‘NEW MIND-SET’ ENERGIZES EGYPT’S ENTREPRENEURS
Businesses meet challenges of tough economic measures
At first glance, software engineer Ahmed Elhaz, psychiatrist Mohammed El Shami and furniture maker Mahmoud Shaaban have little in common: One writes computer code, another provides counseling and the third uses carving tools to ply his trade.
Yet all three benefit from an unexpected turnaround in Egypt’s long-suffering economy.
The country recently made a deal with the International Monetary Fund for a $12 billion loan that saved it from bankruptcy but required tough austerity measures. Those demands help President Abdel Fattah al-Sisi — who visited President Trump at the White House on Monday — sweep out decades of dust in Egypt’s state-dominated economy and spur new businesses.
IT specialist Elhaz, 30, has taken advantage of the spring cleaning, and it is paying off. In 2015, he and El Shami, 38, won a $60,000 government grant for their start-up, Shezlong, which offers psychotherapy sessions to patients via their smartphones.
Less than two years later, Shezlong has acquired 14,000 patients. “At first, I was apprehensive about the idea,” El Shami said. “But once I tried it, I loved how it optimized my time and saved me from the headache of traffic jams. For many of our clients, who don’t come from a culture that is always supportive of psychological therapy, the service has given them access to help they would have been shy about seeking in person.”
“Entrepreneurship is growing, and young people have the ideas,” Elhaz said. “Egypt does have challenges, but the new mind-set will win.”
In a research note published late last year, Merrill Lynch said Sisi tackled needed economic restructuring that was ignored during the nearly 30-year rule of President Hosni Mubarak, who was ousted in an uprising in 2011.
Bank of America said the IMF’s demand that the Central Bank of Egypt float its currency to reflect free-market forces — a move that sent the Egyptian pound plummeting against the U.S. dollar — created an attractive opportunity for investors. The IMF required the government to trim food and fuel subsidies and reduce regulations.
Though the currency drop and reduced subsidies inflicted punishing inflation on most Egyptians, the revalued pound has resulted in domestic products selling faster than high-priced imports for the first time since the mid-1980s.
Egypt’s trade deficit declined 44% in January from $3.49 billion to $1.96 billion in January 2016. In the same period, this nation of more than 90 million people boosted exports by 25%. Egyptian craftsmen are competitive with countries such as India and Vietnam.
“There was an instantaneous attraction for foreign investors and a huge competitiveness gain for the Egyptian economy with it being so much cheaper to produce goods and services here,” said Mohamed Abu Basha, vice president for research at investment bank EFG Hermes Holding.
In a dusty alleyway blocks from Sisi’s Abdeen Palace, cabinetmaker Shaaban, 43, fulfilled back orders for customers looking to remodel their kitchens.
“People are staying in the neighborhood and coming to me for cabinets instead of going out to Festival City Mall and getting them from the big stores that import them from Malaysia and Vietnam,” Shaaban said. “I’ve been able to take on my nephew to help me out, and my brother is happy that his son has a job.”
For the past year, Egypt’s unemployment rate has hovered around 12%, but it is nearly double that for young people ages 15 to 29.
The low cost of labor attracts foreign investors and creates jobs, especially for young people with digital technology and foreign language skills.
Customer service giant Teleperformance, which fields calls for corporate giants such as Expedia and Vodaphone, has shifted jobs from Greece to Cairo, where wages are as much as 60% less than in Europe.
“My dad was a tour guide, and he also speaks excellent English,” said Izzat Shehata, 24, a graduate of the Cairo University Faculty of Commerce. “But the tourism industry has basically collapsed here, so I meet Americans over the phone, handling their insurance claims instead of showing them the pyramids.”
Transportation giant Uber said Cairo was its fastest growing market in the Middle East and Europe. “Things are moving in the right direction,” said Abdellatif Waked, 29, Uber’s general manager in Egypt.
“There was an instantaneous attraction for foreign investors and a huge competitiveness gain for the Egyptian economy.” Mohamed Abu Basha, EFG Hermes Holding