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2013 06 eg du forum
1. REPORT ON THE AGRI-LOGISTICS EVENT
HELD IN CAIRO ON 3 JUNE 2013
I NTRODUCTION
On 4 June 2012, the first agri-logistics event was organised for a broad
audience of Egyptian stakeholders. Its main purpose was to create
awareness on the role of logistics and supply chain management in
agri-chains. Generally speaking the logistics function is "terra
incognita" for many Egyptian producers and exporters, which is why
the event sought to raise awareness for logistics as a function to make
(export) chains more efficient and robust. In a volatile environment, the
latter is of particular importance.
One of the results of the event involved the decision to investigate
whether establishing an agri-logistics forum in Egypt would offer any
added value, as was the case with the Platform Agrologistiek1 in the
Netherlands, which generated extensive added value for the
participating companies and organisations.
Following this decision, in 2012 and 2013 a few short fact-finding
missions were organised to gather information about the Egyptian
1
The Platform Agrologistiek was transformed into the Netwerk Agrologistiek in
December 2012.
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2. logistics and transport markets and to identify the prevailing logistics
bottlenecks. After all, bottlenecks open up new business opportunities
for service providers that have the experience and expertise to solve
them.
The establishment of an agri-logistics forum in Egypt thus creates
opportunities for Dutch businesses and also perfectly ties in with the
âTop Sectorâ Policy initiated by the Dutch government. In fact, the
Netherlands have earmarked amongst others agri-food, horticulture
and
logistics
as
target
sectors
(Top
Sectors)
of
economic
development. To accomplish this mission a partnership between
policymakers, private companies and academia has been created and
agro-logistics is one of the focal areas.
The linkage of agri-food and logistics is very important in regard to
building efficient agri-chains and it explains the success of the
Netherlands as an agri-food exporter2.
It is estimated that 30% of food production worldwide is lost as a result
of inefficient logistics. The logistical losses in Egypt are even higher
and agri-food chains are not sustainable. Consequently; food security3,
which is another priority policy area of the Dutch government, is suboptimal.
This situation creates scope for the establishment of a win-win
scenario. The expertise of Dutch companies and service providers in
2
The Netherlands is the second most important exporter of agri-food products in the
world.
3
According to the World Food Programme, Food Security encompasses the following three
elements: 1. Food availability: Food must be available in sufficient quantities and on a
consistent basis. It considers stock and production in a given area and the capacity to bring in
food from elsewhere, through trade or aid. 2. Food access: People must be able to regularly
acquire adequate quantities of food through purchasing, home production, barter, gifts,
borrowing or food aid. 3. Food utilisation: Consumed food must have a positive nutritional
impact on people. It entails cooking, storage and hygiene practices, the health of individuals,
water and sanitation, feeding and sharing practices within the household.
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3. creating robust agri-chains and efficient logistics is badly needed in
Egypt if logistical losses are to be reduced and food security is to be
increased. This will in turn create market opportunities for the Dutch
logistics and agri-food sectors. Another benefit is that such cooperation
will inject added value and employment into the Egyptian economy.
This is the reason why the Dutch Ministry of Economic Affairs has
decided to look at how a partnership between Dutch agri-food and
logistics companies with Egyptian counterparts could be established.
In this connection, a second event was organised a year after the first
one had taken place, its aim being to present the results of the factfinding missions to a select group of Egyptian companies and to sound
out their interest in cooperating in the establishment of an agri-logistics
forum.
W ORK METHOD
The June 2013 business event presented the results of the fact-finding
missions to Egyptian key stakeholders and examined the potential
carrying capacity for such a Forum. Although intentionally limited in
number, the companies that participated represented the entire
market, ranging from warehousing to processing and from retail to
export.
To get the discussion going, three domains were identified, their
bottlenecks presented in a short introduction, and a few designs for
solutions offered.
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4. Finally, the participants discussed a possible structure and the utility of
an agri-logistics forum.
D OMAIN D ESCRIPTION
1. The first discussion domain involved the structure of the agrisector, which in Egypt represents 17% of GDP or 37% if all the
associated sectors, such as food processing, are included. From a
macro perspective we can conclude that due to the segmented
structure of the sector, with a dominance of small, non-mechanised
producers, logistic consolidation will be very hard to establish.
Pack houses do exist but they are badly managed while first-line
collection points are practically non-existent. Furthermore, logistics
losses cover more than 50% of total production. This all indicates
that multiple optimisation exercises would be required.
From a logistics perspective there are, in fact, three different
markets.
-
First of all there is the export market, which is supplied by large
producers. Here, export chains are already efficient and
product manufacture as well as product handling is carried out
according to international standards.
The air freight terminal in Cairo is the hub par excellence for
exporting companies. A second terminal is currently being built
at Luxor airport.
-
The local informal market lacks structure as well as logistics
efficiency and logistics costs are relatively high as a result.
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5. -
Finally, the local formal market is driven by large retail chains,
which have developed their own logistics infrastructure.
2. The second domain involved multimodal transport. Among EU
importers, measuring the ecological footprint of imported products
is becoming increasingly common. Transport â air and road
transport in particular â is one of the major producers of harmful
emissions.
Nevertheless, multimodal freight transport has hardly been
developed in Egypt, despite the fact that the Nile could be an
excellent transportation artery and that the country has the most
extensive railway network in Africa. The modal share of both
transport modes barely reaches 1.5%. With studies showing a
duplication of road transport in Egypt by 2025 and a corresponding
influence of congestion on the economy, developing multimodal
alternatives is of the greatest essence.
Due to the imbalance between import and export flows and the low
degree of containerisation in Egypt, sea freight container rates are
relatively high and availability of reefer containers is less than
optimal. Inadequate planning on the side of exporters is yet
another concern.
Different experiments conducted in the past involving ferry services
from Alexandria to Italian and Greek ports were unsuccessful due
to the lack of cargo flows in the opposite direction. Nevertheless,
these ferry services offer an excellent solution to reduce the
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6. ecological footprint of products on the one hand and guard Egypt's
competitive edge on the other hand. Furthermore, they are more
interesting in terms of cost than air transportation.
3. Logistics formed the third and final discussion domain. From 20052010, logistics and transportation sectors enjoyed an average
growth of 12% per annum. Logistics in itself represents 4% of
GDP. This relatively low figure indicates that there is plenty of room
for growth.
Unfortunately, Egypt lacks professional storage capacity and
hence is in dire need of modern storage infrastructure.
Remarkably enough, logistics platform are totally non-existent in
Egypt at present. Therefore, the country misses out on clustering
opportunities.
In the longer term, growth in the industry will be hampered by the
Egyptian business culture, which is characterised by the limited
use of external service providers.
Just like in other emerging economies, the cool chain constitutes a
real problem. Not only does the existent cooling infrastructure have
limited capacity, it is also suboptimal compared to international
benchmarks. Existing management skills are also rather limited.
B RIEF SUMMARY OF THE DISCUSSION
List of participants:
ï·
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Mr Zoheir El Ghariny, Makro (Retail)
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7. ï·
Mr Mahmoud Shishiny, MAFA (Export)
ï·
Mr Mohamed El-Gebily, ICAAP (Processing)
ï·
Mr Raafat Ragheb, Logistica (Warehousing)
ï·
Mr Mohamed Radwan, Brinkman (Transport)
ï·
Mr Chryster Schyberger, Brinkman (Idem)
ï·
Mr Bas Zuidberg, Americana (Production, Processing,
Restaurants)
ï·
Mr Marcel Vernooij (Deputy Head Food Security and Agri
Commodities, Ministry of Economic Affairs, the Netherlands)
ï·
Mrs Mireille Boshuizen (Senior Policy Officer Food Security,
Ministry of Economic Affairs, the Netherlands)
ï·
Mr Joost Geijer (Agriculture Counsellor, Embassy of the
Kingdom of the Netherlands in Cairo)
ï·
Mrs Marwa Hussein (Agriculture Assistant, Embassy of the
Kingdom of the Netherlands in Cairo)
ï·
Mr Karel Vanroye (Director, Buck Consultants International)
ï·
Mr Ahmed Wally (Consultant)
The discussion followed the sequence of the three above-mentioned
domains. Below are the main results.
1. In order to be efficient, a supply chain must be transparent and
participants must have enough trust to share information with each
other. However, Egypt is characterised by a lack of social capital
and a culture of working in functional silos. Companies sit on chain
information and are not prepared to share it with their suppliers or
buyers. Controlling chains is very hard as a result. Logistics and
supply chain management are still in their infancy and Egypt could
definitely learn from Dutch businesses.
It is a must to create
awareness on the importance of logistics and it is also necessary
to ensure that the exchange of information on good practice
improves between companies.
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8. 2. All in all, the logistics sector is relatively small and one of the
reasons for this is that outsourcing is not in the genes of Egyptian
companies. They prefer doing things themselves, even if hiring a
service provider is more cost effective and better.
3.
The cool chain lacks proper organisation. In particular, it lacks
cooling capacity and management and handling skills. In many
cases, personnel does not receive proper training in the consistent
handling of chilled products and knowledge of the consequences
for product quality of interrupting the cool chain seems to be
absent. Typical examples: cold storage truck drivers are known to
leave the refrigerated compartment of the truck open for long
periods, or leave products on the pavement in temperatures
exceeding 30 °C. Exploiting Dutch expertise for the purpose of
strengthening cool chains is essential. In addition, expanding
cooling capacity is a must as it is hardly available in Egypt.
Therefore, companies have to invest in all the elements of the cold
chain infrastructure.
4. Vocational training is urgently needed in all aspects of the agri-food
sector and, especially, in the cool chain. There are simply too
many examples of bad practice due to lack of training. An inventory
of the training needs is a first requirement.
5. Product supply by small producers is sub-optimal. Most small
farmers are illiterate and have too little knowledge to be able to
produce efficiently and reduce post-harvest losses. Furthermore,
they do not have the capital to invest in mechanisation. Purchasing
goods from small producers therefore requires a significant initial
investment from the purchasing companies. Having small farmers
work better and more efficiently has high priority. Companies that
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9. seek to expand production now usually opt for the reclaimed lands
in Upper-Egypt so as to avoid the inefficient and highly segmented
traditional market of small producers located in the Delta.
6. Developing multimodal transport is in fact being hampered by the
government, which lacks the required vision as regards the
importance of multimodality for an efficient mobility policy.
Multimodality is a major requirement not only for local markets: it is
also becoming increasingly important for the export sector.
However, certain problems here seem to be unsolvable despite
several trials. The potential of multimodal transport for the export
sector should be reviewed again, preferably on a product-byproduct basis. Grapes and green beans would be suitable products
for inclusion in such an exercise.
7. Monitoring certain products from farm to fork could provide added
value. Examples mentioned include cucumbers and tomatoes. This
type of value chain studies could give a quick and clear insight into
the existing problems. Good practice could subsequently provide
the necessary improvements. Makro and ICAAP are prepared to
participate.
P ROPOSAL FOR COOPERAT ION
The Egyptian stakeholders present at the event indicated an interest in
cooperating in the field of agri-logistics and asked the development of
a value proposition.
An agri-logistics forum initially intended for companies but open to
participation from knowledge institutes and the government could offer
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10. a platform for exchanging good practices, identifying cooperation
potential (among Egyptian parties and with Dutch companies),
identifying and solving bottlenecks, finding funding for certain projects
etc.
The ministry of Economic Affairs could offer seed money, however in
order to demonstrate carrying capacity on the Egyptian side, a
contribution in cash or in kind from the participating organisations
should also be considered. The financial involvement of the Dutch
ministry would be limited in terms of time to the start-up period.
Besides the forum, which fulfils an umbrella role and acts as a
coordinator, three work streams were identified.
These are:
1. The first involves the further development of export and freight
multimodality. It will examine how the establishment of more
sustainable transport chains that better meet the requirements for
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11. carbon reduction set by EU importers can help towards enhancing
supply to EU markets.
2. The second work stream involves supply to local agri-food markets
and urban distribution. It focuses mainly on food distribution at
affordable prices and in a sustainable way so as to limit its impact
on urban mobility.
3. The final work stream looks to training, particularly in the cool
chain. In many cases, the lack of sustainability in Egyptian agrichains is caused by issues involving skills and labour capabilities.
The development of human resources involves a broad spectrum
of
positions,
ranging
from
truck
drivers
to
administrative
employees. A closer look at the capacity of pack houses is a
second element of this work stream. Following a substantial
investment by USAID in infrastructure, pack houses are available
in many areas although management skills are lacking. This results
in a dysfunctional situation. Finally, the issue of the lack of
collection points needs to be addressed. These are simply absent
in the Egyptian market.
C ONCLUSIONS
The business event confirmed the results of the fact finding missions:
1. Dutch expertise is highly regarded by Egyptian agri-food
companies. They view the Netherlands as a benchmark and
partnering with Dutch companies is considered to be of great
value.
2. Despite recent political events, Egypt remains open for
business. In fact, the business opportunities for Dutch
companies are abundant. Some examples include:
a. Cool chain: training, equipment, services
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12. b. Logistics: training, warehouse infrastructure, services
c. Food processing: investments, equipment, training
d. Transport: training, equipment
e. Importation of fruit and vegetables
f.
Packaging for the retail sector
g. Quality control of products and processes
h. Propagation materials and seed for retail / export
product demands
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