Protein from the prairies
Consider the tiny lentil.
As AGT Food and Ingredients Inc. Chief Executive Officer Murad Al-Katib sees it, this low-key legume is a veritable engine of innovation and growth. In a world that faces increasing health, food security and water scarcity issues, lentils provide a high-fiber, high-protein staple that can be grown without irrigation and can actually help fertilize the soil in which it is planted.
In the late 1990s and early 2000s, the University of Saskatchewan developed natural breeding and seeding techniques suitable for Western Canada’s short growing season and limited rainfall. Suddenly, the tiny lentil became a big deal for Canada, which now produces 65% of the world’s supply.
Along the way, the lentil provided a source of inspiration for Al-Katib to develop technology and process engineering systems to deliver the legumes (also known as “pulses”) in ready form to packers, canners, retailers, makers of snack chips and other links in the global food chain.
Al-Katib founded AGT in 2001 in partnership with the Arbel Group, a processor/exporter of grains and lentils in Turkey, the country from which his parents immigrated to Canada in 1965.
The company he launched represents the intersection of his passions for his home province of Saskatchewan, where agricultural constraints were limiting economic growth, and his experience as a public servant in international exports, where he saw the potential of lentils and other legumes to address growing food requirements in emerging markets.
AGT now processes 25% of the world trade in lentils (not to mention its business in peas, chickpeas, beans, pasta and more).
Taxation has had a not-so-invisible hand in this story of growth.
“As an entrepreneur, I believe that governments and government policy actually create the enabling environment for entrepreneurs to succeed,” says Al-Katib.
Many factors go into this mix, he says, such as small business incentives, R&D credits, and favorable rates for capital gains, dividends and stock-based compensation.
“These are all things that have to be considered when putting in place taxation regimes that encourage small businesses and entrepreneurs as engines of growth for the economy,” he says.
“Some of this, in essence, is rewarding people for what I would call sweat equity,” Al-Katib says.
Foregoing compensation for upside stock return is a foundation of entrepreneurial reward, he points out, since few entrepreneurs get paid well at the start.
“If I look at the work I put in when I started my company, I’d have been getting paid three dollars an hour.”
AGT benefited from a small business preferential tax rate on its first CA$500,000 in net earnings, which encouraged initial investment of money and effort.
“We were risking our own capital, and we didn’t want to pay not only a high corporate tax but also high personal tax rates on our salaries,” he says.
Growing the business
In return, Al-Katib has helped build what has become a multi-billion dollar legumes industry in Canada. AGT also contributes to other countries’ employment and treasuries through its 47 manufacturing facilities on five continents with exports to 120 countries worldwide
Major export markets include India, Turkey and Egypt and other countries where people rely on legumes as a source of protein.
As AGT expanded, Al-Katib recognized that “capital is mobile, people are mobile and technology allows us to locate in multiple jurisdictions worldwide, so tax strategy has been a very important part of our business strategy. We spend a lot of time understanding the regulatory regimes in which we operate.”
The 20% corporate tax rate in Turkey — one of AGT’s main markets today — compares favorably to other countries’ rates, he says. This, and the system’s transparency and predictability, have encouraged AGT to invest hundreds of millions there, including the 2009 acquisition of partner, the Arbel Group.
Fifteen years after Al-Katib founded his company, AGT’s consolidated revenue had grown to CA$1.97 billion (US$1.46 billion). But there is more to the story than growth for Al-Katib.
“The world population is growing at a pace where we’re facing a societal challenge to meet the demand for food,” says Al-Katib.
“I’m a believer that entrepreneurs are not only a growth engine, but will also provide solutions to societal problems like food security,” he says.
His efforts were recognized by the Business for Peace Foundation, which presented Al-Katib with a 2017 Oslo Business for Peace Award for work with international agencies to streamline the delivery of food to Syrian refugees.