CAIRO: Makro Egypt held a groundbreaking ceremony Tuesday for its chain of wholesale stores expected to spread through Egypt’s capital in the coming years.
The event for Makro, which is a sales division of Germany’s Metro Group, was held in Salam City and attended by Minister of Trade and Industry Rachid Mohamed Rachid and Cairo Governor Abdel-Azim Wazir.
Makro, a wholesale food and goods store, is slated to open 12 branches in the medium term, according to Jean-Pierre Bienfait, outgoing managing director of Makro Egypt.
The goal is to open 23 stores in the long term, a total investment of ?460 million, though for strategic reasons executives are keeping mum on where the other branches will be.
This expansion, though, is still hypothetical since it hinges on securing the land and licenses required to build. But with all the enthusiasm with which the government has met this project, it is hard to imagine Makro failing in its expansion plan.
“On average, each wholesale store is an investment of about ?20 million, said Bienfait, “and will create about 250 jobs in the local community.
Rachid also spoke at the ceremony, couching his praise for the project in a discussion of how it might benefit Egypt’s internal trade.
“The launch of the first Makro store in Egypt is a very important step in the development of the internal trade mechanism in Egypt. The development of wholesale outlets in the country is seen as one of the tools to upgrading the overall supply chain, starting from the suppliers in the field all the way through until the final products reach the consumer, Rachid said.
Egypt aims to increase investments in internal trade to LE 25 billion over the next five years.
Makro may also play into another important trend in Egypt. One of the most worrying features of the Egyptian economy has been the instability of food prices over the past several years. Because prices are so often dictated at the small-business level, they can behave in ways apart from the international trends.
It is possible that the introduction of more large international food chains will mean that Egypt’s food market will behave more like international markets than it has. This could be an important stabilizing mechanism.
According to Wazir, the incentive for bringing in companies like Makro also lies in the need for job creation. Wazir’s populous governorate suffers from significant unemployment and under-employment problems, and he said he views Makro as a job creator.
“We are encouraging. foreign investment to create more jobs and more prosperity, he said.
Each Makro store, according to executives, is expected to generate around 250 jobs. While over 23 stores that would mean nearly 6,000 jobs, it’s still a small drop in the bucket of Egypt’s unemployment problem.
Makro executives also said they plan to stimulate the local economy by purchasing 90 percent of its goods from local producers and suppliers.
The company has set up a project in Egypt, half of which is being sponsored by the Dutch Private Sector Investment Program, through which it will buy produce from local markets. The total cost of the project is LE 12 million.
The program will include training farmers in vegetable production so that they can meet the quality standards set by Makro. It will also create collection platforms.
When its Salam City opens next year, Makro will have stores in 31 countries, with 650 branches employing around 100,000 people.
Makro generated ?33.1 billion in sales in 2008, representing half of Metro Group’s total sales. The group also has a department store business, an electronics retailer, and a series of hypermarkets.
The main clients of Makro’s wholesale operations include hotels, restaurants, caterers, and medium-sized retailers.
The Salam City store will cover an area of 10,000 square meters and offer 18,000 products.
“Trade, wholesale and retail, said Francois Oliver, incoming managing director of Makro Egypt, “sophisticated supply chains, a well trading infrastructure and a decent overall supply are the backbone of each modern economy and we continue a significant share to the development of all of this.
Makro first announced their intention to invest in Egypt during the World Economic Forum on the Middle East in Sharm El-Sheikh in 2006.
In related news, Rachid told Reuters at the event that Egypt will offer five to six new cement production licenses in the coming few months to meet higher demand.