Egypt’s elevator industry needs a lift: Although demand has jumped as a result of rising orders across all market segments on the back of the state's mega-infrastructure projects and the construction of new cities, the elevator industry — a niche but critical sector — has been under pressure because of the FX shortage and import restrictions, which have driven up the costs of raw materials and imported parts. These issues resulted in shipment delays, extending the timelines set for project launches, according to industry insiders Enterprise spoke with.

The FX shortage took its toll on the industry, adding to pre-existing foundational issues: While the biggest problem facing the industry today is the FX shortage and its implications — such as the import constraints, which private sector players are saying are gradually easing — there are other pressing issues rooted within the mechanics of the industry itself. Our sources pointed to problems such as historic over-reliance on imports and limited skilled and field-educated labor, which are curbing the growth of the industry and its expansion prospects.

Import restrictions put the elevator industry out of order: Following the import restrictions of 2022, the heavily import-dependent sector suffered from price increases and a tight component market. “The suspension of imports has impacted our sector in many ways. First, the big problem right now is the unavailability of supply,” Yasser Shenawey, CEO of elevator supply and installation company Beam Construction, told Enterprise. “When imports [were restricted] in 2022, suppliers started selling their stock of material and elevator components at double and triple their prices. Now that import constraints are easing up, prices are still high because importers are paying more to receive their orders from overseas suppliers,” he added.

Local manufacturing is limited: Installed elevators in Egypt are classified into two types: Fully-assembled “complete packages” and locally assembled elevators. “While there’s a preference for complete package elevators in major projects, they only make up 6-8% of the total installed elevators in Egypt,” Shenawey said. Meanwhile, around 70-75% of locally assembled elevator components are imported, while the remainder are locally manufactured, five private sector suppliers and manufacturers told us. “Egypt only manufactures a handful of the elevator parts, mostly sheet metal components like cabins, panels, and doors. Control panel boards are also locally manufactured, but to a lesser extent,” Liftech Elevators production manager Ahmed Nasr told us.

The EGP devaluation drove up local raw material prices over the global average. “Steel in Egypt starts at EGP 41.5k per tonne, while in a country like Saudi Arabia, a tonne of steel costs the equivalent of EGP 26k, and in Turkey, it costs EGP 23k, so we’re talking about a 50% increase compared to average global prices,” Nasr noted.

Halted imports and the FX crunch cast a long shadow on prices: With the state slowly easing up import constraints, prices are falling, but the issues remain. “The FX shortage coupled with the scarcity of supply has resulted in prices rising by 200% since 2021,” a major supplier told us.

Demand for elevators has peaked in recent years particularly as the government ramped up its development projects and the construction of new cities. These projects include thousands of buildings, both commercial and residential, that require installed elevators, Shenawey said. “Over the last few years, demand has risen by 100%. Ten years ago we used to install 20k elevators per year; now our average is 40k elevators annually,” according to the CEO of a supply company and an assembly factory who wished to remain unnamed.

Inevitably, the inauguration of some projects is postponed because suppliers are delivering shipments under tight deadlines. “Elevator suppliers used to deliver us shipments from abroad in two months; now it takes them six months,” Samco Construction Technical Office Manager Ola Esam told Enterprise. “The problem is not just with elevators but with all imported supplies,” she noted.

There are regulations in place allowing these delays: “Under the import restrictions, postponing project launches has become an imperative. The cabinet has just issued a directive extending the deadline for launching projects in the new cities by six months. If the cabinet hadn’t issued the directive, we would have filed for an extension because of the delays in the arrival of imported supplies,” Esam continued.

Local suppliers are scrambling to meet deadlines: “To avoid stalling projects, we now set longer time frames for delivering and installing the elevators to give ourselves a safety margin,” Shenawey said. Suppliers are also taking into consideration the cost safety margin while signing contracts, so they increase their prices by 10% in case an external issue arises between the time of signing the contract and delivering the elevators, he added.

The industry is missing the know-how: Beyond the issues with importing, another challenge facing the industry is the absence of trained and skilled labor. “The majority of technicians working in the field in Egypt are not vocationally trained and lack the know-how to work and contribute to the sector,” our anonymous said. “Most of the labor force entered the field and learned by trial and error, which downgrades the quality of the Egyptian product when compared to global competition,” Nasr agreed. Eventually, the responsibility falls on manufacturers to teach and train technicians, which hinders the progress of the sector, he added.

Looking ahead, industry players are optimistic: Private sector players are growing more optimistic about the future of the industry following recent domestic developments like new incentives aimed at boosting industrial activity. These incentives will bolster local production of steel, among other industries, which will help with the supply of locally manufactured elevator parts.

Suppliers are throwing a coin in the BRICS well: Industry players are looking for a silver lining in Egypt joining BRICS, which some suggest could be positive for import-dependent sectors. “If we sign trade agreements with BRICS members, that could considerably facilitate our imports from China, Egypt’s biggest supplier of elevator parts,” the anonymous source told us.

Your top industrial development stories for the week:

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