LONDON: Egyptian chocolate spread maker Swifax has doubled its sales and is struggling to keep up with demand since the pound currency dived in November, forcing shoppers traditionally “obsessed with everything foreign” to ditch pricy imports and buy local. “People started changing their habits,” Swifax’s commercial director Mohamed El Gammal told journalists. “We could sell even more … but we have a problem with our capacity.” The pound’s flotation and an ensuing increase in tariffs on more than 300 products shipped from abroad have hit importers hard, but have been a boon for domestic manufacturers such as Swifax. Once shunned in favour of prestigious foreign brands perceived to offer higher quality, Egyptian-made products are much more affordable for customers who are increasingly price conscious as inflation has shot above 28 percent. The bonanza began when Egypt abandoned its peg of 8.8 pounds to the dollar on 3 November. Since then, the currency has roughly halved in value to around 17.75.
Sitting in his office next to a glass cabinet crammed with varieties of the sandwich-filler popular with sweet-toothed Egyptians, Gammal said sales have jumped from 2 million pounds ($112,700) a few months before the flotation to 4 million, as rival imported brands become unaffordable to many. A 350-gram jar of Swifax’s high-end spread, Moltobella, costs 36 pounds while its budget brand costs around 17 pounds. Its main imported competitor sells for about 70 pounds a jar. Floating the pound helped Egypt to secure a $12 billion IMF loan in return for a reform programme that includes tax increases and electricity subsidy cuts, driving up inflation in a country where millions live a pay cheque from hunger.
Egypt also raised customs tariffs on many luxury goods to over 50 percent, plugged customs loopholes and tightened quality controls in an effort to rein in a trade deficit the central bank blames for depressing the currency. Importers criticised the increases, saying local producers don’t have the capacity to fill the gap left by declining sales of foreign goods. According to Emad Maher, manager of hypermarket chain Samy Salama, switching to local products has increased by 90 percent, mainly because of the price difference. “In some products, you can compare the local and imported and not find much difference (in quality). But Egyptians are obsessed with everything foreign,” he said. At Covertina, another chocolate-maker, business is also booming. Chief Executive Mostafa Sayed Salam said production had risen 19 percent in 2016 from the previous year. “After the flotation of the currency, it became hard for importers to sell the chocolate at the old prices,” he said. “My market share has increased from 50 percent to 65-70 percent.” Multinationals are taking notice. Nestle, the packaged food giant, said in January it had signed a deal to acquire Caravan Marketing Company, an Egyptian instant coffee maker that had increased its domestic market share due to competitive pricing. With Egypt long dependent on imports, the trend suggests the government’s efforts to narrow a big trade deficit and boost domestic industries are starting to work.
Even before the float, imports had been falling due to shortages of foreign currency. Egypt had struggled to attract dollars and revive the economy after the 2011 overthrow of president Hosni Mubarak, with subsequent political turmoil driving away tourists and foreign investors. Official trade figures for 2016 have yet to be released but a government official told journalists earlier this month that the deficit had narrowed by 17.4 percent compared with 2015. Imports fell to $62.93 billion from $70.28 billion, said the official, but higher exports also helped to shrink the gap. These rose to $20.26 billion in 2016 from $18.67 billion.