How can Egypt’s agri-business sector overcome long running chronic issues?

Photo: Robert Holmes/Britannica

According to a recently published report by the United Nations Industrial Development Organization (UNIDO), Egypt’s agricultural business (agri-business) sector, which includes agriculture and food processing, contributes 24.5 percent to the country’s Gross Domestic Product (GDP) and 23.2 percent to labor value added. 78.3 percent of food processing takes place in Lower Egypt, while 30.2 percent of agricultural output comes from Upper Egypt.

The sector has much potential because of Egypt’s soil and climate conditions, multiple growing seasons and geographic proximity to Europe and Arab countries. The country has much potential in food processing thanks to its agricultural output and ideal conditions. However, due to a range of chronic issues crippling the sector, it lags behind many other similar countries.

For example, due to unsustainable practices, the sector uses up 86 percent of water resources – an already strained natural resource – and poor support services which lead to high post-harvest losses.

The UNIDO report says: “The food-processing sector in Egypt is highly fragmented, characterized by weak links between producers and processors, high informality among agricultural producers and suppliers, and dominated by [small and medium-sized enterprises (SMEs)], typically resulting in poor economies of scale, leading to the manufacturing of products of sub-optimal quality and packaging, that negatively affects the trade balance and prices of final products.”

Egypt is not ranked highly in any category of food processing, despite being one of the world’s largest producers of fruit and vegetables, and largest exporter of fresh citrus. As little as less than 5 percent of fresh crops are processed, where the global average is 25 to 35 percent, and less than 1 percent of processed food products are exported.

COVID-19 only exacerbated these underlying problems and brought new challenges. The Egyptian government carried out a series of measures to mitigate the pandemic’s impact on agri-business, such as reducing energy costs for the industrial sector, and allowing small scale farmers and livestock breeders to access a lending initiative for SMEs that provides loans at a 5 percent subsidized interest rate.

To overcome these challenges and build a sustainable future for Egyptian agri-business, UNIDO compiled a rapid qualitative assessment by conducting semi-structured interviews with the country’s key stakeholders. The report highlighted five key areas which it stressed should receive the most focus to help the agri-business sector overcome the current challenges and sustain itself in the long-term: supply, demand, labor, production and finance.

Interventions such as relief and stimulus packages are needed to help steer the sector towards structural change and readapting agri-food SMEs business models in order to respond to market changes and compete. Long-term planning is not only crucial for ensuring the sector does not lose its competitive edge but to ride out the short-term challenges as well.

The UNIDO report focuses on food processing and SMEs in its recommendations of how Egyptian agri-business can recover and adapt for a more prosperous future. On the supply side, it stresses on the availability of and access to quality raw materials, intermediate goods (such as packaging) and equipment, all of which facilitate uninterrupted production.  Interventions are also required to ensure that demand among industries and consumers are sustained.

An abundance of skilled, qualified labor is essential, something with the country’s labor market is suffering from due to a mismatch between education and the demands of the job market. Importantly, the sector’s stakeholders must have easy access to financing.

To improve supply, demand and production, a clear roadmap for the country’s manufacturing must be drawn up, while boosting infrastructure capacity and logistics. Food safety must be made a priority, not just for the local market but for export as well. Laws and regulations will need to be reformed to enable this process.

Improved market intelligence is also a must for the supply and demand sides. Very little to no market research is conducted in Egypt, according to the report, and so expertise and knowledge is lacking to ensure that suppliers are focusing on what is actually in high demand in local and export markets.

While agri-food products of Mediterranean countries such as France, Italy and Greece are well known across Europe and the world, there is little awareness of Egyptian food products. This is a branding issue. It is not enough to just improve the quality of Egypt’s food products and to make supplies meet demand. They need to be branded and the image and reputation of Egyptian produce needs to be marketed.

However, Egypt still lacks the qualified labor force to bring all of this together. The lack of skills is not just in new innovative farming methods and manufacturing. There is a severe shortage of lab technicians, food scientists, engineers and food safety and hygiene experts. Skilling and training must also focus on packaging, marketing, distribution, research & development (R&D) and career guidance.

SMEs lie at the heart of the UNIDO assessment’s recommendations. They make up the majority of the agri-business sector and “provide a major source of [income] and self-employment for women, especially in rural areas.”

“Acknowledging the SMEs’ contribution to Egypt’s agri-food sector, […] priority interventions aim at increasing the resilience and competitiveness of SMEs and leveraging their ability to innovate and adapt to changing market dynamics, nature of supply and demand and nature of competition. The interventions address internal and external challenges that agri-food SMEs face as a result of either pre-existing weaknesses or COVID-19 induced threats,” the report says.

A key component is creating a financing infrastructure catered to the needs and requirements of SMEs, such as capital finance and credit, as well as financial inclusion by boosting the bankability of SMEs.

Egypt’s agri-food sector possesses colossal opportunities and massive potential to provide high quality products to the local population and the world market. These recommendations do not only show a way of solving the sector’s chronic bottlenecks, but also how it can grow and add significant value to the Egyptian economy. With thousands of years of farming traditions and agricultural know-how, along with an ideal geography and climate, Egypt can achieve food self-sufficiency and sustainability while also producing a surplus for export.

This article has been slightly altered from its original version to mention the UNIDO report earlier.

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