The unemployment rate in Egypt has always been high. It is not unheard of for a university graduate to be driving a cab, working as a waiter, or striking out on their own. Egyptian youth looking to start their own business are facing tough conditions. More small businesses and startups were founded in Egypt in the last five years than ever before. Yet, many of them have been forced to close down before achieving their full potential.
What chance do startups have to compete when even established companies are in danger? Everyone is struggling under the current economic conditions, but the biggest hurdle local industries face is the government itself. The floating of the pound was a necessary evil, brought about by the overwhelming debts Egypt has incurred. But isn’t it the government who kept getting more and more loans and directing them toward military improvement, rather than health or education?
“The floating of the Egyptian pound might be a great opportunity for foreign investment, but for Egyptians, everything just got harder,” Reham Hesham, co-founder of gaming startup Castling Studios, said. “Any capital a startup has in Egyptian pounds suddenly lost half its value, and people aren’t as likely to buy when they’re worried about their next meal.”
The tough economic conditions aren’t the same for everyone, however. The Egyptian military pays no taxes on importing (according to Article 1 of a 1986 law on custom exemptions), no profit taxes (according to Article 47 of Egypt’s 2005 income tax law) and gets cheap labor by using conscripts.
Egypt’s Ministry of Military Production owns many factories, and most of them produce both civilian and military goods. In addition, the military is involved in the real estate sector and does construction work like building bridges and highways. It’s also contracted for civilian projects, which makes it compete with private and public firms.
With the recent increase in prices, the military-produced goods are available at a price slightly less than other local products, thus killing the competition and gaining popularity.
Instead of supporting local businesses during these uncertain times, the government seemed to be looking out for its own interests. During the sugar shortage crisis a couple of months ago, the government solved the problem by confiscating the sugar from factories and selling it to the public “at a reduced price.”
Edita Food Industries, one of the largest food producers in Egypt, was forced to halt production as their sugar supply (reportedly enough for only three weeks of production) was seized and the company went under investigation. That sugar was later released and production resumed after stopping for only three days, so fortunately the loss wasn’t grave. But treating a local company like smugglers and confiscating their sugar supply gives a bad image of how the government is treating businesses.
Whenever the public is protesting the rise in prices or the unavailability of anything, the military responds by providing it. The military is causing a sick dependence on it, which causes companies to go out of business.
The military can sell stuff in the streets out of vans and no one can say a thing, but small businesses that do have licenses can be forced to close. For example, a kiosk that has stood in a small square in Heliopolis for years recently closed.
Hussein Eleish, who has a view of the kiosk from his balcony, said: “[The owner] closed [the kiosk] for a while then reopened it and a few days later the police came and took everything away.”
Young Egyptians hope that someday, their country’s economy will be more dependent on state-owned and private industries than on the military, and that the latter will be soon separated from the government so that they have a chance to grow and reach their full potential.
Cover cartoon credit: Sergio Algeri/GYV