Tamer Younes, executive board member and head of Corporate Affairs at Procter & Gamble Corporation (P&G) North Africa and Levant, said that his company will focus more on expanding and localizing its production in Egypt, adding that P&G is one of the top five exports in the industrial chemicals sector.
“The company’s annual exports from Egypt exceed $200m to more than 35 countries. The amount gis representing 40% of our local production,” Younes told Daily News Egypt in an exclusive interview. The transcript for which is below, lightly edited for clarity:
How did reforms affect company’s activities?
The industrial sector totally agrees with the latest economic reforms. Actually, we think it was a little bit delayed. The Egyptian government should have taken economic reforms like flotation decision and issuing the Value Added Tax (VAT) two years before the government took them in the last quarter of 2016.
Reform’s anticipation led businesspersons to hold on to their future plans, including pricing some products even after issuing the VAT, as there were some surprises that sparked controversy.
However, price hikes and higher inflation badly affected P&G’s sales, as consumers preferred to buy the low prices products and diminished their purchased quantities from P&G to manage to afford the high inflation. We believe that it is an expected phase that we have to pass, but the hardest days are gone.
I think that the recent reforms as increasing electricity prices, energy subsidy reform are supplementary steps, the government is gradually implementing the reforms to help consumers get over bad effects.
After some time, the market stabilized, and we are optimistic about the general view of the market right now.
We as a manufacturing company search for low price production inputs, hence we try to localize our industrial operations to decrease production costs. Egypt is a huge market with a 100 million population. Egypt’s geographical location, the bilateral agreements with Africa, Arab countries, and other partners encourage businesspersons to invest in it.
More than 99% of the company’s staff are Egyptian, while number of foreign employees eis very limited and they mainly work to share experiences on some specific areas. We have more than 40 Egyptians working in high posts at P&G global, which emphasized that Egypt has many talents. P&G looks at Egypt as a regional market for its operations.
Would you please tell me more about other offices and production lines that you have in Middle East region?
Sure, we try to be close to our consumers. We operate in Egypt, Morocco, Nigeria, Dubai, South Africa, Pakistan, and India. We focus our production kinds in a specific country, according to every market’s needs.
To clarify, it does not make sense if we import diapers from the US because of the high cost of transportation. For example, in Egypt we produce diapers as there is a big need of these products, but in Saudi Arabia we produce more shampoos and export some of them to Egypt.
We manufacture in Egypt about 80% of the P&G local sales, while we import the other 20% from the P&G global operations. We have 65 brands.
What is estimated amount of P&G Egypt exports to other markets?
P&G Egypt is one of the top five exports in industrial chemicals sector. The company’s annual exports from Egypt exceed $200m to more than 35 countries representing 40% of the local production.
Exportation financially supported the company’s operation, when the Egyptian economy was suffering the hard currency availability issue three years ago. However, regional geopolitical situation affects the company’s plans to boost exportation. Our biggest exportation markets were Syria, Libya, Iraq, and others, but political conflicts interrupt the supply chain and change the ranking.
In general, we try to enter new markets to help get over the regional geopolitical issues.
What are company’s top five exportation markets and what new markets are you targeting?
Main markets now are Lebanon, Jordon, Iraq and some of the COMESA countries, such as Kenya and Ethiopia, while the company mulls entering new African markets through the African Continental Free Trade Agreement. We await this agreement to export to Nigeria, which is a big market we want to access, but high customs eliminate the option of entering the market with ease.
Are there specific figures for increasing P&G exportations to other countries?
We always want to produce with the high capacity of the company and increase exportation, but it is hard to define specific figure as I early mentioned that the region suffers some geopolitical issues.
What about company’s investment plans and opening new factory opportunities?
We have been investing in Egypt over the past 32 years, every year we add new investments, but investments are not only about opening a new factory. P&G focuses on boosting production efficiency to offer more products in the market.
We had to stop production lines in Egypt to accelerate other production lines’ capacities and buying more equipment.
We invested more than EGP 3bn since 1986. We have about 1,500 employees, but additional 10,000 employees are working on our business services at other organizations, for example, we do not have our own transportation fleet, but we do contract with some reputed organizations.
In 2011, we inaugurated our second factory in Egypt, which is the world’s third largest P&G diapers. After inaugurating the factory, we convinced our global suppliers to invest in Egypt and provide P&G with inputs and materials. Five global suppliers from Turkey, Germany, Poland, UAE, and Czech Republic invested in Egypt.
P&G t is trying to put a positive footprint, hence the companies always try to do more localized production, discuss with suppliers to add investments in the market, and help other companies to work through collaboration agreements.
In addition to our two factories in Egypt, we opened our regional Planning Service Centre, which reconfirms our view about Egypt as a regional hub.
In 2011, we opened our diapers factory when many businesses stopped. The hardships that faced the country did not badly affect the company’s plans to invest in Egypt.
In the recent years inflation increased and people’s purchasing power decreased. In this phase we try to improve the production efficiency as sales slow-down. The company is very sensitive with the market updates to respond well to the changes, offer consumers affordable products, and increase exports at the same time.
What about this current year’s investments?
Look, many companies face cash flow issues. P&G is one of the biggest manufacturers.
I paid millions of EGP as a VAT on all the inputs during the manufacturing processes. I have already produced the commodities and exported them, but I was not refunded. However, the refund can be used in increasing production efficiency, marketing campaigns, or other investments. The VAT law statedd that companies should be refunded after 45 days of delivering the required documents.
We believe that the government already wants to refund our cash, but there are some internal rules that require verification of the company’s payment to the government. The company has not been refunded its VAT cash since 2016.
We contacted the previous Finance Minister Amr El-Garhy and other officials, but the problem is that the system does not differentiate between reputed organizations with good track record from other uncommitted ones.
We recommend that the Egyptian government solves the VAT refunds issue, as companies await cash to invest more in the market. I suggest that the government repays the funds and issue a tough punishment on uncommitted companies.
P&G Egypt cannot ask the headquarter office for new funds to invest in Egypt, while it already has cash and should use it to help efficiently invest in the local market.
We are very open to discuss solutions as allowing the company not to pay some taxes, as a way to refund the cash.
What are main products contributing to annual sales?
Some laundry detergent products have the biggest share of sales. We have leadingp market shares in many of the categories we manufacture, but we cannot reveal specific figures.
How many programmes do you implement in CSR activities?
Actually, we focus more on creating shared value (CSV) concept, instead of corporate social responsibility (CSR). The CSV concept includes four main pillars, which are community impact, diversity and inclusion, gender equality, and sustainability.
For details, P&G believes in CSV, a whereby CSV confirms that all employees are involved in the company’s decisions.
We implement many marketing campaigns that affirm gender equality to support young women, where one of them was inspired from the American campaign Like a Girl, to help changee old views about girls’ abilities.
We supported many other campaigns that did shed light on successful women. We also launched our campaign Share the Load.
We pay great attention to sustainability activities and using more renewable energy resources, lately we changed the roof to solar-power glass, in an area of one factory, to help use the solar lighting instead of the normal electricity lighting.
We also have discussed cooperation with the New and Renewable Energy Authority (NREA), to buy some equipment that consume less power and are environment friendly, but they were highly priced, so we would like to mull other ways to utilize renewable energy collaborating with the European Union and other partners offering us a low price for renewable energy.
As a better waste management, we collaborate with companies who burn low quality products and generate power instead of the traditional way of burying them.
We plan to manufacture our shampoo bottles from recycling materials in the future.
Is there a specific budget for CSV activities?
There isn’t one umbrella to manage all of these activities, we have about 65 brands.
What about the company’s long-term strategy?
We aim to increase our production capacity and exports.
Where does P&G globally operate?
P&G globally has been investing in 180 countries for over 180 years ago, we have 65 brands and annual sales are $65bn.
In the past, the company had about 300 brands, but they were decreased to 65 brands in 10 categories to help get better revenues for the shareholders.
We pay great attention to diversity inclusion and employ fresh graduates, getting the required training, we have six global regions distributed according to the similar consumption patterns.
The latest general managers for P&G were Egyptian, which reaffirms Egypt’s good talents.