Arafa Zaki (a pseudonym), owner of a ceramics factory in Giza, began his working life at the age of fifteen, helping his father during the summer holidays. After completing his studies, he took over the management of the factory entirely, especially after his father fell ill.
Arafa says: “We were making good profits until 2015. But after the pound was floated in 2016, the prices of basic raw materials rose sharply, increasing the financial burden on the factory. As prices continued to rise, things became more difficult. In addition, the administrative and financial changes adopted by the government, such as higher interest on loans and higher taxes, worsened the burden.”
Arafa complains of the deteriorating situation, stressing that the factory had to cut its workforce to cope with the financial pressure. He adds: “I have worked in this industry for 25 years, and this is the worst period we have ever been through.”
He expresses hope that the new government decisions will solve some of the problems factories suffer from. He concludes: “Despite repeated government attempts, we have not seen any tangible results for five years. Conditions are getting worse day by day.”
The Ministry of Industry announced a comprehensive plan, on the directives of Deputy Prime Minister and Minister of Industry and Transport Kamel El-Wazir, aimed at regularising the status of factories and granting struggling factories an additional grace period of up to 18 months to obtain building permits, according to specific controls. This plan comes as part of supporting local industry and easing its administrative burdens, while ensuring transparent and effective oversight of production operations.
On 10 August, Kamel El-Wazir issued a decision transferring inspection and oversight powers from multiple bodies to a unified committee under his chairmanship. The committee consists of representatives of the ministries of health, petroleum, environment, local development, interior and labour, in addition to the Federation of Egyptian Industries, and on 22 August representatives of the ministries of supply and irrigation were added. The decision aims to ensure transparency and reduce repeated and ineffective interference in inspections, which used to hinder production at factories.
The decision also banned the closure of any industrial facility by the competent authorities except by a direct written order from the minister personally, giving factory owners protection from arbitrary measures that used to affect their economic activity. Factories were also given the right to refuse inspectors not authorised by the committee, with the aim of providing a more stable and clearer working environment.
Kamel El-Wazir explained at a meeting attended by representatives of various industries that the main goal is to improve the quality of Egyptian products and raise their competitiveness in local and global markets, while providing the necessary support to struggling factories to regularise their status and contribute to driving industrial development.
Attempts to Rescue Struggling Factories
The crisis of struggling factories is one of the most important files the new government is working on, as Egypt faces many challenges related to the faltering of many factories in industrial zones. In 2018, the number of struggling factories reached about five thousand out of 19,000 factories operating in Egypt, and it is currently estimated at 13,000 (all these figures are mere estimates not based on an actual count according to scientific rules and methodology), so a comprehensive plan to rescue and restart them was put forward.
Struggling factories are concentrated in a number of industrial zones across the country, most notably the 10th of Ramadan zone in Sharqia Governorate in the Nile Delta, one of the largest zones in Egypt, which includes a number of struggling factories suffering from financial and administrative problems, as well as the Sadat zone in Menoufia, Helwan in southern Cairo, and Shubra El-Kheima in Qalyubia.
Speaking to Zawia3, Samir Aref, head of the 10th of Ramadan Investors Association, stressed that the file of struggling and idle factories requires major and serious government efforts to study the problems these factories face and try to solve them. Aref pointed out that the main solution to rescue struggling factories is to provide rapid financing to support financially troubled facilities, while protecting affected factories from unfair competition with imported products. He also suggested reducing imports in sectors exposed to dumping practices that negatively affect local production.
He explained that the 10th of Ramadan zone includes about six thousand factories, ranging from small and medium to micro, employing more than 350,000 workers. Factories in this zone operate in diverse sectors including engineering, chemicals, ready-made garments and food industries, and most of the problems of struggling factories are financial problems that hinder their continuity.
Aref added that the liberalisation of the exchange rate and the rising cost of wages, services and raw materials all contributed to complicating factories’ problems and increasing financial pressure on them. Although government initiatives such as the “Ebda” initiative have achieved some success in specific sectors, especially the engineering sector, their impact remains limited and they need additional support to achieve tangible results on the ground.
He concluded by identifying a number of proposed solutions that could help ease these problems, including eliminating the bureaucratic procedures that hinder the reform process and reducing the interest rates the banking sector imposes on factories, which could ease financial burdens and stimulate growth in this sector.
The strategic plan for Egypt Vision 2030 included a key item aimed at promoting industrialisation, increasing industry’s contribution to GDP and increasing industrial employment opportunities by 2030. According to government estimates, indicators showed the success of these efforts, as the industrial sector recorded positive growth rates even during the pandemic year 2019/2020, according to data issued by the Ministry of Trade and Industry.
The industrial sector’s growth rate in the 2019/2020 fiscal year reached about 6.3%, with 149 industrial zones containing 14,900 factories across the country. These factories provided about 1.2 million jobs, and the sector contributed about 17.1% of GDP, compared with 16.4% in the 2018/2019 fiscal year.
As for employment, the number of workers in the industrial sector reached 2.3 million, equivalent to 28.2% of total employment in Egypt. This increase helped reduce unemployment to 10.1% in 2020, after it had been higher in previous years.
The state is currently implementing 13 new industrial zones to boost industrial production, with the number of industrial facilities rising to 42,000 in 2020. According to data from the Information and Decision Support Center, the number of registered facilities rose to 56,500 in 2021, compared with 47,800 in 2020, an increase of about 8,700 facilities.
In 2023, the Industrial Development Authority registered about 5,900 new industrial facilities, bringing the total number of industrial facilities to 65,600. The number of workers in these facilities also rose to 3.2 million in 2021, compared with 2.6 million in 2020, an increase of 23.1%.
The New Decisions Contradict Reality
Mohamed El-Mohandes, head of the Chamber of Engineering Industries at the Federation of Egyptian Industries, comments that the government decisions issued to resolve the crisis of struggling factories have not achieved their intended goal so far. He explained to Zawia3 that previous decisions did not bear tangible fruit on the ground, and that the new decisions cannot be considered serious until they are actually implemented and problems actually begin to be solved.
El-Mohandes pointed out that the industrial sector suffers from accumulated problems not limited to a particular sector, noting that many struggling factories refuse to disclose their crises for fear of affecting their business. He stressed that the most prominent problems include financial and administrative crises related to the banking system and state bodies such as the development authority and the industrial register.
He added that the government decisions taken since 2019 to resolve the problems of struggling factories have not achieved the desired results so far, raising questions for the government about the usefulness of these decisions in improving conditions.
El-Mohandes compared past and present periods in terms of government facilitation for industry, pointing out that previous periods saw greater support through incentive decisions to establish industrial cities such as 10th of Ramadan and 6th of October, provide housing for workers, and facilitate administrative and financial procedures, which contributed to the success of those projects. Lower bank interest rates also helped factories take off and grow.
By contrast, he explained that current conditions have become more complicated, as the financial and administrative burdens on factories have increased, negatively affecting struggling factories in particular. He pointed out that the new decisions requiring the formation of a committee before closing any factory may give some factories the opportunity to manipulate products, increasing the challenges facing the industrial sector.
He concluded by stressing the need for government decisions to be consistent with the provisions of the law to avoid any conflict that could put officials and factories in a difficult position, and the need for strict and transparent oversight of the application of these laws.
Financial Challenges
Abdel Moneim Saad (a pseudonym), who prefers to speak without giving his name, like many owners of struggling factories, for fear of government harassment, is not in a very different situation from Arafa, despite working in a different field, producing spare parts for electrical appliances.
Speaking to us, Abdel Moneim explained that he is a main manufacturer of a component used in making electrical appliances, but he works informally. After completing production, he makes an agreement with a large company that adds his output to its final product.
Abdel Moneim points out that he prefers to stay outside the formal market, as formal registration imposes financial burdens such as taxes and administrative responsibilities, which could affect his profit margin. Although working informally costs him part of his profits, especially since his product is of high quality, he sees this option as better under current economic conditions.
Both Abdel Moneim and Arafa complain about the continuing rise of the dollar against the Egyptian pound, which affects the cost of the imported raw materials they depend on in production. However, Abdel Moneim has not been greatly affected by the administrative measures imposed on factories, since he works outside the formal system.
The Ministry of Industry announced a comprehensive plan to implement the directives of President Abdel Fattah El-Sisi, including the directives of Deputy Prime Minister and Minister of Industry and Transport Kamel El-Wazir to regularise status to obtain building permits and grant struggling factories additional periods of up to 18 months, according to a number of controls.
The Ministry of Industry seeks to create new job opportunities in the industrial sector, aiming for the number of workers in this sector to reach seven million by 2030, double the current number of about 3.5 million workers, or 13% of the labour force.
This goal comes within the ministry’s plans to increase employment rates in industrial complexes for small and medium enterprises and provide training programmes that qualify technical workers to meet factories’ needs. These programmes are implemented through the Productivity and Vocational Training Department, which runs 41 training centres in 17 governorates across the country, in addition to the Cadre Preparation Institute and the Centre of Technological Excellence.
Since 1989, the department has partnered with the private sector to establish training stations inside industrial companies, with the aim of raising the efficiency of the workforce. So far, 114 training stations have been established in various governorates, strengthening companies’ ability to employ the skilled workers needed to boost production.
In 2021, the Central Bank launched an initiative to support local industry, allocating EGP 100 billion to support the industrial sector and writing off accumulated interest worth EGP 31 billion for struggling factories. The balances of credit facilities granted by banks to the private industrial sector also reached 31% of total balances, helping provide affordable financing for industrial projects.
Osama Shahed, chairman of the Giza Chamber of Commerce and board member of the Federation of Egyptian Industries, described the problem of struggling factories as “complex”, given the overlap of many financial, marketing and technical factors. He explained to Zawia3 that the crisis requires greater cooperation between the government and the private sector, pointing out that financial problems linked to the banking system have the greatest impact on factories’ work.
The “Ebda” initiative launched by the government is one of the attempts to support struggling factories, but according to the testimonies of factory owners in the Shubra El-Kheima area, such as those working in the textile sector, the factories that joined the initiative have not actually been restarted yet. Hassanein Taha (a pseudonym), a factory owner in one of the industrial zones, said no executive steps have been taken despite his partnership with the initiative for more than a year and a half.
Shahed also explained that the initiative faces major challenges, including the financial valuation of the factory, as there is a gap between the views of factory owners and government bodies, which delays reaching final solutions. He added that the textile and pharmaceutical sectors are among the most affected by the crisis, with efforts focused on studying the conditions of struggling factories in each governorate, especially in areas such as 6th of October and Abu Rawash in Giza Governorate, where an estimated 30% of factories are struggling.
Shahed pointed out that factories’ inability to secure foreign currency from February 2022 until March 2024 had a major impact on providing production inputs, leading to lower profits and disrupted production.
On the other hand, some factory owners stressed that government initiatives, including lower energy prices and financial facilities, have not contributed sufficiently to addressing the actual crises they face. While the government continues to announce new steps to solve the problem, many struggling factories are still waiting for more effective solutions.
