A look at the future of Egypt's food industry and its goals for the rest of the decade: The top priority for investors in Egypt's food industry is to develop the sector on three fronts — developing the product, the producer, and the overall market. This comes as part of a larger goal of tripling the sector’s exports by 2030, while expanding the use of modern tech and sustainability practices to reshape the landscape of local food production, distribution, and consumption, sector sources tell EnterpriseAM. However, several roadblocks stand in the way of achieving these goals — including high burdens and costs, a lack of sufficient workforce training, and widespread informality in the sector.

There’s no solid data for Egypt’s food industry: There are no official estimates of the total investment volumes in the local food industry sector, the head of the Federation of Egyptian Industries’ (FEI) food division Ashraf El Gazayerli told us. El Gazayerli estimates that investments in the sector currently exceed EGP 1 tn, split equally between the formally regulated portion of the sector and the informal sector. He expects these combined investments to grow annually by 10-15% per year, with stakeholders aiming to increase this percentage in the future.

The FEI’s food division has nearly doubled to 27k member companies in four years, El Gazayerli noted, up from just 14k companies in 2020. Among these companies, approximately 1.5k are exporters, contributing about 14% of Egypt’s total non-oil exports and placing the food sector as the country’s third most export-oriented sector, he added.

Global investors want in on Egypt’s food sector: The sector is currently attracting the attention of global firms, El Gazayerli said, adding that he expects to see significant foreign investments from firms based in Europe and the Gulf. Infrastructure upgrades in the sector such as roads and ports also serve as incentives for investors to inject more investments over the coming years. El Gazayerli also emphasized the need to align with global trade and industrial trends, citing trade tensions between the US and China, which he said could both encourage Chinese investments in Egypt and create opportunities for Egyptian products to enter the US market.

Advanced tech solutions will also play a key role in improving the sector: Incorporating tech solutions that reduce costs, improve quality, and ensure sustainability across the production chain is a key factor in modern investments in the sector, El Gazayerli said, pointing to freeze-drying technology as an example of tech that has recently emerged as a promising global trend. Similarly, innovations in herb processing, juice concentrates, and date production are areas ripe for future investments, he said.

M&As in the sector could see an increase in the coming period: El Gazayerli told us that he anticipates increased mergers and acquisitions in the food sector in the coming period — particularly ones involving foreign entities, which could bring a significant amount of FDI into the sector. Local food company Auf Group’s CEO Ahmed Auf told EnterpriseAM that he views the potential increase in M&As as a positive development for the sector, noting that mergers allow larger entities to elevate smaller ones, helping them achieve growth goals at a faster pace.

Egypt isn’t the only country in the region looking to develop its food sector: A growing focus on developing food sector investments in neighboring countries, most notably Saudi Arabia, poses challenges to Egypt's global market share, El Gazayerli said. Countries in the region are now offering incentives to help reduce costs and attract investments in their respective markets — but Egypt holds a greater competitive advantage in the food sector overall, El Gazayerli said. Ongoing governmental efforts to alleviate burdens across the sector may further improve Egypt’s international competitiveness, he added.

We could become a manufacturing base for food companies: Global food companies, including those from Europe, Turkey, and other countries in the Middle East already maintain manufacturing and export bases in Egypt — a trend that is expected to grow as companies view Egypt as a strategic and competitive regional hub. Addressing challenges in the sector could provide a significant boost toward achieving export goals, former Food Export Council Chairman Hani Berzi told EnterpriseAM.

Egypt remains the region’s most cost-competitive option in the food sector, benefiting from lower labor and energy costs, including electricity and gas, Auf said. In addition, the availability of agricultural land, coupled with government initiatives such as affordable industrial land will collectively support local production and strengthen Egypt’s competitiveness.

A growing number of industrial and agricultural zones are a key part of the picture: Industrial real estate developer Polaris Parks signed agreements with the government back in September to develop two new major industrial parks in Egypt, with the company having allocated EGP 10.5 bn for the projects. In November, a coalition of Chinese companies was formed to develop an integrated agricultural zone spanning 1 mn acres in New Valley Governorate, following discussions between Prime Minister Mostafa Madbouly and representatives from the Egyptian-Chinese Businessmen Association.

Private sector companies have also been expanding their agricultural land holdings of late, with UAE-based Al Dahra’s Egyptian subsidiary Al Dahra Egypt planning to invest nearly USD 230 mn to add 80-90k acres to its portfolio in the country over the next five years. The Industry Ministry, for its part, offered over 2.6k land plots — a total of 15 mn square meters — earlier this month for activities like food processing, engineering industries, pharmaceuticals, chemicals, textiles, and building materials.

However, lower subsidies for food exports could throw a wrench into our plans to grow the sector: The government reportedly plans to cut food production subsidies in the coming period, according to a document viewed by EnterpriseAM last month, with producers set to receive 3% of the total value of exports if their added value exceeds 80%, 2.7% if their added value sits between 70-80%, 2.10% if their added value comes in at 60-70%, and 1.2% if their added value is 35-50%.

Currency volatility represents another potential challenge: The FX shortage in 2022 precipitated a crisis in the food industry that has only recently stabilized, Auf said. Stakeholders in the market are now waiting to see whether the current stability of Egypt’s FX reserves will continue, he said, emphasizing the need to maintain the availability of FX as well as price stability. “Currency moves that range between 7-10% wouldn’t be much of an issue, as that would represent a gradual decline that can be managed. The problem is when the currency is fixed for two or three years and then devalued abruptly by a very high rate, which can be detrimental to any entity, especially smaller entities," he told us.

Technical expertise is also needed: The industry’s lack of skilled labor and high levels of waste in the sector both represent significant challenges for the food industry, Berzi said, noting the need for stronger capabilities and greater strategic development within the sector. He emphasized the need to create added value by localizing production and focusing on technology that enhances quality and competitiveness.

The Food Export Council’s current chairman Mahmoud Bazan echoed these sentiments, telling us that the council is placing emphasis on developing the product, producer, and market to expand manufacturing capabilities and meet consumer demand. The issue of technical know-how is another priority for the council, he added. The sector also employs over 7 mn workers directly and indirectly — meaning a 10% annual growth rate could generate 700k new jobs annually, he said.

The gov’t has big ambitions for the sector: The Madbouly government and the Food Export Council aim to increase the food sector’s revenues to over USD 20 bn by 2030, up from an expected USD 6 bn by the end of this year and USD 7 bn in 2025, Bazan noted.

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