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With Minimum Wage Doubling Jan. 1, Egypt Has What ‘Buyers Are Looking For,’ Expert Says

Ten years after the social media-fueled protests and uprising in Egypt booted Hosni Mubarak from his presidential residence at the Heliopolis Palace in Cairo, many still feel a strong sense of a promise waiting to be fulfilled.

While the turbulent political landscape might not have turned out quite as protestors envisioned, business in the country has unexpectedly flourished despite the Covid-19 pandemic’s hardest hits. Egypt’s advantages include a strong vertical cotton sector, strategic access to the Mediterranean, the Red Sea and the Suez Canal, a competitive and skilled labor force, trade deals with key partners like the U.S., and an entrepreneurial zeal invigorating the apparel industry.

“It is as if we have put aside our wait for government policies to settle down and are making our own way forward because we learnt so many things during Covid-19 about connecting better through the Internet and social media, learning many skills that we never knew about,” said a Cairo garment manufacturer who asked not to be named.

Government policies might be fickle, but snail’s pace progress is starting to aid an industry that accounts for more than 4.5 percent of the country’s GDP.

The government’s plan to double the minimum wage from 1,200 Egyptian pounds ($76.32) to 2,400 Egyptian pounds ($152.65) beginning in January has brought cheer to laborers who have struggled with job losses as factories temporarily shut down or cut working capacity. But the news also brought some garment manufacturers to the negotiating table seeking a lower minimum wage.

According to the Central Agency for Public Mobilization and Statistics’ 2018 data, textile sector, including textiles, apparel and home textiles, encompassed 85,000 businesses dominated by privately owned small and medium enterprises.

But Covid-19 was damaging.

Roughly 50 factories closed down from March through September last year. Many more drastically trimmed working days or were forced to slash their workforce in half.

“But very few of our members reported a permanent shut down for Covid,” Rasha Fahim, executive director of the textiles sector for EgyptTextiles & Home Textiles Export Council (THTEC), told Sourcing Journal.

Many companies quickly pivoted, with more than 50 percent producing critical PPE. “Within the textiles sector; spinning mills had a very rough time during Covid, especially when producing such a primary commodity that couldn’t be easily converted into another product. Yet, weaving mills and apparel manufactures succeeded in producing face masks and were a great help for the country to fulfill the domestic needs facing the pandemic,” Fahim said.

According to a report by the Global Textiles and Clothing Programme (GTEX) and its related work in the Middle East and North Africa (MENATEX) project, more than 80 percent of companies in the apparel sector cut wages by at least 25 percent. Implemented by the International Trade Centre, the joint agency of the of the United Nations (UN) and the World Trade Organization (WTO) in partnership between the Egyptian and the Swiss governments, the project in Egypt has been working to increase employment and income generation along the value chain.

Many hope change is on the horizon. The report outlined manufacturers’ need to embrace flexible production and shorter lead times, as retailers abandon their decades-long chase of cheaper product in pursuit of faster, leaner value chains.

Covid-19 has hastened some of these changes.

“The impact of Covid-19 was severe for everyone, but if I make a comparison with the other countries, it seems that Egypt was responsive in taking the necessary measures to lessen the effects on the apparel sector. We have approximately 35 beneficiary factories taking part in our project but none ceased operations, although in general, there was a slowdown and adjustment of the products being manufactured in the industry,” said Delphine Clement, Project Officer, Fibres, Textiles and Clothing Programme, International Trade Centre (ITC), the joint agency of the UN and WTO.

“Egypt was also able to manage the markets—they are oriented towards the U.S., and the demand side, and the phases of lockdown were different in the EU and U.S,” she added.

Ten years after the uprising, Egypt Talks Higher Garment Worker Wages, Changing Norms

WiniTex

As 2020 drew to a close, many garment and textile manufacturers were already more optimistic, with more than 76 percent projecting a return to pre-Covid levels. There were good reasons for that upbeat outlook—apparel exports climbed 41 percent to $1.7 billion from January to September 2021 over the same period the prior year. The textiles, apparel and home textiles combined saw 26 percent growth over this period, to $2.92 billion, according to THTEC.

Egypt’s textiles sector has also jumped feet first into sustainability and innovation.

“Besides Covid-19 the sector in Egypt demonstrated a high level of awareness regarding ways to adapt to more sustainable and quality products. This trend has been accelerated and further reflected, as in this ever-changing industry, fast fashion is also transitioning towards the latest concerns of consumers and markets. How long it will last and how [will business adapt] to the way the market is changing? This will have a huge impact on Egypt,” Clement said.

Driving change and innovation is also the evolving ethos from global buyers, as order sizes, payment cycles, delivery terms, styles undergo seismic shifts.

“If you are looking for one word that characterizes the industry in Egypt, it is ‘flexibility,’” said Yasmine Helal, national project coordinator, Egypt for GTEX. “One of the strengths the factories in Egypt have is their ability to shift quickly, and the fact that they can work with orders of relatively low minimum quantity in comparison to other countries. This is something that buyers are looking for at the moment, especially after Covid.”

While Egypt has an abundant labor force, with more than 1.5 million employed in the apparel industry, Helal said innovation must come from within. “We are supporting the middle management to optimize the work-flow, and production line better and to be able to plan higher productivity for the workers,” she added.

But change requires both a shifting mindset and a rigorous commitment to transformation.

“It is not easy for manufacturers who are used to working with a certain way to transform–but the argument for fashion and sustainability is going on all over the world, and factory owners are seeing that the younger generations are not pro-fast fashion. Step by step many of them are trying to adapt and to see how they can work on sustainability,” Helal said.

“In the last few months there has been a turnaround,” said Ala’a Alsaifi, program and operations officer, Better Work Programme, which is a joint initiative of the International Labour Organisation and International Finance Corporation, working towards safer factories and improved labor conditions.

“I see that most factories are expanding—I hope it is not because of other ad hoc or temporary factors like Covid-19 and negative impact on other exporting countries. But I feel that the industry is doing very well these days, and we hope that progress— and compliance —are sustainable.

“We started a pilot program of Better Work in 2017, for one and a half years. Then the program was restarted in March 2020, just as Covid-19 hit. But in August we have recruited more people and are working 50 factories so far, with 80 more on the waiting list. Social compliance is a condition for exports,” he said.

Mohammed Husseiny, an enterprise advisor at Better Work Egypt who has guided factories in Egypt over the past decade, noted that change has manifested in other ways over the years.

“In the last 10 years, manufacturers in Egypt have been trying to seek out proper technology to compete with global sourcing models. We have seen new machines and new technologies that support workers and enhance their capabilities. We have seen factories adding operations they would outsource before, like printing, dyeing, knitting. Egyptian manufacturers are trying to add value to their products to compete with other markets,” he said, adding that factories are also working on building capacity to comply with labor standards, a critical factor in the global market.

“The industry is moving forward,” he said.

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