Top 4 Reasons Businesses Fail in Egypt

Businesses Fail in Egypt

The economy of Egypt has had its fair share of ups and downs over time. The 2019 pandemic resulted in a considerable fallout in its economy, accounting for around 12 percent of GDP, 10 percent of employment, and 4 percent of GDP in foreign currency earnings, followed by a temporary decline in domestic activity. 

After emerging from the worst of the coronavirus slowdown, Egypt’s economy dealt a new shock by the effects of Russia’s invasion of Ukraine, forcing investors to pull billions of dollars out of its treasury market. A rapidly growing population, limited arable land, and dependence on the Nile all continue to overtax resources and stress the economy.

Apart from the government investing on communication and physical infrastructure, the country’s economy relies mainly on agriculture, tourism, textile manufacturing, and petroleum exports and is heavily dependent on imports from the United States, United Arab Emirates, Germany, China, and Russia. The imported goods include wheat, automobiles, crude oil, and refined petroleum imports.

Some of the MNC’s trading with Egypt include BP, Shell, BG Group, Vodafone, Barclays, and Unilever.  

Other relevant businesses in the country’s market include companies providing sales and marketing solutions, and business information services, that deliver business information reports, credit reports, and valuation reports. These entities aid the growth of banking, financial services, investment, and stock market sectors. 

The economic strengths of Egypt include:

  • Growing youth population and workforce
  • Geographical proximity to Asia and Africa
  • Suez Canal traffic generating more revenue
  • Free trade agreements and arrangements
  • Financial and political aid from Gulf and Western countries

Besides having many advantages, businesses and startups still fail in Egypt. Let us take a look at the factors that contribute to this condition. 

Reasons Business Fail in Egypt

Wrong Timing

 After the covid scenario, the market in Egypt is experiencing fluctuations and uncertainties in its business trends and needs, making it difficult for new entrepreneurs to prosper. 

The main reason companies fail is the time they choose to launch their business. Before launching a product, it is vital that you do thorough research regarding the need for the service or product you offer in the market at the time. Try following up on the performance of your competitors that offer similar services. 

Many entrepreneurs suffer from what is known as analysis paralysis, i.e., overanalyzing the market condition and failing to make the correct business decision. Make sure you are not too early or too late in the business since both can prove detrimental to your growth and success in the market. 

Miscalculating Business Accounts and Market Trends

Overestimation or underestimation of business accounts and business value can lead to instability in the market. It is crucial that you keep an accurate and timely record of your business assets and your market value. 

The volatile market trends in Egypt contribute to the poor growth of its economy. Consequently, the purchasing power becomes low, making it harder for innovative and eccentric business ideas to thrive. 

Insufficient knowledge of existing market trends and poor planning of resources and strategies can also have a negative impact on your firm, no matter what service it offers. 

There are many data providers who can make precise estimations of your business value, credit rating and update you on market trends, along with sales and marketing solutions.   

Lack of Funding

The biggest mistake startup owners in Egypt make is forgetting the fund requirements of their venture for its growth phase. Most of them concentrate on finding finances for their starting phase, neglecting the middle (growth) stage of their business. 

The dearth of risk-taking investors and a lack of other viable finance options end up curbing the growth and creativity of many entrepreneurs in Egypt. 

One of the many startups that had to cut its business journey short due to the lack of funding was Pluto, a community hub launched for entrepreneurs and freelancers. Due to a shortage of funds in its growth phase, the company tried to gather finances in a crowdfunding platform, which proved futile as it managed to cover only 6% of the targeted budget. 

Weak Management and Competition

The lack of business talents is what kills the startups in the country. Egyptian entrepreneurs should work on their leadership qualities, judgment, emotional intelligence, reliability, and ego management. In a nutshell, weak administration skills can result in poor ROI.

Poor competition in the Egyptian market could be one of the reasons for the sluggish growth of its startups. There are many startups that failed due to the lack of competition and management skills, Le Planner and Hedma being some prime examples. 

Summing Up

Due to the political unrest and increased inflation rate in Egypt, its economic growth is declining. The Egyptian government is making an attempt to tackle its weakening economy and is currently focusing on import substitution under its government agenda – Egypt Vision 2030. 

To sum up, many variables contribute to the failure of startups in the country. So, if you are an entrepreneur in Egypt who wants to succeed, you can seek the aid of business information companies that offer business insights in the form of business information, valuation, and credit reports. 

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