Egypt pins hopes on African markets to shore up economy

The Libyan and Sudanese markets accounted for almost half of the Egyptian food industry’s exports, which have a high competitive advantage because of proximity and consumer demand.
Saturday 20/07/2019
Clouds on the horizon. Container trucks stand in line on a road due to bad weather in the Mediterranean city of Alexandria.(Reuters)
Clouds on the horizon. Container trucks stand in line on a road due to bad weather in the Mediterranean city of Alexandria.(Reuters)

CAIRO - The manufacturing and export sectors in Egypt suffer from the loss of many traditional Arab markets, especially geographically close ones such as Libya and Sudan, in addition to the losses of Iraqi, Syrian and Yemeni customers and their inability to find replacement markets.

The Libyan and Sudanese markets accounted for almost half of the Egyptian food industry’s exports, which have a high competitive advantage because of proximity and consumer demand.

The share of Arab countries in the Egyptian exports in general is about 24%. Cairo is seeking to increase that share by boosting exports from $22 billion a year to $55 billion in five years.

Cairo is counting on increasing exports to conventional markets by about 20% a year but conflicts in the Middle East have played havoc with its plans.

“The Egyptian market is starting to groan, sector by sector, because of the many conflicts and a large number of factories in the food sectors suffer from a staggering accumulation of merchandise in warehouses,” said Hani Barzi, chairman of the Export Council for Food Industries.

He said sugar mills have about 1 million tonnes of “stagnant stocks” because of a market recession since March, the continuing Libyan crisis and increased tensions in Sudan.

Business organisations are preparing a promotional plan targeting African markets by sending trade missions and taking advantage of logistics prepared by the Egyptian Ministry of Commerce and Industry.

Egypt plans to establish ten logistics centres around Africa, with the first set for Kenya.

Exporting companies would ship products to the centres and sell them directly to traders. The goal is to offset lost opportunities in areas of political tensions.

Cairo is trying to reap the benefits of activating the African Continental Free Trade Area Agreement (AfCFTA), that Egyptian President Abdel Fattah al-Sisi had, as current president of the African Union, announced at the recent extraordinary African summit.

The African Union website states that seven countries, including Egypt, made offers to host AfCFTA’s General Secretariat.

The move would boost Cairo’s goal of doubling its exports but new markets promotions need efforts beyond those required in traditional export markets because of expected strong competition.

Several markets in the Arab region, Europe and the United States have imposed bans on importing some Egyptian products. Adel al-Shenwani, a member of the board of directors of the 10th of Ramadan Investors Association, said the instability in neighbouring markets prompted Egyptian exporters to target new African markets, including Cameroon, Chad, Burundi and Gabon.

He said many food industry exporters had focused on exporting products to Sudan in recent years at the expense of the local market. With the political crisis in Sudan, those exporters found themselves in trouble.

Shenwani said high costs hindered exports to African markets. The cost of shipping a container to countries with no sea or river port is $8,000-$10,000. The cost is $6,000 in countries with ports.

The high cost of transport to landlocked countries is because of the increase in fees collected in countries to secure goods against theft of goods.

Bahaa al-Adly, president of the Badr Investors Association said: “There is but the African markets for Egyptian exports because of trade in our traditional markets, exports have slowed considerably.”

He said export activities and the Egyptian economy could receive a significant boost by targeting markets in Central, West and East Africa.

Cairo is seeking to boost its foreign currency resources but there are challenges presented by African markets, which generally favour a barter system because they cannot pay cash in dollars.

Mahmoud El Borai, secretary-general of the 6th of October Investors Association, said Egyptian exporters are looking forward to the inauguration in October of a shipping line connecting the port of Ain Sokhna on the Red Sea to East African countries.

He said Egyptian products face fierce competition in African markets, especially from countries already established in those areas, including India, Turkey and China.

It takes about 45 days for Egyptian goods to reach Tanzania but only one week for Indian goods to get there. The introduction of a new shipping line in October is expected to shorten the trip for Egyptians goods to nine days.

The new shipping line is to connect Ain Sokhna Port in Egypt to Mombasa in Kenya. Investors’ associations urged Egyptian Minister of Business Affairs Hisham Tawfiq to extend the shipping line to Dar es Salaam and Zanzibar in Tanzania.

18