Interview: Ahmed El Rashidi
Which part of Egypt’s distribution network is most in need of infrastructure improvements?
AHMED EL RASHIDI: The transportation network connecting the farmer to the market is very basic. There is a lack of refrigerated logistical centres and a need for additional collection centres in the three to four governorates with large fresh food markets. On reaching the destination, space is not available to responsibly shelve and store perishable goods. Therefore, most perishable products are sold in small informal markets where the level of loss can be very high. In order to avoid these losses and to deliver quality products to consumers, stricter regulation is needed.
In Egypt, trucks are the only method used to distribute products, so the extent and the quality of roads have a direct impact on the quality of products. In many areas, roads are difficult to use, and there are often no ring roads, with it taking three hours to move 50 km. Ship and river transport do not exist yet, and these networks are not integrated to other transport networks. For example, Lake Nasser is one of the largest sources of freshwater fish, but there is no transport from it, while refrigerated containers are difficult to find.
What is the single biggest challenge facing agro-industrial and fast-moving consumer goods (FMCG) producers in Egypt?
EL RASHIDI: We have two systems: the formal and informal. Informal companies cover the majority of FMCG distribution and production and deal with hundreds of millions of pounds worth of goods, though only a fraction of that is reported. This means they aren’t using invoices, or paying taxes, so it is a parallel world to the one formal companies are operating in.
To limit costs, formal companies invest less in quality, allowing for a grey market where there are no government checks or health licences, leading to disease. For example, cheese is a very sensitive product, with white and yellow cheeses being multi-billion-dollar businesses, yet less than 50% of the produce is sold under an actual brand. These practices flourish because out-of-pocket spending is limited, and salaries are low, encouraging the grey market. Another contributing factor is lack of credit; there is simply not enough plastic. Local grocery shops function as credit providers for hundreds of families in their surrounding areas, giving them the opportunity to ask for higher prices than formal supermarkets. The credit issue also helps ensure that customers are not familiar with branded products because the grocer is just handing out what he has in stock. If he makes a greater profit from selling products from the informal sector, he will do it.
How can the sector expand Egyptian food product exports to regional markets?
EL RASHIDI: Both the government and the companies working in the sector need to invest in quality. There has to be a strategy to develop and improve the “Made in Egypt” brand, yet many companies do not have the know-how. So, in addition to improving overall quality, we need to build on the perception that a product made in Egypt reflects the highest level of quality available. This strategy also needs to be supported by the government, our trade associations and various producers. Furthermore, the government has to give additional support to exporters to make sure that they can offer their products for a competitive price on regional markets.
The Tripartite Free Trade Area agreement is useful for reducing Customs costs, although exporting to Africa can be challenging from a logistical perspective, and many companies choose to circumvent these kinds of highly complex places. However, more committed exporters invest in difficult locations with the aim of returns over the long run. Therefore, serious exporters need far greater support from the Egyptian trade attachés, who should be focused on understanding the unique challenges and circumstances of each country.
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