Egypt's logistics ecosystem adjusts to disruptions

 

From the New Suez Canal to the East Port Said development, Egypt’s logistics ecosystem has expanded substantially in recent years despite headwinds resulting from the US-China trade war in 2019. However, as the Covid-19 pandemic began to spread across the world in early 2020, key transport connections were disrupted due to restrictions on cross-border travel. Maintaining a reliable logistics value chain therefore became simultaneously more important and more challenging.

Covid-19 Effects

Substantial supply and demand shocks were felt globally along logistics chains as a result of the pandemic. Around 90% of Egypt’s international trade passes through its 48 ports, and 94% of inland freight travels by road. While both have been significantly disrupted, road transport was most affected owing to an overnight curfew and the subsequent increase in daytime travel congestion. However, to ensure the free flow of essential goods, curfew exceptions were granted for the distribution of food products and factory goods. Egypt’s ports largely remained open, with many operating at limited capacity because of containment measures and lower demand. The increase in blank sailings – where scheduled port stops or entire routes are cancelled by a carrier – resulted in artificially high shipping activity at sea and low cargo volumes at ports. For much of the first half of 2020 domestic demand declined for non-essential goods, while lockdowns throughout Europe and North America had a downward effect on container traffic.

Further challenges came as a result of the disequilibrium along supply chains in China – Egypt’s top source of imports – as factories in multiple cities were closed as health measures. This was followed by a drop in the demand for goods from China due to concerns about importing from the country, which was hit heavily by the pandemic. As a result, a number of backlogs were created along the supply chain. Air freight – an industry greatly affected by the pandemic – served as a lifeline for essential imports such as medical supplies, raw materials and factory supplies following the initial disruption of supply chains. However, in March 2020 international flights were banned from Egypt’s airspace, which increased pressure on existing air freight capacity. Medium-term disruption to industrial supply chains is likely, given that many intermediate and investment goods – such as electrical equipment, chemicals and raw materials – are imported by air. As these goods make up 60% of the country’s non-oil imports, the manufacturing sector may need until 2021 to readjust following the supply chain disruptions. These challenges were also particularly pronounced at ports.

However, some supply chains remained strong, which could serve as a future incentive to reconfigure them with a more local focus. “As the local supply of fast-moving consumer goods, groceries and some manufacturing goods has held up well, this may lead to a long-term readjustment of supply chains,” Hesham Safwat, CEO of Jumia Egypt, told OBG.

E-Commerce

A notable side effect of the Covid-19 pandemic has been the disruption of traditional retail activities and substantial increase in e-commerce activity, particularly in large cities like Cairo. The change in circumstances, which permitted e-commerce to flourish from March 2020 onwards, may engender a long-term shift in consumer habits – especially when access to international goods normalises. “E-commerce has seen a significant increase in interest and activity; however, this has been a challenge considering the supply chain disruptions across borders for certain products, such as electronics from China,” Safwat said.

Looking Ahead

While challenging headwinds prevail in the short to medium term, Egypt’s logistics infrastructure looks set to grow down the line due to increasing investment from the private and public sectors. In that regard, Egypt’s sovereign wealth fund is looking to position the country as a logistics centre in the years ahead, taking advantage of the many recent structural changes happening globally due to Covid-19.

Share

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Egypt 2020

Transport & Logistics chapter from The Report: Egypt 2020

Previous article from this chapter and report
How new road systems support Egypt's economy
Next chapter from this report
Agriculture, from The Report: Egypt 2020

Articles from this chapter

This chapter includes the following articles.
Cover of The Report: Egypt 2020

The Report

This article is from the Transport & Logistics chapter of The Report: Egypt 2020. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart