5 Ways COVID-19 is Actually Positive for the Egyptian Economy

Author: Hatem Sabry, CFO at Trella

The Coronavirus Disease 2019 (COVID-19) is arguably one of the worst pandemics in recent history. But history also teaches us that with every hardship, human civilization emerges better informed, better equipped, and simply “more immune” than before.

The COVID-19 pandemic situation is no exception, and in this short piece we highlight 5 major trends we see coming out of the outbreak, which are extremely positive to the Egyptian economy:

1) Boosting Tech adoption

The first positive development (that we at Trella are especially excited about) is the noticeable surge in the acceptance and adoption of technological solutions as a means of communication and conducting business. Governments around the world, not only in Egypt, are conducting video conferences to manage national affairs. Companies are all bragging about their virtual, work-from-home meetups (Ok, we plead guilty to that too!). And it is now a norm to get things done over the phone or a voice/video conference, rather than only physical meetings. At Trella, we are also seeing a very positive behavioral change regarding App Adoption by our Shippers and Carriers, as well as accepting digital instead of only physical documentation (something which the logistics industry has always been known for). We are confident that this change will last after COVID-19, as this is simply the way forward for a more efficient and productive economy.

2) More attention to Tech infrastructure

The Egyptian Government has made great strides in improving the country’s infrastructure as part of a broad structural reform program. Electricity and road networks are more reliable than they have ever been. The faster adoption of Tech in Government and businesses will pose the logical question of whether Egypt’s Tech infrastructure is up to speed. Mentioning “speed”, one indication of Egypt’s Tech infrastructure status is the Speedtest Global Index which ranks Mobile and Fixed Broadband speeds from around the world on a monthly basis. As of February 2020, Egypt ranked 108th and 99th in Mobile and Fixed Broadband, respectively, lagging many regional peers. Investing in Mobile and Tech infrastructure is a natural step that the Government and private sector would have to give more attention and priority to, in our view, in order to capture the productivity benefits of higher Tech adoption.

3) Better supply chain connections

The macro economy is the sum of the underlying micro economies of large corporations, SMEs, and micro entities. These micro economies are all interconnected in a massive supply chain grid, under governmental oversight and supported by the financial system. We are witnessing a somewhat unprecedented spirit of collaboration between companies across the supply chain. Traditionally competing businesses are coordinating support packages for families directly impacted by COVID-19. Moreover, given the de facto slowdown in productive activity as a result of shorter working hours and stricter mobility controls, the Government is prioritizing the mobility of shipping to Ports, as well as movement of fresh produce and essential goods and staples. Trella is at the core of this, and we are on a mission to keep businesses moving, and the supply chain connected day in, day out.

4) Promoting a Savings culture

Shocks like the ones caused by COVID-19 expose households to reduced income levels, especially those relying on informal jobs and/or irregular income. When this happens, having a saving cushion could be life-saving. As a response to the COVID-19 crisis, the Egyptian Ministry of Social Solidarity has announced an EGP27.6 billion package to support pensioners which would impact 2.4 million families with 10 million citizens. While these social security measures are crucial, a more structural and sustainable approach to promote Egypt’s low savings levels is much needed. Savings generally fluctuate with economic cycles, but Egypt has alarmingly low levels compared to developing countries, as measured by Gross Domestic Savings (GDP less Consumption expenditure) as a percentage of GDP. According to World Bank data Egypt’s Gross Domestic Savings stood at only 6.2% of GDP in 2018, compared to 32.3% MENA average, 26.4% South Asia average, 18.2% Sub Saharan Africa average, and 18.7% Latin America average. The time has never been more crucial to bump this topic up the Egyptian national agenda to promote a culture of savings, whether through the banking sector or the broader non-bank financial sector (including emerging FinTechs). At Trella, we are responsible for constantly communicating with our Carriers who depend on us to make their living and (hopefully) savings for the rainy days.

5) Faster Financial Inclusion

Following on the above point on Savings, the Central Bank of Egypt (“CBE”) has been promoting a Financial Inclusion agenda for the integration of the unbanked population of individuals and SME / micro entities. We see COVID-19 as a big opportunity to accelerate the execution of Financial Inclusion. This March 2020, the CBE has officially instructed banks to establish Financial Inclusion departments and to submit their formal 3-5 year Financial Inclusion strategies to the CBE by mid-May 2020. Moreover, the CBE is now formally requiring banks to expand their digital banking services, including mobile wallets and prepaid cards. At Trella, “going cashless” is a core pillar of our strategy, and we see the recent Financial Inclusion developments as a great catalyst which we are already banking on to execute the strategy. Our Shippers and Carriers are increasingly accepting digital payment channels, a change we are thrilled to see.

Times like these are difficult, and could be stressful to many. However, they are also an ideal opportunity to make necessary adjustments and transformations for the better of the people, businesses, and the economy.

Stay safe, stay positive!

Hatem from the Trella team