2013 06 eg du forum


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2013 06 eg du forum

  1. 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. Buck Consultants International
  2. 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 ‘Top Sector’ 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. 2 Buck Consultants International
  3. 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. 3 Buck Consultants International
  4. 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. 4 Buck Consultants International
  5. 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 – air and road transport in particular – 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 5 Buck Consultants International
  6. 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:  6 Mr Zoheir El Ghariny, Makro (Retail) Buck Consultants International
  7. 7.  Mr Mahmoud Shishiny, MAFA (Export)  Mr Mohamed El-Gebily, ICAAP (Processing)  Mr Raafat Ragheb, Logistica (Warehousing)  Mr Mohamed Radwan, Brinkman (Transport)  Mr Chryster Schyberger, Brinkman (Idem)  Mr Bas Zuidberg, Americana (Production, Processing, Restaurants)  Mr Marcel Vernooij (Deputy Head Food Security and Agri Commodities, Ministry of Economic Affairs, the Netherlands)  Mrs Mireille Boshuizen (Senior Policy Officer Food Security, Ministry of Economic Affairs, the Netherlands)  Mr Joost Geijer (Agriculture Counsellor, Embassy of the Kingdom of the Netherlands in Cairo)  Mrs Marwa Hussein (Agriculture Assistant, Embassy of the Kingdom of the Netherlands in Cairo)  Mr Karel Vanroye (Director, Buck Consultants International)  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. 7 Buck Consultants International
  8. 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 8 Buck Consultants International
  9. 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 9 Buck Consultants International
  10. 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 10 Buck Consultants International
  11. 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 11 Buck Consultants International
  12. 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 12 Buck Consultants International