Egypt’s consumer markets attract Arab investors

Food and drink account for 37.1% of the total spending of Egyptian households.
Saturday 31/08/2019
People walk past a clothing store window with placards announcing discounts for winter sales in Cairo, last January. (Reuters)
Huge market. People walk past a clothing store window with placards announcing discounts for winter sales in Cairo, last January. (Reuters)

CAIRO - The Egyptian Ministry of Supply and Internal Trade has proposed to Arab investors ten investment opportunities in trade logistics and huge wholesale and retail markets of a total investment value of about $2.4 billion and covering an area of 126 hectares.

Arab investors are racing to win those opportunities, driven by the rising consumer power of an Egyptian population of more than 99 million people.

Food and drink account for 37.1% of the total spending of Egyptian households, which represents a good incentive to invest in large retail food commodity markets, which also offer on the side many other consumer goods such as clothing, electrical appliances and furniture.

The domestic trade sector contributes about 17% of Egypt’s GDP and the Ministry of Supply and Internal Trade aims to increase that share to 21% in the next three years. In developed markets, these ratios range 25-30% and are important indicators that boost demand, economic growth opportunities and factory operations.

Investors from the United Arab Emirates, Saudi Arabia and Lebanon are competing for opportunities in logistics areas the government is seeking to launch in South Sinai, the Red Sea, Suez, Ismailia, Fayoum, Beni Suef, Sohag and New Valley.

Ibrahim El Ashmawy, assistant head of the Internal Trade Development Authority, said the ministry “has a plan to boost the activity of the internal trade sector, which last year reached $55 billion in commodity trading.”

He said the strength of commodity trading in Egypt stimulated the private sector to enter the activity, which is consistent with the government’s strategy to expand the sector by introducing more logistics areas, commercial centres and store chains in various districts.

It is expected that a large logistics zone for trading and conditioning dates and pickled goods for export will be inaugurated on an area of ​​4.2 hectares, in addition to the opening of wholesale markets for ready-made clothes. In the last year, some 23 million shoppers visited the 11 Carrefour hypermarkets in Egypt, which are owned by the United Arab Emirates’ Majid Al Futtaim Group.

Noureddine Mohamed, president of Target Investment, said the Egyptian housing sector is experiencing a slump in housing sales so real estate companies are moving to invest in the administrative and commercial sectors and the latter is the most sought after because of population increase and the rise in consumer power in Egypt.

Mohamed said the shopping malls sector is more attractive to Arab investors, especially from the United Arab Emirates, after the successful experience of Majid Al Futtaim Group with its Carrefour and Cairo Festival City shopping centres.

Cairo is preparing to organise in September, under the auspices of Egyptian President Abdel Fattah al-Sisi, a forum for commercial brands to attract the largest number of international investors possible to open outlets in the local market. Mohamed said the real estate investment companies’ gains in housing units were 15-20% and that he expects these rates to reach 50-60% in the sector of commercial malls.

Mohamed Mohie, vice-president of the Egyptian Association for Direct Investment, said Arab investors are aiming to expand investment to the regions in the coming period after having focused for many years on Cairo because of the lack of basic services in the regions.

There are about 1.8 million shops in Egypt employing about 3.5 million workers but Wessam Eissa, a member of the 6th of October Investors Association, said the reality has proven that hypermarkets are the more successful in Egypt, compared to small markets.

He said the experience of United Arab Emirates and Saudi investors in the field motivates them to expand their investments in Egypt and duplicate their successful experiences in investing in shopping malls. The domestic trade sector, particularly hypermarkets, is characterised by a fast-working capital cycle, which boosts profit levels in the context of a consumer boom supported by a large population.