By Marwa Mefreh and Samira Saeed
Investors in food industries will bring in new investments to the sector in the upcoming period if a Food Safety Authority is established, as per a ministerial decision issued in 2011.
A board member of the Chamber of Food Industries, Mohamed El-Shafei, said a unified body for food safety to apply international quality specifications and unite regulators is lacking. This reduces the competitiveness of local products, especially since most foreign countries do not recognise Egyptian regulations.
The Chamber of Food Industries introduced the Food Safety Authority Law in 2007; however, conflicts between various ministries to manage the authority disrupted its establishment for many years, despite other ministerial decisions to establish the entity following the 25 January Revolution.
The Food Safety Authority received several approvals from governments that ruled during the four-year period following the revolution, but to no avail.
El-Shafie said the food industry is the largest and the most attractive sector for investment in Egypt, due to its large consumerist nature, compared to other Middle Eastern countries. Products are manufactured locally for many international markets under joint agreements.
El-Shafie noted that the biggest crisis currently facing the food industry, besides the establishment of the authority, is the lack of currency for importing raw materials, in addition to the rising prices of raw materials globally and their reflection on commodity prices domestically and in export markets.
The size of food industry investments is about EGP 25bn; however, it requires incentives to grow even more, according to El-Shafei, who affirmed that the Egyptian market is promising and capable of attracting investment once the economic climate improves.
Chairman of the Chamber of Food Industries Mohamed Shoukry said the food sector is witnessing many challenges that prevent the achievement of targeted growth rates, especially with regards to the legislation governing the sector.
Shoukry explained that there are food legislations that were issued by the Ministries of Health, Industry and Supply, to regulate the sector. In addition, local councils have other laws ruling the sector, he said.
Chairman of the Sugar Division in the Food Industries Chamber, Raafat Rozeika, criticised the diversity of regulators overseeing food projects. He added that it is not normal to have 17 entities overseeing one factory, and that the government needs to activate the Food Safety Authority to ease the burden on manufacturers and encourage investment.
He added that current laws threaten investors with imprisonment if they make minor mistakes, and now businessmen are afraid to expand their projects.
The legislative system does not encourage investors to pump more investments in the legal market, and so they work within the parallel market, which is not subject to supervision or taxation, said Rozeiqa.
He added that the sector’s companies face many problems that affect their business results locally and abroad, especially since their exports decreased by 20% earlier this year due to the delay in paying export subsidies.
Egyptian exports witnessed a decline of more than 15% in the previous eight months, which is an indicator that the government is unable to achieve its $28bn target in the field of exports by the end of the year.
The Ministry of Trade and Industry has put forth a plan covering four years, targeting an increase in Egypt’s exports with a total of $42.5bn by 2018. The plan includes increasing food sector exports to $7.7bn during that period.
El-Damaty added that food industries depend on a small profit margin, which limits the companies’ ability to afford the expenditures, in addition to the obstacles they face under the increase of production and transportation costs.
Head of the Sugar Division at the Chamber of Food Industries, Hassan El-Fendi, said the cost of launching an investment project in the food sector in Egypt is very high in comparison with neighbouring countries, causing investors to think twice before pumping any investments.
El-Fendi added that the Egyptian market, in spite of the obstacles affecting its growth, is still attractive to investment due to its huge size, the increase in its purchasing power