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Business under Sisi’s second term: Manage three challenges to capture Egypt’s opportunities

Egypt’s 2018 presidential elections quietly came and went, with President el-Sisi securing 97% of the vote and a second term in office. For executives, the elections were reassurance of policy continuity and stability. During Sisi’s next four years, executives can expect much of the same – continued commitment to economic reforms and stabilization, led by the Ministry of Finance, highlights on national projects, and prioritizing national security.

With continuity confirmed, Businesses should focus on capitalizing on signs of economic recovery to capture the opportunity in Egypt. However, hitting targets and growing operations in Egypt are not without their challenges. These are the three challenges executives should manage in Egypt in 2018:

  1. Reconciling the data with the on-the-ground reality

FSG is forecasting Egypt to be the fastest growing market in the Middle East and North Africa in 2018. In addition to this, more positive data is emerging from the market – inflation is easing, foreign reserves are at an all-time high, and unemployment fell to a seven-year low. The government’s reform momentum is showing signs of fruition, but despite the positive data, Egypt’s operating environment remains complex; ongoing subsidy cuts and regulatory changes create persistent challenges around demand planning and cost assumptions that make it difficult for businesses to reach their growth targets.

For example, businesses that import their finished goods or raw materials must continue to manage the dual exchange rates – the fixed importers rate and the free-market rate – and the implications this has on margins and pricing. Engaging in scenario planning for the potential values of the two exchange rates will help businesses react more quickly to adjust their cost assumptions that feed into their pricing policies. Businesses that have local partners with the right capabilities to navigate around nuances like these will increase their competitiveness.

  1. Tracking the recovery in customer demand

To optimize growth in Egypt, MNCs’ local teams need to be equipped with the capabilities to track signs of demand recovery and respond with the relevant sales push or marketing tactics to influence purchasing decisions as customers begin to normalize their spending. Surprisingly though, consumer spending levels have been more resilient than expected (partly due to population growth) considering the introduction of the 13% VAT and over 100% devaluation of the pound. In the months after the devaluation, private consumption still grew 3.2% YOY (Q1 2017) according to the Ministry of Finance. Compare this to Russia, which experienced a 100% depreciation at the end of 2014, followed by a 9.7% and 4.5% contraction in consumer spending in 2015 and 2016, respectively. Or Argentina, which experienced a 30% devaluation in 2015, followed by a 1.4% contraction in consumer spending in 2016.

Despite resilient spending in Egypt, consumers and business customers still changed their habits, purchasing mainly necessities, trading down to cheaper brands, and delaying investments. To capture the moment when customers begin to trade back up and resume investments, local teams should monitor several signposts – the easing of interest rates and inflation, improvements in industrial production and the purchasing managers’ index (PMI), public sector wage growth, and currency appreciation. Monitoring these will help local teams with their demand planning.

  1. Monitoring regulations and reforms, and assessing which are relevant for your business

A final challenge executives need to manage this year is the regulatory and reform environment. Egypt’s parliament has been busy amending and passing new legislation, recent ones being the Customs Act, Consumer Protection Act, Natural Gas Act, and Universal Healthcare Act. With so much activity, businesses need to identify those regulations that have a direct or indirect impact on their operations and demand for their products.

For example, the Universal Healthcare Act has clear relevance to healthcare companies, but companies outside the health sector may not be aware that they also face a direct impact. All companies must help fund the new health system by paying a 4% premium on each employees’ monthly salary, in addition to a small tax on sales revenues, shifting cost assumptions for all businesses. Executives must ensure their local teams are closely monitoring regulatory changes and updates and preparing their businesses for the anticipated impact.


For more insights on Egypt in 2018, FSG clients can access the latest Egypt Market Review.

Not a client? You can purchase a copy of the Egypt Market Review. Contact us to learn more.

The post Business under Sisi’s second term: Manage three challenges to capture Egypt’s opportunities appeared first on Emerging Markets Insights.



This post first appeared on Emerging Markets Insights: A Blog By Frontier S, please read the originial post: here

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