Interview: Ashraf Mahmoud
How did the recent sugar shortage impact domestic fast-moving consumer goods (FMCG) production?
ASHRAF MAHMOUD: The previous sugar crisis resulted in issues that the market and government were forced to grapple with. Almost 50% of Egyptians’ monthly expenditures are spent on FMCGs, so when the crisis hit, FMCG companies were affected directly. The government successfully addressed the issue through economic reforms, taking control of sugar stocks until it was able to stabilise the supply by controlling the currency market and securing dollar liquidity, thus enabling the import of needed quantities and bridging the gap between supply and demand. According to the Ministry of Supply and Internal Trade, the government currently has a sugar surplus of more than four months on hand to cover the market’s needs. However, in order to avoid another similar shortage, the problem warrants further scrutiny: Egypt produces 18 tonnes of beet per feddan compared to Europe’s 45 tonnes. This issue should be a focus within the country’s public policy, as the current practice of breaking up ownership of agricultural land negatively impacts sugar beet cultivation. In order to resolve both the pricing and production crisis, the country must increase plantation areas and their yields.
What are the primary factors driving increasing demand for sugar in Egypt?
MAHMOUD: There are several factors impacting persistent sugar demand rates in Egypt. Although the population has been growing at a rate of approximately 2% each year, sugar consumption has been increasing at a slightly higher rate, with the general consensus that it is driven by evolutionary consumption trends.
More generally, demand is affected by such diverse factors such as changing deficit rates, new production capacities and new consumption trends. These factors have shifted from being predominantly household to being strongly industrial, and can be seen manifested in the expansion of the food and beverage industries.
In what ways are local food processing companies responding to existing cost pressures?
MAHMOUD: For sugar producers the challenge is to maintain a price that is within the reach of the public. Considering our national reliance on sugar, the industry is continuously striving to maintain a competitive cost structure, achieved mainly through cost control and integration of agricultural inputs.
One challenge is the special grades of sugar required by industrial companies. Often, technological adaptations and additional expenses are incurred to tailor production so that we might fulfil the requirements of this fast-growing and demanding sector.
Another challenge is the gradual lifting of subsidised energy resources that is sure to affect all companies and factories operating in the Egyptian market. However, not only do we see this as a sound economic opportunity that is favourable for the national economy’s general interest, but it will also encourage us to develop an action plan in which power is used efficiently.
How can the government incentivise foreign direct investment (FDI) into agri-business?
MAHMOUD: The government’s awareness of the challenges and opportunities in this sector is clear in the emphasis being placed on agricultural development, including new land concessions and irrigation in tandem with strategic initiatives targeting large-scale farm development. These projects include local and foreign investments and will create new opportunities in the sector. In the ongoing effort to fill the void between local production and consumption, Egypt imports the majority of its agricultural commodities.
However, all the factors for agricultural development are present in the country, such as water, land, underground aquifers, climate and labour. Together with Egypt’s strategic geographic location, this will drive FDI in the direction of agricultural commodities, making inputs and outputs accessible to various markets.
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