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30 June business risks

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Iris Boutros

Iris Boutros

Planned protests mean 30 June will be a big day in politics for Egypt. For companies, it increases short-term risks and challenges of doing business, largely because of the disruptions. Things can start to improve if the day and the Tamarod campaign are successful in moving Egyptian leaders representing different interests towards honest dialogue. Until this happens, protests and violence will continue to increase risks for businesses in post-revolutionary Egypt.

On the one-year anniversary of President Mohammed Morsi’s inauguration, supporters of the Tamarod campaign will take to the streets in an expression of no confidence. The movement has collected about half of its 15 million-signature goal, declaring 30 June a day of peaceful protest and a milestone in its pursuit of a change of leadership for Egypt. It proposes holding early presidential elections with a five-member interim transitional council holding presidential powers.

Meanwhile businesses are trying to predict what this day means for them. A scenario, where Egyptians take to the streets in extremely large numbers followed by a continuation of massive protests and violence as in the early days of the 25 January Revolution, fortunately for business, is unlikely. Yes these were historical days for Egypt. But for business, at least one to two months of disruptions immediately followed, remaining as a regular part of doing business, particularly when bigger protests lead to street clashes.

The ideal scenario here would be large, peaceful protests that ultimately cause little to no disruption to business. Some minimal disruptions to productivity are certain. If nothing else, more time is spent on coffee chatter. A utopian scenario includes large peaceful protests leading to an acknowledgement of a non-trivial number of Egyptian voters being dissatisfied with the state of affairs. They have signed the Tamarod campaign to indicate as much and a recent poll indicates that half of those aware of the campaign would also sign. In this dream scenario, a legitimate dialogue by the major players representing the interests of differing Egyptians would soon follow.

In the real world, these repeated political flair ups hurt businesses. Protests and violence means blood spilled and money spent caring for people and repairing the damage. They make the logistics of getting business done, getting to meetings and getting products to markets via roads, railways and ports difficult. Days like 30 June delay the signing of contracts. They encourage holiday goers to cancel trips to Egypt. They encourage investors – who have waited patiently for over two years for Egypt to settle down and offer the high returns the market offers –to seek alternative investments.

Businesses are already suffering from the increasing costs of producing goods and services in Egypt. Labour, capital and energy are all significantly more expensive. Add this to the pains of doing business in pre-revolutionary Egypt with uncertainties about the timing of energy price changes, challenges in finding the labour talent that matches their needs, and excessive government involvement in particular sectors.

The 30 June protests will increase risks in the short-term. Risks will start to reverse trend if the events that follow move Egypt from being trapped by major political interests locked by their inability and unwillingness to talk. Right now it seems everyone’s constituency is dissatisfied, either because they disagree with the leadership or because they believe dissenters are hindering the government from getting on with the business of running Egypt. As tensions build and the day approaches, the potential for violence seems to be increasing. If the day and the Tamarod campaign set Egypt on a path to dialogue and an acknowledgement that different Egyptians have very different ideas about the future of Egypt, it will be a huge success in moving Egypt forward and in helping business reduce risks.

About the author

Iris Boutros

Iris Boutros

Iris Boutros is an economist and strategist. She focuses on growth, impact investment, and decision-making. Follow her on Twitter @irisboutros

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