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The Midas touch

CAIRO: The recent fluctuations of gold prices, which reached a 25-year high of $727 per ounce and rapidly dropped down to $657 per ounce and have temporarily caused paralysis in gold markets worldwide have not had much of an affect on the sales influx at Azza Fahmy outlets. Yes, [the fluctuation] does affect the price …

CAIRO: The recent fluctuations of gold prices, which reached a 25-year high of $727 per ounce and rapidly dropped down to $657 per ounce and have temporarily caused paralysis in gold markets worldwide have not had much of an affect on the sales influx at Azza Fahmy outlets.

Yes, [the fluctuation] does affect the price but not as much as it would with the regular jewelers, says Fatma Ghaly, deputy general manager at Azza Fahmy Jewelry. I am not selling you the value of gold; I m selling you [the value] of the design, of the marketing, the brand name. In designer jewelry, she explains, the value of the gold used doesn t have much effect on the price of the whole piece. Besides, the brand caters to a niche group of customers, usually not affected by the change in prices.

Nevertheless, at the trader level, the market paralysis has been felt. When the prices started going down last week, Ghaly tried to exchange gold (the gold recycling process known in Egypt as selling kasr). But her market representative’s attempts to buy and sell gold failed. She dealt first hand with the market s shock concerning the price fluctuations.

No one is doing anything . You d think because it went down yesterday [Monday, May 15], people would buy. No one is buying. No one can understand, she says.

The threat presented by this market crisis lies in the rapid increase and drop in prices that has led people to stop trading until the market stabilizes. Industry professionals can only hope that prices will settle with the opening of the gold stock markets today, ending about 40 days of anxiety, losses and anticipation.

Ghaly has the company s system to thank for keeping its finances intact through this global crisis. We were very lucky; we had stocked up, she says, explaining that their system entails instantly replacing the material (gold and silver) they sell, which has allow them to avoid buying throughout this phase.

But apart from the prices, there are other bigger issues to consider. The government’s latest efforts toward economic reform are making an impact on many sectors, and the jewelry business is no different.

Since designer Azza Fahmy started her business in the 1970s with a small workshop and two employees, her company and the Egyptian government has taken strides on the road to development. It isn t just the gradual expansion in the company; now there are outlets in Cairo, Alexandria, Dubai, Bahrain and Jordan, plus a factory and over 140 employees. More recently, specifically in the past two years, the government has taken many decisions that have made running the business much easier and more productive.

Working with the Ministry of Trade and Industry, Ghaly notes that now the government takes the initiative to ask about the problems facing local businesses and takes steps to remove obstacles. They are actually helping us. We see things that are happening instantly, which was not the case before.

As a jewelry business, Ghaly explains, they faced problems with the regulations of the marking authority, damgha, (previously working under a food related authority, it has been recently moved to the Ministry of Industry), problems with importing semi-manufactured goods for their products and red tape obstacles with their exporting process.

All these issues were raised with the Ministry of Industry. And they are going ahead with solving a lot of it, which is helping the sector in general, she says.

Even though the positive changes are relatively new, with some decisions being implemented just a few months ago and overall revenues yet to be calculated at the end of the fiscal year, particular incidents have demonstrated the government s reform intentions.

We had an export shipment that was going out to Dubai that was stopped because of some regulation, says Ghaly, Instantly, over the phone, the ministry made it go through. This could never have happened before. It would have stopped and you would have waited for a week before you solved [the] problem.

Ghaly also notes the ministry s response to the industry s need for qualified labor. [We] don t have any skilled labor. We raised this issue with the ministry. What we are doing now is that we are building a center to train workers. They are getting trainers from abroad. They are giving courses, she says. The center will officially open its doors next September; it has already offered two courses for interested workers.

When you start exporting and when you have skilled labor and you have eased regulations, investors might come to the country, notes Ghaly. How can investors come when there is competition from a place like India for example, where they have [much cheaper] very skilled labor, [and] rules and regulations are much easier. Everything is available there, what would bring [investors] to Egypt?

I have to ease the laws and the regulations and have labor that is relatively cheap, compared to Europe and the States. I ll be more attractive for investors and I ll be able to export. This is what we are working on.

Ghaly s trust in the rate of economic reform and its positive impact is evident in the plans the company is undertaking or still considering. For starters, regional expansion of franchised outlets is expected to spread within the Arabian Gulf, according to Ghaly. In 2007 a specialized Azza Fahmy store will open in London.

Although, as in jewelry businesses around the world, the business is limited to the family (Ghaly, Fahmy s daughter, and her sister Amina contribute to the trademark designs), making room for investors is now being studied.

The manufacturing side will be kept under the family s control to maintain design quality. Retail, however, is expected to draw investors as a separate entity within Azza Fahmy Jewelry. Ghaly explains that they are looking for investors in the countries they export to, with an aim to have a local partner each country.

Other plans have also evolved. After the dream of having a training center for workers has become a reality, Ghaly s eyes are set on a local design school. Noting that the idea is still in the brainstorming phase, she says that one way of ensuring a steady flow of new blood in the company, leading to a rejuvenation of designs, is to have a school for designers. Not only would the school cater to all local jewelry businesses, but Ghaly wants it to be a regional attraction.

Some people think it is competition but I think it is healthy. For people to say that Egyptian jewelry is in, for me, it is good, instead of people saying we have never heard of Egyptian designers, she says.

Topics: FJP

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