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 Reuters. “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 Nov. 3. 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.
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 Reuters 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. Read the full story here.