Nivex Agricultural Investment recorded sales of EGP 1.6bn in 2015; the company is taking measures to increase their total sales by 10% in 2016.
Nabil Yacoub, chairman of the board, said that the company owns 500 acres where several crops are cultivated for exportation. Nivex rents approximately 500 acres from territories operated by the Armed Forces and intends to rent approximately 150 additional acres this year in order to achieve its targeted sales increase.
Exports represent approximately 90% of the company’s annual transactions; the other 10% of products are offered on the domestic market.
Yacoub anticipates a fall in the value of agricultural exports this year in light of the continuing decline of the value of the Euro and the Russian Ruble against the United States Dollar Dollar. Europe and Russia are the main markets for Egyptian exports, along with Gulf countries.
He attributed the 20% decline in Egyptian exports in the past year to an increase in production costs relating to production supplies and transport infrastructre, as well as the collapse of the tourism sector.
Companies would not be able to raise prices abroad due to strong competition on global markets from competitors such as Spain, Morocco, and Israel, said Yacoub.
He pointed out that some countries with which the European market deals, will be forced to increase the volume of their exports to compensate for lower values in an attempt to compete with larger markets.
Yacoub said that the legal system and current measures do not foster growth in the agricultural sector.
The government began to gradually remove petroleum subsidies in FY 2014/2015, a move that served to increase production costs. Energy is a key element in all stages of the production process, including irrigation, cultivation, harvest, and the transportation of the crop yields.
Yacoub disclosed that the recent increase in transport costs has become a burden on farmers. Smaller merchants were subjected to high costs which have led them to exit the market.
The cost of shipping goods by air recently has increased by 33%, to $1,200 per tone, up from $900 per tonne, due to EgyptAir price increases which have led other carriers to also increase their fees, according to Yacoub.
He added that the fees collected by the Armed Forces for shipments on the Cairo-Alexandria desert road highway have increased to EGP 580 per container from the previous cost of EGP 130.
The cost of transporting shipments on the desert road, managed by the National Roads Company, increased to EGP 580 from EGP 130, and the cost of transport via small pick-up trucks increased to EGP 500 compared to EGP 50 in 2010.
Yacoub also noted that the collapse of tourism has contributed to a decline in agricultural exports, because the agricultural sector depends on aircraft vacancies to export to Europe so that their products do not spoil.
He explained that the decline in incoming tourism to Egypt resulted in a smaller number of planes flying into the country and, therefore, less space to transport crop exports.
Yacoub considered reductions or eliminations of supports to exports for some products as an important reason behind the recent decline in exports.
The company received export support from the government worth 10% of the value of annual exports before this figure dropped to only 6% for some products and was completely removed for others.
Yacoub stressed the need to increase export support to 13% for some products which face fierce competition on global markets, or to at least return to previous rates, because companies consider this amount to be a profit market and, thus, offer their products at the price of production.
He pointed out that generous support from state governments in such countries as Morocco have allowed domestic industries to make gains in international markets. The Moroccan government offers land to investors, under a usufruct system, for 99 years, and subsidizes production supplies and transport, as well as mitigates all issues from which the agricultural sector in Egypt suffers.
Yacoub called on the government to establish a comprehensive development plan for the agricultural sector and to encourage the private sector to supply further investments and promote exports.
On a related note, Yacoub said that the emergence of the crisis between Russia and Turkey would not necessarily increase Egyptian exports to Moscow. Egyptian companies have experienced several problems with Russia in recent times, especially regarding financial transactions.
He explained that Egyptian exports to Russia require that 90% of shipment payments are received in advance because several clients are reluctant to pay fees on time. Morocco is heavily pursuing Russia’s agricultural consumer market, and Moroccan companies are more competitive than their Egyptian counterparts.
Yacoub stated that the government would not be able to implement the plan to increase agricultural exports to Russia by 15% this year, due to issues facing companies both domestically and internationally. He explained that the creation of new markets required oversight from agricultural quarantine departments who have policies that he claims impede trade in the foreign market, requiring certain criteria be fulfilled to which Egyptian products do not conform.
East Asian markets have the potential to take on large quantities of Egyptian citrus fruits and vegetables but they require frequent freighting traffic.