RIYADH: The entrepreneurial climate in Egypt appears optimistic despite the impending fallout from the Russian-Ukrainian crisis, the pandemic and domestic growth falters.
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 towns, massive infrastructure improvements and the expansion of the Suez Canal. .
“The country has enormous growth potential. There is so much happening in terms of investment and improvement, especially in the past two years, with the overhaul of roads, bridges, metro and railways,” said Brick owner Shehab Mubarak and Mortar, a Cairo-based real estate company. Arab News.
Business optimism is not only shared by locals, but also fueled by a growing number of GCC companies looking to invest in Egypt. One of them is IDAR Contracting, a Saudi Arabia-based real estate company that plans to set up shop in Egypt in addition to venturing into the region’s food and beverage business.
“We recently conducted a survey and were amazed by the country’s economic openness, its impressive growth and the sheer size of its ongoing government projects,” Ahmad Yaman, owner of IDAR Contracting, told Arab News.
The Egyptian government has worked hard to invite new businesses into the country, and the result has given national entrepreneurship a huge boost.
“The new laws, allowing foreigners to be the sole owners of their businesses and facilitating the transfer of foreign currency, are encouraging factors. The officials also offered us a location for a factory in their industrial zone,” Yaman said.
Other GCC companies keen to explore emerging opportunities in the northeast African country include Lebanon-based Kamp Hospitality Group. The restaurant chain, which has made a name for itself in Riyadh, plans to franchise its Kampai restaurants in Egypt.
“We plan to open ten restaurants in Egypt over the next four years,” said Henri Farah, CEO of Kamp Hospitality Group, while revealing its expansion plan.
Impact of the Ukrainian crisis
The shimmering entrepreneurial trend is encouraging in light of Ukraine’s crisis which has clouded the country’s prospects for foreign direct investment, or FDI.
According to a seminal article “Egypt emerges as a top FDI destination” by economic scholar Hebatallah Ghoneim published last year, the country had the highest FDI rates in Africa in 2021 despite the universal pandemic that darkens the continent from an economic point of view.
“Nearly 90% of FDI in Egypt comes from the European Union, Arab States, the United Kingdom and the United States,” Ghoneim said in the document, while stressing that the investment cake was quite diverse and did not depend on a single country.
To make matters worse, the Egyptian stock exchanges in Cairo and Alexandria have recently seen a considerable outflow of capital. According to a recent Reuters article, the country has seen hundreds of millions of dollars flow out of its Treasury markets since the Russian invasion of Ukraine.
“Expected growth for the next financial year starting in July was 6%, but we don’t know how growth will be affected by the Ukraine crisis. The government’s priority, for now, is to provide people with basic necessities,” Mosbah Qotb, an economic analyst and journalist, said in an interview with Arab News.
The problem does not end there. A recent article by the Middle East Institute warned of a looming food crisis in Egypt, given the country’s high reliance on grain imports and the inability of the agricultural sector to produce enough to meet the needs of the country. country.
According to Qotb, Egypt imports 80% 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 declining tourism outlook which may not show signs of recovery in the immediate future.
According to the fundamentals
But not all is as bleak as the current economic climate, as the Egyptian government’s foreign exchange reserves, currency stability and infrastructure momentum have bolstered the country’s growth prospects.
“The reassuring factors are that foreign exchange reserves are at a satisfactory level of about $40 billion and that the government’s strategic wheat reserves are sufficient for four months, after which local wheat production will be available on the market” , Qotb said.
He further pointed out that monetary stability fueled by large diaspora remittances amounted to nearly $33 billion. Exports in 2021 hit a record high of $45.2 billion. And to top it off, unemployment levels were within the acceptable range of eight percent.
“In addition, Suez Canal revenues, which amount to $6 billion in 2021, are expected to increase by 10% this year,” he added.
The analyst believes that the country’s growth is also fueled by its vibrant start-up industry, thanks to a smart young and educated population that has had a positive ripple effect on the medical and education sectors.
GCC come calling
Lately, Gulf Cooperation Council companies have shown keen interest in enterprising Egyptian companies. A prime example of this move occurred last month when First Abu Dhabi Bank offered to acquire a majority stake in Egypt’s largest investment bank EFG Hermes, 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 frenzy also spilled over into the e-commerce space when Saudi Arabia-based B2B platform Sary recently acquired Egypt-based Mowarrid.
Yet the path to rebirth will not be straightforward as much will depend on how Egyptian entrepreneurs steer the course of business through these difficult times to their advantage.