Egyptian small businesses optimistic about 2023

Reuters

• Firms expect growth in F&B, tech and e-commerce
• Entrepreneurs hopeful despite inflation hampering recovery

The majority of Egyptian small business owners are optimistic about their growth prospects for 2023.

YouGov and GoDaddy’s 2023 Small Business Survey found that 67 percent of Egyptian entrepreneurs are expecting growth this year, with the food and beverage, technology and e-commerce sectors perceived as having the most potential.

Selina Bieber, commercial strategy senior director for international markets at web services company GoDaddy, said: “As we slowly recover from a global pandemic, we are starting to see increased online activity and growth among startup businesses in Egypt and the wider region.”

• Egypt’s inflation accelerates to 21.3% beating expectations
• Egypt’s inflation accelerates to 21.3% beating expectations

GoDaddy noted that many Egyptian business owners expect to rely on digital marketing and a social media presence to grow their business in the coming year.

Two in three Egyptian businesses already make 20 percent of their income this way, and one in five generate over 60 percent of their revenue through social media channels.

“The GoDaddy Mena survey shows optimism with more sector growth in Egypt, and more and more small businesses investing in an online presence and digital tools to help acquire new customers,” Bieber said.

The survey results stand in stark contrast to macroeconomic data and forecasts.

According to S&P Global, “rapid inflation continued to hamper the Egyptian non-oil economy at the end of 2022, as businesses indicated further declines in both output and new business.”

S&P’s Purchasing Managers’ Index (PMI) — a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector — “signalled a solid deterioration in the health of the non-oil sector, albeit one that was less marked than in November.”

Despite the challenges of inflation, firms cutting staff and supply constraints, S&P found that sentiment around the country’s private sector economic outlook is at its highest in months.

“On a positive note, expectations towards future output improved for the second month running from October’s record low and were the strongest since June,” it stated.

S&P noted optimism that Egypt was taming its inflation rate, which in December was reported by the country’s official statistics agency at 21.9 percent — up from 6.5 percent at the same time the previous year.

David Owen, an economist at S&P Global Market Intelligence, said: “The Egypt PMI recovered somewhat to 47.2 in December (45.4 in November) but continued to signal a decline in operating conditions across the non-oil economy.

“Output and new business fell at sharp, but softer, rates with firms mainly linking the downturn in sales to inflationary pressures.”

Any figure below 50 on the PMI indicates economic contraction.

Behind some of the increasing costs is Egypt’s languishing pound, which dropped in value throughout 2022, in part due to the terms of an International Monetary Fund support package.

“The pound’s depreciation against the US dollar in recent months continued to drive input costs higher, although the latest data signalled a softer rate of inflation than November’s four-year record,” Owen said.

“Nonetheless, with last month’s data indicating that firms had shouldered most of the cost burden, output prices continued to rise at a rapid pace at the end of the year as firms passed a greater proportion of their expenses onto clients.”