An inside look at Egypt’s logistics sector: Recent disruptions to trade channels have driven multinational firms to double down on their supply chains leading to a demand in warehousing and more investments in Egypt’s logistics sector. We spoke withHassan Allam Holding Co-CEO Amr Allam (LinkedIn) to discuss what is coming up in their logistics pipeline and learn more about what Egypt needs to do to attract more investments in logistics.

Greenfield investments are the name of the game: Greenfield projects are at the core of Hassan Allam’s business model and benefit from the company’s operations in real estate and construction, Allam said. Despite being capital intensive, the process is methodical and easy to replicate once the appropriate contractual framework is in place and funding is secured.

How they do it: The company identifies a plot of land that is strategically located with access to utilities, buys it, develops the relevant infrastructure for a logistics park, builds it, and then leases it out to tenants. After leasing the property, the company continues to manage the park and provide services to its tenants, thereby earning itself additional revenue streams.

Projects are already in the works: Hassan Allam Holding has several greenfield projects in the pipeline, including a logistics park in East Cairo that is 45% complete in terms of construction and 70% leased. Other investments include a partnership with Egypt’s government for the storage and handling of strategic supplies in Luxor Governorate. The company is also in talks with a major international commodity trader to establish a grains hub for Africa in Egypt.

By the numbers: Greenfield projects take up the heaviest projected capex as each park requires up to EGP 2 bn for acquiring the land and building the infrastructure, Allam told us. With upwards of three such projects in the pipeline, together with the acquisitions, the company’s planned investments come up to about EGP 10 bn over the coming 24 months. All of these projects are currently underway, with the majority of the funding secured, he added.

A high proportion of the funding for logistics parks is debt: “The debt to equity ratio in these types of projects is usually 50-50,” Allam told us, with the company holding between 25-50% of the equity pumped into each investment.

Acquisitions are also on the radar: Brownfield investments are another approach the company follows, which involves acquiring smaller players with established warehousing capacity as well as cargo handling, palletization, and 3PL operations either in the vicinity of existing Hassan Allam parks or within airports.

And partnerships with established players: Hassan Allam Utilities’ collaboration with Agility in Yanmu Park — established a year and a half to two years ago — is an example. Hassan Allam reached out to Agility after acquiring the land for the park. Agility is big on investments in Africa’s logistics sector, and they wanted a local partner to help them broach Egypt’s market. Two-way knowledge transfers have been integral to the partnership, and there are plans to expand the Yanmu brand across Africa, Allam added.

Expansion plans: Although Hassan Allam’s logistics operations are limited to Egypt at the moment, the company recently acquired a controlling stake in CACC Cargolinx and plans to use it as a springboard for expansion into airport cargo operations in Africa. Airport cargo handling and off-ramp handling have some of the highest growth potential in the region, Allam told us. Africa, KSA, Morocco and Libya are lined up as next destinations for logistics operations expansions.

Startups are also attracting attention: The company has funneled investments towards logistics startups including Na’la, Maksab, and Bosta as a way to outsource some operations and integrate technological innovations into its operations. “In the past year and a half to two years, we have deployed USD mns in these technology plays,” Allam told us.

And data centers: The company has set aside space for possibly hosting data centers in the 20 to 25 MW range and above at logistics parks that are under development, Allam said. Although there are some regulatory obstacles to be worked out, the Egyptian government recognizes that data centers can be a major attractor for FDI, he said. Digitization has seen substantial progress through Nafeza, he added.

Golden licenses are speeding things up: “[The golden license process] didn’t take 90 days,” Allam said, but it streamlined their acquisition of necessary licenses and permits. A bigger problem lies in making government authorities cooperate with the license, he said. 

Customs clearance is another sticking point: 100% of parcels entering Egypt via airports and other gateways are opened by customs, Allam said, whereas the figure in the US is closer to 3%. This puts a ceiling on the number of parcels that can be processed at Egypt’s ports. “If this doesn’t change, e-commerce will never grow to where we want it,” he added.

Nevertheless the sector’s outlook is positive: Hassan Allam Utilities and AP Moller Capital launched an integrated logistics platform for warehousing and handling services in Egypt. The fact that there is robust demand from big players for logistics investments in Egypt, despite the adverse macroeconomic climate, is a testament to the sector’s potential, Allam said. The strategic partnership between Hassan Allam Utilities and AP Moller Capital aims to deploy c. USD 200 mn of direct investments in the logistics industry, air freight, and warehouses in Egypt.

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