2017 is expected to bring some challenges as well as opportunities for several industries, with a large effect on the economy. The CEOs of some of the most prominent companies working in Egypt continue to share their views on the current economic situation as well as their expectations for their industry and the Egyptian economy over the upcoming months of 2017 with the daily business news roundup Enterprise. Daily News Egypt continues to tackle the highlights of Enterprise’s interviews with these prominent business figures.
2017 will be a year of opportunities and new realities: Raouf Ghabbour, CEO of GB Auto
Raouf Ghabbour, CEO of Ghabbour Auto (GB Auto), believes that 2017 will be “a year of adapting to a new reality” with changes in subsidies, energy, and the currency.
He also expects 2017 to be a year of opportunities. “I believe there will be companies that will not be able to adjust their salaries to ensure their people are comfortable, so you will see talented people looking for new opportunities,” Ghabbour said.
In his opinion, the best-performing sectors in 2017 will be education, food, and healthcare. He noted that in the healthcare sector only hospitals are expected to improve, not the pharmaceutical sector which is facing lots of pressure with price controls.
On the other hand, Ghabbour expects all luxury products to underperform in 2017, noting that any product at the higher end of the price range is going to suffer. “The hiccup we are facing is less about “people do not have money” and more about “consumers need to mentally cope with the price increases”. It’s more psychological than financial, Ghabbour said.
When asked about his opinion in terms of the largest issues expected to face the industry in 2017, Ghabbour said that the business climate will be generally challenging in the first half of 2017. He added that the company may face cost pressures. He also added that the working-capital requirements have more than doubled, and there will be a need to increase payroll to ensure staff can cope with the inflation.
In conclusion to his talk, Ghabbour directed a message to the business community, saying that it is crucial to think about the local added value. “We need to manufacture. It is difficult, but I think the flotation of the Egyptian pound is the best decision made by policymakers since I joined the business in 1977,” he noted. Ghabbour added that relying on tourism revenues, remittances, and Suez Canal revenues has spoiled businesses. “It is time we took responsibility for ourselves,” he added.
The economy’s largest challenge is the speed of execution: Wael Fakharany, managing director of Careem Egypt
Wael Fakharany, the managing director of Careem Egypt since September 2016, said that he is very optimistic about 2017. He believes that the reforms undertaken by the government may be painful, but extremely necessary. “The thing to do now is to just push through without losing momentum,” he added. Fakharany explained that for Careem, 2017 will be a year of expansion, scaling, and taking risks.
Careem has new plans to expand further across the country throughout the next two years to be present in every Egyptian city, according to Fakharany. He expressed his optimism and excitement about the company’s prospects; with a strong belief that the best time to take risks is in a challenging economic environment. “I think this is the best time to invest,” he stressed.
In Fakharany’s opinion, the largest challenge for the economy will be the speed of execution and the ability to adapt to new structures and institutions. He believes that the quicker adaptations to the new changes and acceptance of the new policies take place, the better off businesses will be. He noted that taking too long to adapt will only result in missed opportunities.
For the ride-hailing industry, the largest challenge according to Fakharany, is the regulatory framework or the lack thereof. Fakharany said that he is very excited about the industry as a whole with its growth at a tremendous speed and its multi-stakeholder benefits, including financial inclusion and economic empowerment. However, the biggest challenge right now is not having a regulatory framework in place. “Having the proper regulatory framework will allow us to have proper documentation so we can provide a safer service,” Fakharany added.
Fakharany believes that the best sectors to invest in right now are fintech companies and car leasing. He stressed that investing in luxury goods right now would be a bad idea.
Government reforms will result in long-term growth and recovery: Jose Maria Magrina, CEO of Suez Cement Group
To Jose Maria Magrina, the CEO of Suez Cement Group, 2017 will be a year of reforms. He believes that the government has taken the right measures which may be difficult but are also necessary to set Egypt on the path for medium- and long-term growth and recovery. He believes that further steps are necessary though, such as a further reduction of fuel subsidies given the rise of international oil prices. “The government has concentrated on reducing subsidies to industry, so it is now time to tackle the lion’s share—the subsidies that go to the majority of the population,” he added. “Key to this is making sure that welfare benefits are directed to those in need.”
In Magrina’s opinion, the biggest challenge for the economy will be regaining its footing as a competitive exporter. He believes Egypt imports more than it produces and shifting the balance will demand new regulations and an investor-friendly environment. “We are presuming that in the short-to-near term, the economy will start exporting and generating foreign currency to maintain the deficit at a sustainable level,” he added.
He believes that local investors will be leading the recovery as they are the only ones who will be able to push the economy forward. “With the Egyptian pound becoming competitive, we will need to take this advantage to increase exports,” Magrina pointed out.
Magrina believes that the construction industry is facing significant challenges with this period of instability. “2016 closed with 7% growth in cement consumption, but there is an overcapacity and other state actors are building the world’s largest cement plant. The industry will need more visibility on the role of the state in supply,” Magrina said.
Other challenges, in his opinion, are logistics, arbitrary toll fees, and taxes.
On the other hand, Magrina believes that exports and serving the government’s demand is considered a great opportunity for his company and everyone in the industry.
He expected the best sectors to perform in 2017 to be banking and investment banking, and financial institutions in general, while the automotive sector will be the worst performing sector according to him.
2017 will be painful for everyone: Magued Sherif, CEO of SODIC
CEO of SODIC Magued Sherif expects 2017 to be painful for everyone; however, he believes all the challenges the country is currently facing are inevitable and largely overdue.
In his opinion, the largest challenge for the economy will be how every business adapts to the flotation of the pound. He said that the most common concern right now among businesses is how to budget with the current uncertainty and what exchange rate to use, noting that his company is budgeting at around EGP 20 per US dollar.
In terms of the challenges facing the real estate sector throughout 2017, Sherif said that the main challenge will be the need to replenish land banks at very expensive rates. “The government remains the primary source of land, and even before the flotation, they had raised land prices beyond what we as an industry feel are already prohibitive levels,” Sherif added.
Sherif said that the opportunity for his industry remains unchanged, especially with the high demand for property and a limited supply from formal developers. He also expects residential offerings to outperform other asset classes.
He expressed his company’s openness to opportunities to add to its land bank through acquisitions or partnerships with other developers who have substantial holdings, but not the capacity to develop them.
He predicted the best performing sectors in 2017 to be basic commodities and any business that exports, adding that it is a great time for someone with a competitive, locally produced product. On the other hand, he believes that the food industry is promising even in times of economic hardship.
He concluded by saying that the largest regulatory issue he is watching out for is how the state will react to the stress his industry is facing. “We need to ask ourselves what happens to the real estate industry if the government continues to raise land prices,” Sherif said. “I would like to see something done to curb the price of lands and extend payment periods.”