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

Beloved Lion Killing Sparks Virtual, Real Life Outrage

Twitter, as usual, was epicenter for anger directed at Palmer, with some questioning his manhood, calling for him to be released into the wild More

Video Booming London Property Market a Haven for Dirty Money

Billions of dollars from proceeds of crime, especially from Russia, being laundered through London property market, according to anti-corruption activists More

Video Scouts' Decision on Gays Meets Acceptance in Founder's Hometown

One former Scout leader thinks organization will move past political, social debate, get back to its primary focus of turning boys into good citizens More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Scouts' Decision on Gays Meets Acceptance in Founder's Hometown

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
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 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle 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 '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 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 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