News / Middle East

    Some Egyptian Businesses Thriving in Crush of Economic Downturn

    An Egyptian vendor carries bread downtown Cairo, Egypt, Aug. 5, 2013.
    An Egyptian vendor carries bread downtown Cairo, Egypt, Aug. 5, 2013.
    Reuters
    Egypt's smaller companies have struggled since the uprising that pushed aside Hosni Mubarak in 2011. But in a few corners of the economy, businesses are doing just fine.
     
    Against a background of unrest, access to credit and foreign currency has dried up. Government officials have stopped taking decisions and security has all but disappeared from the streets.
     
    Factories and workshops have been hit by interruptions in subsidized diesel and gasoline and by regular power outages as the government runs low on the dollars it needs to import petroleum products from abroad.
     
    Angry workers routinely shut down plants and block ports.
     
    Gross domestic product grew at an annualized rate of just 2.3 percent in the nine months to end-March, well below the 6 percent a year thought necessary to absorb new entrants to the labor force.
     
    But for many in the food production, building supply and other businesses, even though the economy may have slowed, people keep demanding services.
     
    “Last year we had in sales volume terms and in value terms our best-ever year in the Egyptian market, and this year will be even better,” said Taher Gargour, managing director of sanitary ware and tile-maker Lecico Egypt.
     
    “We're selling more at higher prices than we've done in any year, even the best years of the Mubarak economy when overall GDP growth was at its peak.”
     
    At a time when mainstream contractors were suffering for lack of business, Lecico has been supplying toilets and tiles to small and individual builders who were taking advantage of a breakdown in government zoning rules.
     
    Across the country, skylines have turned brick-red as people add illegal floors and build concrete and fired-brick buildings on agricultural and other restricted land.
     
    The building boom has also been driven by Egypt's bulge of young adults at marriage age seeking a place to live.
     
    “The other story is that given uncertainties about the economy and the strength of the Egyptian pound, people are moving to real estate as a sort of safe haven investment,” Gargour said.
     
    Lecico's net profit jumped 28 percent year-on-year to 16.3 million Egyptian pounds in the first quarter of 2013, while revenue climbed 15 percent to 331.9 million pounds.
     
    Feeding the fish 

    Hussien Mansour, chief executive of Aller Aqua Egypt, a maker of extruded feed pellets for fish farms, says the business environment has become insufferable.
     
    “Egypt's currency problem makes it harder to import,” Mansour said. “The diesel shortage is hurting production. Wages are rising and security on roads has become a problem.”
     
    As the government borrows to finance a steadily growing budget deficit, private borrowers are being crowded out.
     
    Banks are giving fewer loans, demanding more rigorous guarantees and setting more conditions. They now typically charge 18 percent interest on loans, plus administrative costs and fees, Mansour said.
     
    The lack of access to credit means businesses have to prepay with cash, which ties up capital and is painful for companies whose products have an expiry date.
     
    “The collection time that used to take a week can now take two months. This is affecting very big companies as well as small companies,” he said.
     
    Yet this hasn't stopped Aller Aqua, an Egyptian-Danish partnership, from taking advantage of the economic downturn to build a new factory in Sixth of October City west of Cairo.
     
    “Lots of contractors are suffering because the market is bad. Many have suspended operations,” Mansour said.
     
    Egypt is a world leader in tilapia farming, mostly on the Nile Delta, where fish are typically reared in flooded rice fields. Aller Aqua's 40 permanent staff and 40 temporary workers use imported soy, corn, fish meal and other raw materials to produce 20 percent of the country's extruded fish feed.
     
    The factory will triple the company's capacity, making it the biggest extruded feed maker in Egypt's rapidly growing market, Mansour said.
     
    Red tape

     
    Hammam Elabd, chief executive of Western Mechatronics, a maker of industrial scales, conveyor belts and other factory products, also says credit has been a concern.
     
    Before the 2011 uprising, smaller companies were rarely asked to provide letters of guarantee when buying goods on installment, but now it is standard. And before, the bank would typically demand a down payment of 30 to 40 percent. Now they are asking for 100 percent, Elabd said.
     
    “The impact has been tremendous. Sales have gone down, expenses have gone up, and financing of the basic things that you buy and sell has been a problem,” he said.
     
    This has cut into Elabd's sales, but he has found an alternative to the home market.
     
    “If not for our contracts outside Egypt it would have been worse,” said Elabd, who said he had turned in particular to the market in Libya.
     
    The foreign sales have helped Elabd skirt the problem of foreign currency for imports that has hurt many other companies.
     
    The government tightened access to foreign currency after a run on the pound in December, with priority given to importers of commodities defined as essential, such as basic foods.
     
    But even importers of these commodities who were eligible for currency at the official rate have had to buy some of their currency on the black market, said Mansour of Aqua Aller.
     
    Even then banks keep demanding new documents.
     
    “Companies must provide customs documents to banks. Companies are allowed to withdraw a maximum $30,000 a day, so it can take two weeks or more to complete a sizeable import purchase,” Mansour said.
     
    “We have problems convincing foreign investors to work with us or to finance what we import from them or to allow us to pay later in installments - they all demand up-front payments for anything they would export here,” Elabd said.

    You May Like

    Multimedia US Observes Memorial Day With Wreath-laying, National Concert

    Obama lays a wreath at the Tomb of the Unknown Soldier in Arlington Cemetery

    The Strife of the Party: Will Trump Permanently Alter Republicans?

    While billionaire mogul's no-holds-barred style, high-energy delivery are what rocketed him to nomination, they also have created rift between party elites and his supporters

    China's Education Reforms Spark Protest

    Beijing is putting a quota system in place to increase the number of students from poor regions attending universities

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora