Egypt Agriculture Economic Overview

An Expert's View about Investment Opportunities in Egypt

Last updated: 1 Jul 2012


Introduction
For decades Egypt’s economy was focused on remittances, tourism or the Suez Canal for revenue, but ignored agriculture, an important part of Egypt's GDP. Agriculture advocates Egypt’s Agricultural Economics Research Institute (AERI) say  one of the main concerns of the 25 January uprising is eliminating corruption and improving the per-capita GDP as well as the distribution of wealth and looking forward to a country’s agricultural sector as it  strengthening  and  symbolizing the country’s ability to sustain life  and independence through self-sustainability and trading strength, as well as opening the doors to an employment sector that makes use of large populations of 87 million and annual growth rate at 1.96%(2011 est.) , according to CIA world factbook
Egypt's agricultural sector remains one of the most productive in the world, despite the small area of arable land and irregular and insufficient water supplies, problems of waterlogged soil and soil with a high salt content. Farmers do not have to pay for water used in irrigation. Drainage efforts have proved insufficient to counter these problems the sector's performance.
Egypt’s powerful agriculture sector has been in serious decline over the past 30 years, but still comprised 13.7 percent of GDP in 2010, according to statistics from the United Nations Food and Agricultural Organization (FAO). Agriculture and Land, only 3 percent of Egypt’s approximately 3,000,000 hectare of land is arable, about 3% of land area. This percentage has hardly changed since 1972! 
Since the mid-1980s, the government has attempted to reclaim the desert for cultivation, and has managed to successfully reclaim some 1 million acres of desert. Plans are underway to reclaim an additional 3.5 million acres by the year 2017 with the South Valley Development project near Lake Nasser. These efforts, however, are countered by the fast pace of urban and industrial expansion, which has been claiming an average of 31,000 acres a year.
According to the World Bank statistics published in 2010, number of farm tractors in Egypt reached 103188.00 in 2008 ranging from 70HP and above. Egypt rank 36 of 147 in world tractor concentration.390.57 tractors per 100 sq. km of arable land or 26.2 per arable hectare. 40% of total labor force is in the agriculture sector as estimated by an AEIR expert
According to our finding, Major brands are MF, Ford Holland, Same. John Deer, Fiat, Case,Fendt, Deutz, Kubota, Yanmar, Mitsubishi, Mahindra, Hinomoto, Satoh and several others brands. The top 10 brands control 40% of market share and remaining share is distributed by over 90 distributor and dealers. The Egyptian tractors distribution is very fragmented. A couple of handful of key players  and over 90 smaller ones .Service work shop  and credit payments plays very important factors competition. In Egypt, as in the case of most –if not all- of emerging developing countries, Market sizing are very difficult to obtain with a reasonable degree of accuracy. Local Official historical Imports data, as well as international data providers are neither accurate nor reliable due to grey market practices. Figures for, imports, exports, local production and consumption per type/value /brand/origin   should be verified from several sources in the supply chain, portably and appropriately within in the context of a through market assessment.

 

Challenges
During the 1980s, Agriculture Minister Youssef Wali began aggressively putting into place the free-market policies initiated by former President Anwar Sadat. Though these policies were intended to liberalize the economy, they quickly widened the gaps between the rich and the poor, and import and local goods.
This culminated in Law 96/1992, which granted landowners, whose land was seized and redistributed by former President Gamal Abdel Nasser, the incontestable right to reclaim it despite the fact that millions of ordinary Egyptians farmers had invested in and built their lives on the land since 1952.
Additionally, large food subsidies and unfair trading systems has forced many farmers to re-prioritize their output in less efficient ways, Once a key Egyptian crop, the output of cotton dropped over 75 percent from 1972 to 2009, according to the FAO Production Yearbook, these subsidies create dependencies on patterns of consumption, resulting -according to the World Bank-, millions of Egyptians living below or just above the poverty line, since farmers pay for these subsidies with their livelihood, which divides the country up into beneficiaries and benefactors, Agricultural advocates say providing those with better wages would spur economic growth, rather than the implementation of food subsidies allowing for mass state dependence and control.
Opportunities
Only about 3 percent of Egypt’s approximately 1,000,000 square kilometers of land are arable, which percentage has hardly changed since 1972? Moreover, large arable parts of the Delta remain uncultivated while other parts do not get used to maximum capacity due to the lack of farmers’ education and lack of governmental assistance. The land is arable and extremely rich and could potentially, if properly cultivated, allow for two to three harvests per year of high quality crops, rather than the one to two it does now.
Embracing the agriculture sector would also address another troubling issue facing the country: unemployment, which official government statistics put at 11.9 percent, but many economists believe is higher. With government encouragement, the agriculture sector could provide a viable solution through various sustainable employment opportunities, such as farming, marketing, transport and storage.
Agriculture experts in the say that improving the agriculture sector is especially important at the moment because Egypt needs to monitor its international dependencies, as that has a tendency to get out of control during times like these, and by investing in the agriculture sector during the transition to democracy, will begin to increase the livelihood of lower socio-economic classes and increase foreign demand for Egyptian products.

 


Posted: 15 April 2012, last updated 1 July 2012

See more from Investment Opportunities in Egypt

Expert Views    
Egypt Agriculture Economic Overview   By Buhaisi Consulting International