News / Middle East

In Egypt Turmoil, Start-Up Firms Find Ways to Flourish

Two men on a scooter ride near soldiers on military vehicles at Abbasiya square near Egypt's Defence Ministry, in Cairo, May 4, 2012.
Two men on a scooter ride near soldiers on military vehicles at Abbasiya square near Egypt's Defence Ministry, in Cairo, May 4, 2012.
Reuters
Egypt's revolutions have been kind to Ahmed El-Kerdany. The young entrepreneur has raised millions of dollars of funding and kept his business growing through the country's worst political and economic turmoil in decades.

In 2010, he and several friends in the city of Alexandria launched Mashaweer, a service which helps customers avoid the traffic in Egypt's gridlocked cities by running errands for them. In December that year, the firm began operating in Cairo.

Two months later, president Hosni Mubarak was overthrown by mass protests across the country, triggering an economic slump that has not yet lifted. This month, president Mohamed Morsi was ousted by the army during another wave of national unrest.

But Mashaweer has continued to grow, raising $4 million from Egyptian investors and expanding its staff to 300 people, whose orange scooters are a common sight on Cairo's streets. It bought a speedboat for deliveries on Egypt's north coast and opened an office in Beirut last November; it aims to open one in Dubai by the end of 2013.

“For some people, the revolution was a disaster for business. For us it was an advantage,” said Kerdany, 27, speaking at Mashaweer's sparsely furnished Cairo offices on several floors of a shabby apartment building.

He said waves of political instability over the past 30 months had slowed growth; corporate clients periodically became more cautious about spending, and mass protests made it harder for Mashaweer personnel to move around Cairo and Alexandria.

But the unrest created opportunities, he said. The firm was able to start an advertising blitz in Cairo as media advertising rates sank during the uncertain period around Mubarak's ouster, and it could buy scooters from desperate distributors on 36-month payment plans instead of the usual 12 months.

Economy

Egypt's economy has been hit hard by the political instability. Gross domestic product grew an annual 2.2 in the first quarter of this year, far below the level of about 6 percent needed to absorb young job-seekers.

Many big, established companies have struggled with poor security, labor unrest, fuel shortages and difficulties obtaining foreign exchange. Last year net profit at Ezz Steel, Egypt's biggest steel maker, plunged by more than half to 250.4 million Egyptian pounds ($35.7 million).

But such figures do not tell the whole story. The post-Mubarak period has also seen a surge of interest among young Egyptians in starting their own companies, some involving new technologies and markets that were not explored before the revolution, businessmen say.

In some cases, push factors are at work; people are being forced to become entrepreneurs because of the growing difficulty of finding secure jobs at established firms.

But there are also pull factors. By disrupting some of the big, dominant companies, Egypt's unrest created more space for small, nimble start-ups to operate. And by removing Mubarak's authoritarian government, it gave young Egyptians a sense of empowerment which encouraged some to start businesses.

“Many companies started after the revolution - the main reason is psychological. Many young people realized they can do what they want,” said Ahmed Zahran, who helped to found solar energy firm KarmSolar in October 2011. “Egyptians became risk-takers after the revolution.”

Data from the investment ministry supports this theory. Capital invested in new firms fell to 897 million pounds in May this year from 1.11 billion pounds in May 2010, as the economic slump hit corporate financing. But the number of new firms founded during the month actually rose, to 823 from 690.

Abdelrahman Magdy, chief executive of Egypreneur, which helps local entrepreneurs find the contacts and services they need, said that before the 2011 revolution, Egypreneur had 2,000 to 3,000 followers on Twitter. It now has about 20,000.

Small

By themselves, Egypt's start-up companies are too small to re-ignite economic growth or solve the problem of youth unemployment, estimated at over 20 percent. According to the investment ministry, firms established in May 2010 created  16,851 jobs; those established in May this year, just 7,151.

But the ability of Egyptian entrepreneurs to operate in the current environment suggests room for much faster economic growth when the political situation eventually stabilizes.

Zahran, 33, who worked for a multinational oil firm in Tunisia and in the energy industry in London before returning to Cairo, said Egypt's economy was “massively underserviced” after years of stagnation, leaving opportunities for expansion.

Many recent start-ups try to address inefficiencies and logjams in the economy, using new technology or business models to grapple with issues such as traffic congestion, vocational training and jobs for young people, and fuel shortages.

KarmSolar was founded in response to one of the biggest curbs on Egypt's development: the fact that most of its population lives on just 8 percent of its land, Zahran said. Providing energy and water supplies to let people live in other, more arid areas has been prohibitively expensive.

The company designs solar-powered water pumping systems and solar-powered buildings to help businesses and villages operate off the national power grid and without using diesel fuel.

KarmSolar has raised 30 million Egyptian pounds of funding, boosting its staff to 25 people from four, and aims to become profitable by end-2014, Zahran said. It hopes to start sales elsewhere in the Middle East in the next five years.

For Ahmed Essam, 30, the explosion of political news and debate in much of the Arab world since its 2011 uprisings is a business opportunity. He resigned his job at a software company after Mubarak's downfall to set up a venture developing applications for smart phones, and is now focusing on an app that plucks news from the Internet.

“Consumption of news is soaring in the Middle East, because of all the political changes - everybody is affected. So there's an opening here,” he said.

For Egypt's big companies, funding has become more difficult since the revolution as capital markets have slowed and banks have become more cautious about lending.

But many of the start-ups, which require only moderate amounts of capital in their initial years, say they have had no problem raising money through more informal channels.

Mashaweer began by borrowing money from family and friends before attracting a wider circle of individual investors who were impressed by the firm's advertising. Zahran said KarmSolar approached energy industry executives who liked its technology.

In contrast to solar energy firms in many other countries, he said his firm was not counting on receiving any state assistance, partly because the Egyptian government would remain distracted by political issues for some time to come.

“We're not expecting any help. Our business has to succeed on its own merits,” he said.

Egypreneur's Magdy said he could see “no end in sight” to Egypt's political conflict, but he didn't expect that to deter many of its entrepreneurs.

“These ventures depend on people's dreams and their hopes. They're not going to stop because of politics.”

You May Like

Video Genome Initiative Urgently Works to Freeze DNA Before Species Go Extinct

Smithsonian senior research botanist Vicki Funk says ultimate goal is 'trying to get one-half of the diversity of plant life on Earth at the genus level in two years' More

Video Russia Accused of Abusing Interpol to Pursue Opponents

Report from member of British think tank says Russian extradition requests keep targets from traveling More

US Lawmakers Weigh Turkish Anti-terror Moves

Turkey’s two-pronged campaign against Islamic State militants, Kurdish PKK forces provokes mixed reactions on Capitol Hill More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Russia Accused of Abusing Interpol to Pursue Opponentsi
X
Henry Ridgwell
July 28, 2015 9:53 PM
A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video Special Olympics Athletes Meet International Friends

The Special Olympics are underway in Los Angeles, California, with athletes from 165 countries participating in an event that gives people with intellectual disabilities the chance to take part in an international competition. VOA's Mike O'Sullivan reports that for athletes and their families, it's also an opportunity to make new friends in an international setting.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Iran Nuclear Pact Wins Few New US Congressional Backers

Later this week, President Barack Obama returns from a trip to Africa to confront a U.S. Congress roiled by the nuclear accord with Iran, an agreement that has received the blessing of the U.N. Security Council. Days of intensive lobbying and testimony by top administration officials have won few new congressional supporters of the pact. VOA’s Michael Bowman reports.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Critics of Japan Defense Policy Focus on Okinawa

In Okinawa, many locals have long complained that Tokyo places an unfair burden on the tiny island by locating most of Japan's U.S. military bases there. As Japan's government moves toward strengthening and expanding the country's defense policies, opponents of those plans are joining local protesters in Okinawa, voicing concern about where the country is headed. VOA’s Brian Padden reports from Okinawa.
Video

Video IS Uses Chemical Weapons in Syrian Attack

Islamic State militants have added a new weapon in their arsenal of fear: chemical weapons. VOA Kurdish service reporter Zana Omer was on the scene within hours of a recent attack in Hasakah, Syria, and has details of the subsequent investigation, in this report narrated by Miguel Amaya.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs