RIYADH: The entrepreneurial climate in Egypt looks upbeat despite the looming fallout of the Russia-Ukraine crisis, the pandemic and domestic growth hiccups.
Much of the nation’s buffer comes from President Abdel Fattah El-Sisi’s economic reforms that led to the emergence of mega real estate projects, new cities, massive improvements in infrastructure and the expansion of the Suez Canal.
“The country has a lot of growth potential. There’s so much happening in terms of investment and improvement, especially in the last two years, with the overhaul of roads, bridges, metro systems and railways,” Shehab Moubarak, owner of Brick and Mortar, a Cairo-based real estate company, told Arab News.
The business optimism is not only shared by the locals but also nurtured by an increasing number of GCC companies that are looking to invest in Egypt. One of them is Saudi-based IDAR Contracting, a real estate company planning to set shop in Egypt besides venturing into the region’s food and beverage business.
“We recently conducted a survey and were amazed by the country’s economic openness, impressive growth, and the sheer size of its ongoing government projects,” Ahmad Yaman, owner of IDAR Contracting, told Arab News.
The government of Egypt has been working in overdrive to invite new companies into the country, and the outcome has given a considerable fillip to domestic entrepreneurship.
“New laws, allowing foreigners to be sole owners of their companies and facilitating foreign currency transfers, are encouraging factors. The officials also offered us a location for a plant in their industrial zone,” said Yaman.
Some of the other GCC companies eager to explore emerging opportunities in the north-eastern African nation include the Lebanon-based Kamp Hospitality Group. The restaurant chain, which has carved a name for itself Riyadh, plans to franchise its Kampai restaurants in Egypt.
“We plan to open ten restaurants in Egypt in the next four years,” said Henri Farah, CEO of Kamp Hospitality Group, while disclosing his expansion plan.
Impact of Ukraine crisis
The shimmering entrepreneurial streak is encouraging in the light of the Ukraine crisis that has cast a dark shadow on the prospects of the country’s foreign direct investment, or FDI.
According to a seminal paper “Egypt emerges as a top FDI destination” by economics scholar Hebatallah Ghoneim released last year, the country had the highest FDI rates in Africa in 2021 despite the universal pandemic clouding the continent from an economic standpoint.
“Nearly 90 percent of the FDI in Egypt originates from the European Union, Arab states, the UK, and the US,” said Ghoneim in the paper, while pointing out that the investment pie was fairly diversified and not dependent on one country.
To make matters worse, the Egyptian stock exchanges in Cairo and Alexandria have recently witnessed a considerable capital outflow. According to a recent Reuters article, the country has seen hundreds of millions of dollars leave its treasury markets since the Russian invasion of Ukraine.
“The forecasted growth of the next financial year beginning July was six percent, but we do not know how the growth will be impacted by the Ukraine crisis. The government’s priority, for now, is to provide for the population with basic necessities,” said Mosbah Qotb, an economic analyst and journalist, in an interview to Arab News.
The problem doesn’t end there. A recent paper by the Middle East Institute warned of an impending food crisis in Egypt, given the country’s high reliability on grain imports and the farming sector’s inability to produce enough to meet the country’s needs.
According to Qotb, Egypt imports 80 percent of its wheat from Ukraine. Other imports from Ukraine include corn and sunflower oil, which could further worsen inflation in the region. Also, on the anvil is the dwindling tourism prospect that may not show signs of revival in the immediate future.
Depending on fundamentals
But not everything is as gloomy as the prevailing economic climate as the Egyptian government’s foreign exchange reserves, currency stability, and infrastructure momentum have reinforced the country’s growth outlook.
“The reassuring factors are that foreign reserves are at a satisfying level of around $40 billion, and the government strategic wheat reserves are sufficient for four months, after which local wheat production will be available in the market,” said Qotb.
He further pointed out that currency stability fueled by significant remittances from the diaspora amounted to nearly $33 billion. Exports in 2021 hit a record high of $45.2 billion. And to top it, unemployment levels were in the acceptable eight percent range.
“In addition, the Suez Canal earnings, amounting to $6 billion in 2021, are expected to rise by 10 percent this year,” he added.
The analyst believes that the country’s growth is also being nourished by its vibrant startup industry, thanks to a smart young and educated population that’s had a positive ripple effect on the medical and education sectors.
GCC comes calling
Of late, Gulf Cooperation Council companies have been showing avid interest in enterprising Egyptian firms. A stellar example of this move happened last month when First Abu Dhabi Bank offered to buy a controlling stake in Egypt’s biggest investment bank EFG Hermes, which is valued at $1.18 billion.
Last year, Abu Dhabi-based Aldar Properties acquired a majority stake in Egypt’s Sixth of October for Development and Investment Company, or SODIC, for 6.1 billion Egyptian pounds or $386.8 million. The shopping spree also reverberated in the e-commerce space when the Saudi Arabia-based B2B platform Sary recently acquired Egypt-based Mowarrid.
Still, the road to revival won’t be simple as a lot will depend on how Egyptian entrepreneurs will steer the course of the businesses through these tough times to their advantage.