Turning the tables

May 19, 2014 12:37 pm

By Maha El Gazzar

Egypt’s January 25 uprising in 2011 undoubtedly left a huge mark on the country’s economy. For the past four years, the economy has been struggling to gain momentum during the continuous political havoc and disorder, which has scared away many foreign investments.

Last month, Egypt’s finance minister, Hani Qadri, stated that the economic growth target had slipped and the budget deficit would widen more than official forecasts, as the turmoil of the past three years is taking its toll on the economy. The state’s budget deficit for 2013 to 2014 would be approximately 12 per cent, he says, adding that he expects it to stand at ten per cent to 10.5 per cent in the next fiscal year. With several events taking place on the political, security and even economic fronts, growth is expected to reach two per cent to 2.5 per cent during this fiscal year, down from a target of three per cent to 3.5 per cent, he adds.

With a youth unemployment rate of 30 per cent and its economy only now coming back to levels seen before its 2011 uprising, Egypt’s salvation may lie in small, informal businesses run by those struggling with low incomes in the Arab world’s most populous country.

The Bakery Shop (aka T.B.S) is one business venture that started before the Egyptian revolution, only to grow more successful after the political uprising. What started out as a small business in 2008 between three partners has now grown into a renowned brand with 11 outlets and more than 320 employees across Egypt. T.B.S is a quality bakery that started out as a partnership between Sameh El Sadat, Tarek El Nazer and Basel Mashhour; they were joined in 2011 by Yasser Abdel Sallam, who left his position as head of bakery at the Four Seasons Hotel.

The popular summer destination of the North Coast was chosen as the debut of T.B.S, and so, in the summer of 2008, beach-goers witnessed the opening of the little bakery. People’s immediate response was to ask where T.B.S hailed from, as the quality was too good to embody a local offspring. “They [customers] didn’t believe that our store was a local brand,” explains Mashhour.

In 2010, after opening two shops, and in order to expedite the growth of their business, the partners sold 51 per cent of the business to Delicious Inc. (a company that also owns the famous Cilantro café franchise in Egypt).

Surprisingly, the business did not slow during the country’s tough times, as its revenue grew by 19 per cent, with net income growth at 46 per cent and assets growth at 45 per cent.

The partnership resulted in T.B.S having 15 outlets by mid 2013, including 10 T.B.S stores and five Delicious Bakery stores – a second-tier brand, with lower price points, which were created to cater for a more scalable mass market in Egypt.

Last year, T.B.S founders submitted a management buyout offer to Delicious Inc and ran a process with multiple private equity investors to fund the transaction and by early 2014 they got back 60 per cent of the company and the new investor (HM Partners) replaced Cilantro with 40 per cent ownership.

Following the footstep of Abdel Sallam and to join the full-time partner Mashhour and El Nazer, El Sadat has also quite his full time job in June 2013 at Investment Management Team at The Abraaj Group in Dubai. “I then decided to resign after ten years of private equity experience in the region to join T.B.S to conclude the management buyout and grow the company with the management team to the next level,” he says. “We remain bullish on the sector and committed to our story and that has been the main reason behind the management buyout that we concluded in the midst of the revolution events. We know that the macro environment is still challenging in Egypt, and because of this completely deconstructed environment we’re living in, we passionately believe there is a huge space to build, create and solve – virtually any and every problem you can think of.”

Also venturing into the food business was Christopher Khalifa with his Zooba restaurant. He opened his first outlet in 2012, in the height of economic and political turmoil. However, his first year was very positive and exceeded his expectations from a revenue perspective, he said.

However, launching the business during that time was anything but a walk in the park. The bureaucratic infrastructure in Egypt is not very start-up friendly and often feels like a roadblock to starting and growing a business, he explains. “I think one of the things I found most difficult was trying to understand and adapt to the government bureaucracy and the legal framework that governs the different facets of my business,” says Khalifa. “To this day, I’m not quite sure I fully understand them.”

Khalifa left his full time job at EFG-Hermes in December 2011 in order to devote his time to Zooba. The restaurant has now three outlets in Cairo.

Others have decided to delve outside of the food business. Especially, since the recent years have proven that the internet in Egypt is booming more than ever, both in terms of penetration and in the number of Egyptian websites. New servers are constantly being added to cope with demand, even as competing websites merge or disappear altogether. Popular social networking sites, video streaming and music download, to name a few, have all attracted Egyptians’ high traffic online. Young entrepreneurs are also not shying away from the electronic boom; Waseem El Tanahi, creator of the online guide Cairo 360  (www.cairo360.com), launched the website in 2010.

The English language site was Egypt’s first comprehensive online guide and is designed to provide independent reviews and features of Cairo’s venues with valuable local insight.

El Tanahi then believed there was an absent content for the Egyptian capital online. “Going online is better suited for the market of today,” says El Tanahi. He launched the website with the help of his team. “We have an editorial team that dealswith Cairo 360 like a magazine, only without the stress associated with lead times. When we get the information we need, it can be published the same day,” explains the entrepreneur.

Born and raised in Abu Dhabi, 27-year-old El Tanahi earned his BA in marketing in London before Cairo presented an opportunity for him at the time. The website has experienced a major slow down during Egypt’s tough time which forced the military to impose a curfew for months, resulting in the capital’s nightlife to take a big hit.

The online guide is now doing better than ever and, Media Republic, the company behind the Cairo360, is now expanding into new digital projects.

A major problem with such a guide in Egyptian society is that people are very adverse about rating, El Tanahi explains. El Tanahi is constantly asked by business owners the price for reviewing them. “We want to provide a strong PR platform to all Cairo’s venues,” he says, which is a new concept to many who are used to paying for reviews. “People should not be scared of reviews; even if they don’t get a five-star rating, we welcome them to call us back when they have made any improvements or changes.”

Another non-food SME that was rather inspired by the Egyptian revolution was Bridge Egypt (www.bridgegypt.com), a CSR consultancy firm. Founder Karine Kamel left her

Full-time job as the PR and marketing director at Orascom Housing Communities (OHC) in July 2012 to start her new business.

Bridge Egypt aims to offer a platform for companies to match them with the non-profit world, while also marketing social causes.

Kamel always had a passion for entrepreneurship and, one year after the revolution, she took the plunge. The company has managed to include quite the client list in a short period of time, which include Novartis, the Ministry of State for Administrative Development, the Breast Cancer Foundation in Egypt, as well as Kamel’s old employer OHC.

The young entrepreneur never saw the need to move into the mainstream workforce, even during the country’s tough times, “although some days I wish I was still an employee with a guaranteed monthly income,” she says.

Another story of two young female entrepreneurs is that of Mandala Yoga and Lulu’s Kitchen. Founded by Nancy Morrison (ex PR professional and now certified yoga teacher) and managing partner Alia El Askalany, it was launched in September 2013, and was born of the idea that as many people as possible should be given the opportunity to experience the healing power of yoga and meditation.

“Egyptians have been going through an extremely difficult time over the past few years, emotionally and mentally it has been traumatic. Yoga is known to have numerous health benefits especially when it comes to depression, stress relief and emotional balance. Add this to travelling, which is always good for the soul, to beautiful and unique locations around Egypt and you can see what Mandala Yoga retreats is all about,” says El Askalany.

According to the founder, the word ‘Mandala’ is Sanskrit for ‘circle’, but actually mandalas are intricate designs that are used to represent the universe in its entirety.

Mandala Yoga hosts retreats and events around Egypt. “So far we have thankfully had successful retreats in South Sinai, Aswan and Marsa Alam,” says El Askalany.

El Askalany, who devotes her entire time to the business, has also launched her own start-up called Lulu’s Kitchen (Cozy Cooking Classes).

Furthermore, informal business is invading the streets of Egypt. Ghada Fathi Waly, managing director of Egypt’s Social Fund for Development, has recently estimated that at least two thirds of the country’s economy ride on the informal businesses. Waly, who was last month appointed a government minister, recommended allowing the businesses to run outside of government control to allow them to flourish, while registering and taxing only potential exporters.

Whether its small or informal businesses, it seems that big businesses are taking strides some back in Egypt. Three years now after the revolution and the economic conditions in Egypt remain grim. The risk of a currency devaluation and companies shutting down businesses will more likely invite a flowering of entrepreneurs to join the startup bandwagon.

Some argue that the country’s presidential election, set to take place on May 26 and 27, might bring some stability to its falling economy. Field marshal Abdel Fattah El Sisi, Egypt’s ex-defense minister, is the most likely candidate to win as he enjoys the most popularity among the people having deposed former president Mohamed Morsi following mass protests.