Egypt, the most populous nation in the Arab world and one of Africa’s largest economies, has great potential in all retail sectors, but challenges and risks are substantial, the MEED Invest in Egypt Conference was told this afternoon.

“The retail spend is pretty diverse,” head of commercial banking Egypt at HSBC Bank Egypt Mona el-Sayed said. “Most sectors will grow driven by population growth, which is 1.5-1.7 per cent a year, and by the increase in the purchasing power of Egyptian households. The numbers in the $10,000-a-year bracket will increase by more than 100 per cent in coming years.”

“We are seeing quite a bit of interest in the sector,” El-Sayed said. “ We are seeing it across auto, pharmaceuticals food and healthcare. We are very optimistic.”

“There is significant domestic opportunity due to rising demand plus exports,” El-Sayed said. “There is a sector where there is a lot of room for growth. The infrastructure is there. There is a significant industrial base to work from.”

El-Sayed said the biggest immediate challenge was developing an effective home finance product.

“How do we put in the right structural arrangements to promote mortgage growth. This is the hottest topic,” she said.

“You have challenges from governance perspectives,” said Basel Hussein Roshdy, managing director and chief investment officer at Nile Capital & IT Ventures. “There are issues about taxation and international copyright. It is important to tackle and assess the risks of competition and of imports and exports on your services plus the scalability of your business to grow.”

“(To attract investment) you need institutionalised types of businesses in retail,” Roshdy said. “There are a lot of growing companies in pharmaceuticals. But in retail and others you have a lot of issues to do with institutionalisation. The retail business has to be more broad minded about what is new and think about exporting what they produce. They need to think about the quality of what they are producing and what kind of commercial agreements they are following.”

Roshdy said his firm is seeking investment opportunities in Egyptian companies operating in retail.  

“We look for creating and maximising value from investing,” Roshdy said.  “You need to have a very sustainable management that is both honest and competent and can take the company from point A to point B.”

Roshdy said the retail sector faced four key challenges: taxation, foreign exchange availability, intellectual property right protection and the limited number of local retail brands with potential for internationalisation.

Taxation adviser in the Ministry of Finance Mamdouh Omar said Egypt has free trade agreements with the EU, the Greater Arab Free Trade Area (GAFTA), Comesa, Efta and Turkey.

“There are a lot of opportunities to be able to compete with European companies if we produce much better quality,” Omar said.

“Trade arrangements are one of the most important tools,” Omar said. “That is why we are encouraging our manufacturers to maximise the benefits of these agreement.”