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

Official: S. Sudan President, Rebel Leader to Meet in Tanzania

Talks part of effort to end conflict in country that has left more than 10,000 people dead, displaced more than 1.5 million others More

Dutch Deny Link to Mystery Submarine Off Sweden

Netherlands denies Russian claim that 'foreign vessel' photographed in waters off Sweden could be Dutch More

China Boosts Efforts to Help Afghan, Regional Stability

Observers say China’s increased regional involvement are due to concerns that Afghan instability and the presence of anti-China militants in Pakistani border areas could fuel Xinjiang troubles More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
China Political Meeting Seeks to Improve Rule of Lawi
X
William Ide
October 20, 2014 10:23 AM
China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Nigeria Agrees to Cease-Fire With Boko Haram

Islamist militant group Boko Haram and the Nigerian government have agreed to a cease-fire. The Nigerian government issued an order Friday, telling all military chiefs "to comply with the cease-fire agreement in all theaters of operations. Why now and the significance of the agreement are questions on some people’s minds. VOA's Mariama Diallo reports.
Video

Video Kobani Fighting Sends 400,000 Refugees to Turkey

The offensive by Islamic State militants against the northern Syrian city of Kobani has caused hundreds of thousands of residents to flee to Turkey. They receive help from Turkish authorities and individuals, but say much more is needed. VOA’s Scott Bobb reports from the town of Suruc a few kilometers from the border.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.
Video

Video Syrian Defector Leaks Shocking Photos of Torture Victims

Shocking photographs purporting to show Syrian torture victims are on display at the U.S. Holocaust Memorial Museum in Washington. The museum says the graphic images are among thousands of photographs recently smuggled out of Syria by a military policeman-turned-defector. As VOA reporter Julie Taboh reports, the museum says the photos provide further evidence of atrocities committed by the government of Syrian President Bashar al-Assad against its own people.
Video

Video Drought-Stricken California Considers Upgrading Water System

A three-year drought in California is causing a water shortage that is being felt on farms and cities throughout the state. As VOA's Mike O’Sullivan reports, water experts, consumers and farmers say California needs to make changes to cope with an uncertain future.
Video

Video TechShop Puts High-tech Dreams Within Reach

Square, a business app and card reader, makes it possible to do credit card transactions through cell phones. But what made Square possible? VOA’s Adrianna Zhang and Enming Liu have the answer.

All About America

AppleAndroid