Pico Agriculture intends to supply EGP 70m in new investments this year to construct a packaging plant and expand its factory.
Board Chairman Alaa Diab revealed that the company intends to establish a plant to package agricultural products for exports at a cost of EGP 40m and construction will begin in the near future.
The company aims to establish three labs to modify plant tissue so pest-resistant trees can be produced and to modify water salinity in horticultural crops including peaches, plums, apples, and mangoes with investments estimated at EGP 10m per centre, with a total of EGP 30m.
Diab estimated Pico Agriculture’s sales for last season to be approximately EGP 230m, representing an increase of approximately 9% from the previous season. The company aims to increase this figure by 135% for the 2015/2016 season up to EGP 260m.
The company plans to expand into foreign markets in the near future to increase sales due to saturation in the domestic market. Exports currently represent about 60% of the company’s annual sales and the remaining 40% of production is offered on the domestic market.
The most important markets the company deals with include Europe, Arab countries, East Asian countries, Russia, South Africa, and Mauritius.
England alone receives 60% of company exports, representing the largest share for any country thanks to the ease of interacting with customers there. England is followed by the rest of Europe, Russia, and East Asian countries.
Diab said the agricultural sector is one of the most important economic sectors in Egypt and contributes to 15% of GDP but suffers clear neglect. This is despite the fact that the sector is labour-intensive, employing farmers, merchants, and exporters.
The agricultural sector has experienced slower growth rates in recent years and stressed a need for new investments to increase production in domestic and overseas markets. Modern methods should be introduced into the agricultural sector, the most neglected sector of the country’s economy, and an interest should be taken in research centres to enhance productivity and increase economic returns from agriculture in the near future.
The unnatural increase in prices for agricultural production inputs have harmed the sector directly, especially in light of increased prices for consumers which reduces demand for products thanks to the lower purchasing power enjoyed by the Egyptian consumer.
Diab criticised the agricultural research centre for failing to carry out its intended role, in addition to the lack of guidance provided by the Ministry of Agriculture and Land Reclamation. The ministry does not communicate with farmers, which described ministry engineers as isolated from the land and its owners.
He welcomed the government’s decision to construct commercial retail chains and logistics centres to collect and preserve products from spoiling but emphasised the importance of completing the projects quickly in order to benefit as much as possible.
The logistic centres protect product quality and prevents them from spoiling. He estimated the amount of field crops which spoil to be between 20-25% and horticultural crops 50% for some items such as tomatoes.
He criticised the government’s agricultural policy as of late, particularly the decision to link wheat purchases this season with global prices. This decision will lead global markets to control cultivated lands on the local market.
Mid-December 2015, the government decided to purchase wheat crops from farmers this season at global prices in preparation for providing a subsidy worth EGP 1,300 per acres for plots smaller than 25 acres.
Based on this decision, several investment companies with large plots of land made the decision to stop cultivating and several companies intend to refrain from cultivation next season as well if this decision remains in effect.
Diab explained that such decisions would push producers to withdraw from the agricultural sector completely, which could bring about a collapse. He called for different policies to be put in place to avoid the serious damage that will drag everyone down, especially the national economy.
In the same context, Diab said that agricultural exports are facing a crisis due to government neglect, especially on part of the Ministry of Agriculture, who is first and foremost in charge of agricultural production. He feels that the ministry does not play a leading role in protecting production from collapse.
Diab attributed the decline in the value of agricultural exports last season, despite increased quantities, to economic problems across the world as well as the drop in value of both the ruble and the euro against the dollar. He also pointed to increased production costs on the domestic market, including production inputs, transport, shipping, and so on.
He accused the Minister of Agriculture of failing to listen to businessmen and exporters and being more interested in the academic field rather than the reality on the ground.
He has requested a meeting with Agriculture Minister Essam Fayed more than once to discuss with him the most important problems hindering agriculture and obstacles facing investors in the hopes of solving the issues. However, the minister always said he was busy with ministry affairs.
The ministry’s lack of concern for the private sector operating in the agricultural field evidenced a lack of state interest in the field.
He requested that a solid economic plan be established to enter foreign markets, and that the state work to decrease the value of production supplies to enable Egyptian companies to compete with global markets. Diab also pointed to a need to intensify presence in foreign exhibitions which help introduce customers to Egyptian products.
The African market as promising he said but noted that it requires a well-studied, realistic plan. He said that opening new markets is not an easy process, especially in light of obstacles in foreign markets, the most important being Agricultural Quarantine departments in those countries.
East Asian countries can take in large quantities of citrus fruits and vegetables but that they require efficient traffic in order to arrive quickly. This enhances the competitive ability of Egyptian products and protects crops from damage.
According to Diab, Egyptian exports of agricultural products have achieved great leaps due to export subsidies worth EGP 5bn annually. However, exports were heavily impacted following the reduction or elimination of subsidies for some products, he explained, asking that export subsidises be instituted once again in order to achieve targeted growth rates.
Diab explained that the state’s failure to support exports caused many to leave the market due to weaknesses associated with Egyptian products and an inability to open new markets at present.
In a related development, Diab said that expanding land reclamation efforts is not economically feasible at this point in time, pointing to difficulties in implementing the state’s plan to reclaim 1.5 million acress. He criticised the announcement made by the ministries of water resources and agriculture surrounding a plan of action for the project which includes full statistical studies on water needs, characterising these statements as unreliable.
He called for the preparation of realistic, objective studies on part of specialised foreign advisory offices to ensure that enough groundwater is available for economic time periods. This would guarantee that no time or money is wasted on a project that is not practically or economically feasible.