Egypt Cement Crisis
Egypt Has Huge Reserves of Cement Enough For 20 Years
Egypt has huge reserves of cement enough for 20 years. This situation puts the industry in a difficult situation due to the increasing cost of manufacturing and the low demand for cement locally.
To find out the latest developments of the cement crisis which threatens possible shutdown of some factories, Daily News Egypt talked to Medhat Stefanos, head of the cement division in the Chamber of Building Materials in the Federation of Egyptian Industries, and the vice chairperson of the Egyptian-Greek Business Council. Here are the excerpts of the interview:
What measures would the state adopt to protect the local cement industry?
The main role of the government is to identify the problem and its reasons. It should take the measures that it deems in the interest of the industry and would protect it. It is necessary to create competitiveness and determine fair prices that guarantee the rights of both the manufacturer and the consumer, which would positively affect the national economy.
Are not the lower prices a reflection of healthy market?
Lower prices do not necessarily reflect the health or fair market situation. In fact, it is the other way around. There are certain elements in the manufacture process, such as the investment cost, to be taken into consideration, alongside the value-added which results from any economic activity. I believe the solution to the cement crisis is in the hands of the government, and we are waiting for it.
Did reducing natural gas prices ease the crisis?
The decision to cut natural gas prices has had no impact on cement companies because they do not currently rely on gas for production, but rather on energy mix containing coal and alternative fuels.
Are there any signs of increasing demand for cement, especially with lower inflation?
There is not any sign of possible increase in demand over the coming period. Lower inflation is only one element in the process, and it would not affect sales. The cement supply is huge and cannot be fully consumed before 20 years from now. I expect the sales of the sector to reach 47m tonnes by the end of 2019, if the consumption rate continues that way.
Why didn’t you propose solutions to solve the crisis of cement and the bankruptcy of some companies as the cement division knows the ins and outs of the industry?
The situation of the industry does not enable us to suggest solutions for the problems the industry is suffering. We have explained the issue to the concerned bodies and we are awaiting a solution. However, we are willing to cooperate with any entity that asks for our help to solve the cement issue.
Which is better: large companies’ acquisition of smaller ones or the temporary suspension of production?
This is up to the owners of small, large, or even medium-sized cement companies, whether owned by Egyptian or foreign investors or state-owned national companies, and no one can make a decision on behalf of another body. In fact, the existence of certain companies will contribute to improving the market situation and increase the profit margins of companies, many of which are experiencing significant losses in the current period.
Did the export subsidy programme approved by the cabinet several months ago have a positive impact on the sector?
Unfortunately, the export subsidy programme did not have any impact on the sector for several reasons, the most important of which is that it is a traditional and long-term solution, and its impact is limited. We need a stimulus programme, not a subsidy. It does not make sense to subsidise products that have been exported for three years. The loss has already happened, and subsidisation will do nothing. We need programmes to stimulate exports instead.
In my opinion, the industry needs an in-depth and detailed insight from the state to achieve the required growth and get the most of the Egyptian industry’s potential.
As the vice chairperson of the Egyptian-Greek Business Council, what is the size of Greek investments in Egypt?
The value of Greek investments in Egypt is nearly $1bn. We must realise that foreign investment is inseparable from its domestic counterpart, which serves as a model for attracting foreign funds. It is necessary to encourage the local investor first and work to support him and help him attract foreign investors.
Can this figure increase and how?
In order for the Egyptian economy to attract more foreign investors, we must first understand what we really want. When an investor enters the market, he wants to put his money in a suitable opportunity. Therefore, it is necessary to have an analysis of the Egyptian work environment, an investment map that shows the areas that need local and foreign investments, and clear conditions and facilities provided to investors. Accordingly, we should create a dialogue between the two parties.
What are the most important areas of Greek investments in Egypt?
There are many different fields, the most important of which are small and medium-sized industries. A small-sized country like Greece sees the Egyptian market as a huge and diverse market. We must have a local investor who is looking for partnership with his foreign counterpart and exchange their knowledge and experience. Also, investors in Egypt need bank facilities and laws that guarantee their rights because work management is not solely about injecting funds.
What products can we add to the export list from Egypt to Greece?
Certainly, any Egyptian product that lives up to the quality to be acceptable not only in Greece but also in Europe. Greece is a gateway to the markets of Europe and specifically the Balkans and Eastern Europe. This needs intensifying the activity of producers and encouraging the state to export so that Egyptian products can compete with their European counterparts. I believe that we are able to compete and have a long history of competing in Egypt. The Egyptian product has a good reputation abroad.
Regarding cooperation in the field of gas in the Mediterranean between Egypt, Greece, and Cyprus, what impact would that have on the trade exchange between the three countries?
The Egyptian state is now moving towards being an energy hub for the entire region thanks to its cumulative expertise. There are investments in the clean energy sector, good international relations with neighbouring countries, and natural gas cooperation in the Mediterranean. Cooperation in these fields is certainly better than competition, which would leave a positive impact on the trade exchange between the three countries.