to change.

There are scattered charitable works by MIDROC companies. Why don’t you establish a foundation to streamline your efforts?
It would be better if you asked this question to Al-Amoudi. It would have helped us a lot if we did it in an organised way. The problem is everyone has his own philosophy. Al-Amoudi doesn’t believe in publicity. Sometimes we are blamed for not announcing the charitable works we have done because of his belief. Some officials are surprised when they learn about our charitable works that remain unreported.

What kind of father and husband are you for your children and wife?
It would be better if they spoke about it. All my children are born from the same mother.

And your personal philosophy?
Life has five stages and I believe I am at the fourth. First, you have to know yourself. You have to take the responsibility to educate and elevate yourself.

Then comes family, if you have children and a marriage, anything else comes after them. If you cannot raise and educate them, you should not bring children into this world. You have to execute the responsibility in any condition. I have sacrificed my life for that.

Third, if you are lucky, you serve the community. I have done things in my religion. I have contributed as a leader in establishing the first Ethiopian Orthodox Church in America. I feel lucky for that and other contributions I have made at the community level. Some others are even luckier and take responsibilities at the national level. If you have passed all these, you can lead a country. I had that chance and I am serving the employees at the Technology Group and my country with all my energy.

There are people who have reached the fifth stage, which is contribution for the betterment of humanity. Albert Einstein is one of those. Al-Amoudi has reached that point too. I do not think I will reach this stage, but I hope I will finish the fourth stage perfectly.

When will you retire?
There is no retirement for human beings before death. My road map shows I will go into teaching later. I will share my experience as to whether what I have learned is right or wrong.

By then, will you give up your responsibility as a President of the University?
Unity University will be my next home. So I will maintain my presidency.

Do you think that the contributions of the Technology Group and Mohammed Hussein Al-Amoudi’s other companies have gotten their due respect and recognition?
Not really, partly because of our failure of establishing a foundation. The other is a lack of a proclamation that governs holding companies operating in Ethiopia.

Has Mohammed ever been disappointed about his investments in Ethiopia?
Yes and no. To begin with, he is excited just to be in Ethiopia. He says, even in hard times, “We cannot go anywhere. Ethiopia is our home”, even when he is disappointed. EBR


4th Year • September 16 2016 – October 15 2016 • No. 43

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