Entrepreneurs voice challenges they faced: Experiences from different industries

CAIRO – 14 December 2018: As more and more young individuals turn to entrepreneurship, it becomes clear that their voices need to be heard.

In fact, Early Stage Entrepreneurial activity rates higher in Egypt compared to the rest of the world, with Egypt reaching 14.3 percent compared with a global average of 12.3 percent.

Commenting on this, Senior Vice President of the International Council for Small Business (ICSB) and President of the Middle East Council for Small Business and Entrepreneurship (MCSBE) Ahmed Osman says, “In terms of age distribution, there is a noticeable increase in the percentage of youth who decided to start their own business, especially those in the age bracket range of 18-24, constituting 16.2 percent of Egyptian entrepreneurs.” This growth in youth entrepreneurship may be attributed to higher awareness and interest to have independent career, or potentially an alternative path, given the high youth unemployment. The President of the MCSBE further explains that the societal perception of entrepreneurship is at an all time high with 83.4 percent viewing entrepreneurship as a sound career option.

Challenges in the market

“We [all of Africa] have the challenge of infrastructure; we cannot invest when there is no infrastructure. Infrastructure is one of the conditions for having investment; whether roads, telecommunications or whatever. Africa needs to have infrastructure of all kinds. We also need to have an abundance of low-cost electricity. Africa needs to be more competitive in terms of producing quality goods at a low cost to ensure that our products are attractive; this is how to increase African attractiveness,” the Director of Economic Affairs at the African Union Commission René N’Guettia Kouassi told Egypt Today.

For African Union’s Commissioner of Economic Affairs Victor Harrison, however, the problem is not infrastructure: Africa has a problem of poverty and underdevelopment, despite having significant natural resources and a young population. “The continent continues to be characterized by all the features of underdevelopment, including a low level of human development, industrialisation, manufacturing and productivity as well as dependence on the primary sector. Africa’s private sector, on the other hand, is specifically characterized by small size and informality, weak linkages, low level of competitiveness and lack of innovation; however, it’s important to note that not all is groom,” says the Commissioner. This, for Harrison, limits the businesses that people can do and their chances of success.

Taking about how to fix the challenges facing entrepreneurs, Osman previously told Egypt Today, “Concerning the regulatory reforms, I hope the new law for SMEs would give the start-ups tax breaks and incentives. President Abdel Fattah El Sisi has spoken about entrepreneurship in several events, which is great change in the government’s mind-set, which proves their belief in the role of young people to lead the economy.”

Furthermore, Osman argues that there is a need for policymakers, private sector parties, civil society, research educational institutions and business incubators to work together on facilitating the inception, creation and launch of start-ups. “Ideally, they should create new business incubators for SMEs [Small and Medium Sized Enterprises] to fund start-ups in specific sectors, targeting women entrepreneurs, especially in Upper Egypt and poor areas. An entrepreneurial culture could be supported through promoting successful entrepreneurship role models in the media, and by offering entrepreneurship curricula in schools and universities. The private sector should engage small, local businesses in its supply chain, and out of their CSR budgets, to help train entrepreneurs and invest in start-ups.”

Fashion: Palma

When Mostafa Magdy, Founder and CEO of Palma, first came across the idea of Palma, one of the fastest growing handbag brands in Egypt, he was confused as why there are not many successful local brands in Egypt. “I was always interested in fashion, and back in college I was always intrigued as to why we don’t have a lot of successful local brands here in Egypt and most of the available brands are foreign/imported even though there are lots of bags and apparel manufacturers here in Egypt that are really good but the local fashion brands presence is still really low.

More so, international fashion brands like Zara, Calvin Klein, and Old Navy used to outsource some of their production to Egypt. So, we thought that the production/manufacturing is already here, all that is missing is the research-based designs, marketing, and branding. That’s when we started to try and fill this gap, and our vision for Palma actually is to be a full-fledged fast fashion brand and to add more product lines other than bags in the near future.” Magdy saw a gap in the market, just like many other local start-ups and fought to find a place in the market and fill this gap.

Asked about the difficulties his company faced when they first started, Magdy admitted that dealing with manufacturers and getting good quality was an issue at first, suggesting that Palma had to do lots of research to find the perfect quality. “When we first started two years ago, our quality was actually very bad. But during the last year, we improved our quality dramatically and we even started exchanging some of the old bags that had defects that customers bought more than a year ago with new ones with much better quality.” Another problem was legalities, explains Magdy, is the lack of advice available for entrepreneurs on which company type to create and how the taxing system works. “We had to do lots of research on our own to figure things out,” Magdy reveals proudly.

Nonetheless, according to the Magdy, “The business climate here in Egypt is really good and welcoming for us [entrepreneurs]. The market is huge and has lots of gaps. The e-commerce market in Egypt is really kicking off and consumers are more encouraged to buy online now more than ever; it’s actually increasing.” Much like Senior Vice President of the International Council for Small Business (ICSB) said, e-commerce in Egypt presents a great opportunity for entrepreneurs.

Co-Working Space: ICan Academy

Jehad El-Sayed, a young entrepreneur, who opened up her very own co-working space in her early 20s, managed to survive the marketing due to her sharp research skills and flexibility. Despite starting off as an English training centre, El-Sayed soon changed her whole business model and shifted to a co-working space to keep up with market dynamics. Her ability to shift with the market and adapt, as well as her ability to let go of an idea when she saw it was not working, which is something experts Osman and Ismail warned off, allowed her to stay in business.

“I did not begin as a co-working space; it actually started off as an English training centre. When I first started working, I worked in an English training centre and the owner was a woman, in her 30s—her name is Sarah—and she has many branches and is well-known in the field. I was very impressed with her and she took me under her wings. I worked as a tutor and then in management, during which I was responsible for social media, marketing and a lot of other things. I worked in three other companies for three years, then I fell ill and had to stay home for a while. During my time at home, I applied in a lot of places and was not accepted. That’s when it came to me: I should have my own place. Customers where already contacting me asking for lessons, so why not?” El-Sayed tells Egypt Today.

When this happened, El-Sayed explains, the idea of a co-working space was not around, meaning there was nowhere to give lessons if you do not have a place, except if you go to a café. There were no training rooms for rent. “After we opened, it was an English training centre for a while but it was not very profitable and there was a lot of time when the place was empty. I would give a course or two a day and the rest of the time the place would be free,” the young entrepreneur recalls. Soon, she started to think of renting to people who want to give courses or training per hours; this was around the same time the first co-working space, Maqar, opened in Egypt.

After analysing the market and doing her research, El-Sayed decided to change her start-up and moved into the co-working field, “I liked the idea so I shifted the business model completely. I closed the place for two months, changed the decorations and worked on my new model for it to be a co-working space. I changed it and offered three things: Training rooms, office rooms for start-ups, and student activity rooms for meetings and whatnot.”

Asked about the difficulties she faces when she first opened, El-Sayed explained that her biggest problem, and the biggest problem for any start-up, she argues, is marketing. At first, she relied on a well known and a start-up digital marketing firms but did not see any real results because they needed a high budget to ensure high returns. “They wanted like LE 10,000, this was too much for me at the time. I ended up being responsible for the page myself for about two years. The marketing is the problem for all start-ups. You could have a great idea but you do not know how to market for it,” recalls El-Sayed.

Despite having faced difficulties in establishing herself, El-Sayed explains that the atmosphere in Egypt is welcoming to new businesses and start-ups, “I think that the atmosphere in Egypt is welcoming, especially to co-working spaces. This is the time for co-working spaces. Those who opened up two or three years ago are even better because in the past there was less competition, now there are a lot of co-working spots. So, those who built a reputation in the past went a long way.”

Looking at her start-up specifically, she holds the view that the sector will continue to grow and is prosperous, “A lot of youths are doing start-ups now, especially in the marketing and tech fields. In a month, I get maybe four or five people who want to rent the room to have meetings. The increase in start-ups is increasing demand for co-working spaces because it is difficult for them to rent a whole place; instead, they think, ‘We will rent a room now and then we can get a bigger place.’ The co-working space has made it easier for start-ups and I think one of the reasons that start-ups are increasing now is the abundant availability of rooms in co-working spaces. Entrepreneurs no longer think that they need a LE 50,000 or LE 60,000, all they need is LE 2,000-3,000 to get a room in a place.”

It seems that start-ups and co-working spaces have their own ecosystem, something that Ismail would agree on given his recommendation that the government should allocate more office spaces for start-ups, “an area where they could come in and start operating immediately.”

But training rooms and co-working spaces are not just for start-ups, there is also high demand for training rooms from students as they do not just rely on universities. “Plus, there are certain things that are not taught in universities, for example, social media. No university in Egypt teaches social media and so those who want to learn it have to take courses. Android and web design is the same. Many people want to take training courses. The environment in Egypt is generally very welcoming,” explains El-Sayed.

Jewellery: Taba Silver

Omar Abdel Nasser started Taba Silver when he was in the American University in Cairo, undergoing his Bacherlor’s degree. He wanted to have a start-up business alongside his academics. “My father has lots of Jewellery stores all over Egypt and having a start-up in the same field helped me deliver a certain modern silver style online,” the young entrepreneur explains his choice of silver jewellery to Egypt Today.

Despite having his father’s experience to benefit from, Abdel Nasser admits that he faced many challenges, most prominently last-minute cancelations of customized orders that cannot be resold. “The kind of difficulties that we face is the cancellation at the last moment especially with a customized order where we have to pay for it cost upfront then deliver the design,” says the entrepreneur, continuing, “One of the other difficulties which we face as a jewellery brand especially in customizing is that not all people know the process of manufacturing a piece of jewellery or know how many steps the design goes through in order to be between your hands. It reflects that people may not know the time estimate and they order a customized design and expect it the next day to be at their doorstep.”

The customizing idea is appealing to most of the customers since of its ability to create a personalized design, he explains.

Still, the entrepreneur, who started his own business very early on in his life, recommends the business climate in Egypt for start-ups, especially those in e-commerce. “The business climate in Egypt actually is a welcoming environment for most start-ups, especially if the nature of your service is demanded. At first, the idea of having an online store was difficult to achieve but the online purchasing concept has became very common in the recent years and with the nature of the silver or affordable jewellery in general is a demanded item among any online user especially the youth (18-24).”