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Qatar's Alfardan sticks to family model

On the seventh floor of a Doha tower block, in a room filled with display cases containing old coins, clocks and Koranic manuscripts, 82-year-old Hussain Alfardan sits fingering a pearl necklace he says is worth $2 million.

“These pearls are yakka, the highest grade of natural pearl – each piece is rare. Today the pearl is the number one stone in the world. The most expensive stone, the most precious is the pearl.”

The room, known as the Tawach Gallery – one of the largest private collections of natural Gulf pearls in the world – is a commercial showroom and museum for Qatar’s pearl industry and the achievements of its owner, Alfardan.

The son of a pearl merchant, Alfardan opened a small jewellery shop after World War Two and over 50 years, grew it into Alfardan Group Holding Co, a multi-billion dollar conglomerate that trades automobiles, develops real estate and provides banking services.

While state firms developed the Gulf’s energy wealth, family-run businesses such as Alfardan Group built much of the rest of the economy. They generate over 80 per cent of non-oil gross domestic product in the six-nation Gulf Cooperation Council, consultants PwC estimate.

Now family businesses around the Gulf face a more challenging environment. The plunge of oil prices since 2014 threatens slower growth, even in richer countries such as Qatar.

Governments have started to cut spending in some areas because of shrinking energy revenues. Last week, Qatar’s ruler Sheikh Tamim bin Hamad Al-Thani warned citizens the government could no longer “provide for everything”.

But the shift may create opportunities for private business. Sheikh Tamim said he would reduce subsidies to some state-owned companies and wanted the private sector to play a bigger role.

“I have been advocating a stronger push towards privatisation for a long time. I believe that no country should be too reliant on the government only for income,” Alfardan said in an interview for the Reuters Middle East Investment Summit.

FAMILY

As a boy in the 1940s, Alfardan took boats out to the pearling grounds off Qatar’s coast, watching his father buy from the divers. He recalls walking for hours because of a lack of motorised transport in Qatar, and using herbal remedies because of a shortage of hospitals.

His business empire, now overseen largely by his sons Ali, Fahad and Omar, includes the luxury St. Regis Hotel, the 70-floor Kempinski Apartment Suites, which is Qatar’s tallest building, and Commercial Bank of Qatar. Like most family groups in the Gulf, it does not reveal consolidated financial data.

Alfardan, wearing steel-rimmed glasses and a long white robe with a black-corded cotton headdress, indicated his group was now conservative about expansion.

“I have been focusing efforts on what we currently have rather than expanding too much and then having to deal with the resulting complications, such as recruitment of new managers and numerous activities being overseen at the same time. I believe it’s better to concentrate on the things you can run well.”

Governments around the region are pressing companies to hire more local executives and staff rather than foreigners. This pressure may grow as low oil and gas prices increase the urgency of keeping non-oil income inside the country.

Alfardan said he wanted to see all his companies run by Qataris one day, but that aside from his family, filling senior positions with locals had been difficult. Around a quarter of his staff are Qatari though at Commercial Bank of Qatar, whose chief executive is Qatari, the ratio is closer to a third.

Some other family groups in the region have declined in the past decade, hit by internal disputes or competitive pressures. Alfardan said he knew the risks but believed his diverse conglomerate could continue to thrive in the traditional manner.

“Many family-run businesses start with a visionary and hard-working first generation, followed by a second generation that successfully sustains the momentum, and then unfortunately ending up with a complacent third generation who just let the business falter and eventually fail. I have carefully considered this common trend and have made extensive plans to avoid this from happening.”

He dismissed solutions proposed by Western-educated management experts in the region, including going public: “Once you convert to a shareholding company, then you have to deal with the resulting pressures from shareholders and board meetings.

“Although I have brought in managers and experts from around the world to ensure operational excellence, my sons are the only ones I trust to carry my business forward as they are personally invested in its success.” – Reuters

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