In a fortunate turn of events, Iraq declared victory over the Islamic State in December, but the country’s economic challenges are far from over. A nation that has been torn apart by successive wars and plagued by security issues, Iraq is now seeking USD100 billion in foreign investment as part of a plan to rebuild parts of the country and revive the economy. In particular, the capital-intensive manufacturing sector of Iraq, with its high potential to substitute imports and provide jobs at scale, needs a consistent supply of patient risk capital and entrepreneurial support to enable SMEs to overcome their challenges, create jobs and alleviate poverty.
Father and son team, Abdul-Ameer Al Hoshan and Firas Al Hoshan have a rich heritage in civil engineering and construction. In 1992, they established a construction contracting firm, under whose aegis they provided valuable services to clients in the public and private sectors, built partnerships in the community, and delivered critical resources for many vital-needs establishments such as schools and hospitals. The father and son duo focus on using sustainable systems and practices while implementing new and improved approaches to deliver projects to the community.
Their detailed knowledge of the building industry and entrepreneurial insights led them to identify a gap in the market for locally produced thermostone blocks for construction of homes, schools and hospitals. Demand for quality and affordable thermostone is high in South and Central Iraq against which local production and supply for thermostone stands at a mere 100,000 cubic meters annually. To meet the high unmet demand, exporters from Kuwait supplied roughly 600,000 m3 of thermostone and producers from Iran, around 700,000 m3, according to 2015 figures by the Department of Customs in Iraq.
Moreover, thermostone imported from Kuwait and Iran does not meet the standard requirements of the local building market in terms of size and shape, and the price is usually tightly controlled by the exporter. To illustrate, imported thermostone prices are higher than local products by about 55.7%.
Al-Hoshan planned to substitute the imported thermostone with a local product that adheres to Iraqi building standards, and would be cheaper to procure, allowing him to meet domestic demand by replacing the imported thermostone with a local substitute. Accordingly, Noor El Qamar was founded in early 2015 to manufacture thermostone in Basra, Iraq with Al- Hoshan and his son investing US$ 4.2 M to build a factory with a production capacity of 100 000 cubic meters.
In late 2016, GroFin was approached for finance and support to expand plant capacity against spiralling orders. The project financing is being used to construct a new thermostone production line as well as to import a furnace, a water treatment system, mixer machines and purchase dumpers, a mechanical conveyor, a cutter machine, a compressor and a chiller for modernising the new production line.
Apart from plant and equipment finance, GroFin also extended business support to the manufacturing venture, which has been instrumental in establishing this start-up with appropriate management systems and Environmental, Social and Governance (ESG) compliance.
In 2016, Noor El Qamar employed 75 skilled, unskilled workers and technicians at the plant. With GroFin’s finance and support, the new, expanded plant now employs 118 workers drawn from the local population.
“GroFin provided capital investment for Noor El Qamar when our start-up could not access finance or support from traditional financial institutions. We are now well placed to replace expensive imports with high quality local products that are customised to the domestic market,” says Al Hoshan.