Optimistic about the future, Egypt business guru Raouf Ghabbour thinks the worst is finally over for Egypt business environment as the economic reforms start to pay off after years of turmoil and uncertainty.
Speaking at his office on the outskirts of Cairo in an interview with Daily News Egypt, Ghabbour seemed to be fully confident about the outlook of his businesses in Egypt despite the hard times his group experienced.
“I think the worst is over. I am not saying that 2018 would be a significant year in terms of growth and business climate, but for sure it will be better than 2017,” Ghabbour, who has been a CEO of the company since the young age of 35, told Daily News Egypt.
Ghabbour has been the CEO of GB Auto SAE since 1990 and served as its managing director.
Ghabbour’s tenure with GB Auto SAE began in the tyre sales department in 1977 and served as its managing director of commercial vehicles since 1982.
“It has been tough times for all business activity in Egypt. Now we could say it is time to reap the reforms’ fruits,” he concluded.
Let’s start with your opinion about the results of the economic reforms?
I think reforms starts to pay off. We could say that the worst is over for the business environment in Egypt. We have experienced hard times since the currency flotation last November, but now the circumstances are getting better. The current political administration has the will to complete what they have started.
How does the current monetary policy affect the business environment in Egypt?
Surely, the current high interest rates are denting the business community. But let’s be honest with ourselves: after the currency flotation, the Central Bank of Egypt (CBE) had no option but to raise interest rates. If the CBE didn’t tighten its policy, the local currency would suffer from speculations.
So, also, the higher interest rates environment is harming our business and investment climate in Egypt, but this was a must.
So when do you think the CBE will ease its monetary policy?
I think the CBE wants to tame the rampant inflation first. Higher inflation rates are harming also the business environment. When the headline inflation hover around 35%, the CBE should move, and that is exactly what happened.
I think the bank will start an easing cycle of the monetary policy by the end of current year or at the beginning of 2018, as soon as the inflation starts to take a downtrend.
The FX crunch is over. How does this matter reflect on your business?
It’s quite true that the FX shortage is now over. Before the flotation, we had to wait for weeks to get our needs from the hard currency. Now, we get all of our needs in just a few days.
Local lenders are making hard currency available for all. Sometimes before pound devaluation, our requests for dollar were refused as we are importing non-essential goods. Now that this is over, the supply and the demand is well-balanced.
When should the dollar start to fall against the pound?
At the current stage, the dollar is overvalued against our local currency. This could be attributed to a late decision to float the pound. The downtrend for the dollar should embark towards its fair value by the mid of next year.
Let’s move to the new Investment Law. How should it affect the business climate in Egypt?
I think the new Investment Law would attract foreign investors to Egypt again. I didn’t read the law, but I knew well that the government has introduced lots of incentives to investors to lure back foreign investors after years of turmoil.
Let’s move on to Egypt’s automotive sector and talk about the sector’s outlook.
The sector is one of the most badly affected, due to the higher inflation and interest rates. But with all we hope speedy recovery is underway in full swing, with the rates to be cut soon, and inflation to take a downtrend trajectory.
The new initiative introduced by the government should spur growth in this vital sector.
What scope is there for improving the incentives on offer for auto manufacturers in Egypt?
Major manufacturing destinations have rolled out large-scale incentive programmes, including vocational training assistance and fiscal breaks to auto and component manufacturers.
In the case of Egypt, there needs to be a greater push for local manufacturers to export their goods. One way this goal can be accomplished is to mandate a minimum volume above what can be absorbed by the local market.
Alternatively, a certain percentage of the total production could be allocated for exports.
What potential exists to increase production of spare parts and components from within Egypt?
The potential is there. However, we need more support from the government to increase production of spare parts and components.
A proper regulatory environment that encourages investment is needed.
Moreover, exemptions or subsidies should be put in place for manufacturers that reach a level of production that exceeds the demand of the local market.
This would boost the exports of spare parts and components, and thus the country’s competitiveness in the region. It could make Egypt a regional a hub for manufacturing cars.