Monday,24 September, 2018
Current issue | Issue 1338, (30 March - 5 April 2017)
Monday,24 September, 2018
Issue 1338, (30 March - 5 April 2017)

Ahram Weekly

Pricier appliances

Egypt’s home appliances sector is struggling with the repercussions of the floatation of the pound

Pricier appliances
Pricier appliances

The floatation of the Egyptian pound has led to a spiralling increase in the prices of imported goods, among them home appliances, with customers now not only complaining of exaggerated prices but also of the unavailability of many brands.

Prices of electronic products and electrical appliances saw several waves of increases even before the floatation of the pound. The decision of the banks to only make foreign currency available for essential products made it hard for traders to import new goods.

Things worsened after the floatation and the consequent instability in exchange rates.

Remembering the good old days when demand was high as well as profits, a group of home appliances vendors in Abdel-Aziz Street, a downtown Cairo area known for its home appliance shops, have come together to adjust the prices of showcased products.

This has become common practice as “the fluctuation in the dollar value of goods can change prices every day and sometimes every hour according to the market situation,” Mohamed Ragab, a vendor in the Street, told Al-Ahram Weekly.

He added that the number of customers visiting the area had decreased by half due to the high and volatile prices.

Secretary-General of the Division of Home Appliance Traders at the Federation of Egyptian Chambers of Commerce (FECOC) Hani Metwalli told the Weekly that the prices of products would not become stable because of changes in the exchange rate.

“Traders are losing out,” Metwalli said, adding that changing the customs dollar exchange rate was not effective for importers because contracts to import home appliances had to be signed two months in advance, meaning that importers do not benefit from short-term reductions in the exchange rate.

Minister of Finance Amr Al-Garhi announced last week that the customs tariff exchange rate would stabilise at LE17 to the dollar until the end of March, up from LE15.75 in the first two weeks of the month.

The government started to set a specific customs tariff exchange rate in February that is a bit lower than the official rate, but the FECOC underplayed the effect of this move as the customs tariff only represents 11 per cent of the final price of products.

Mahmoud Khattab, chairman of home appliances retailer B Tech, told the local media last week that the fluctuation in the exchange rate was a major concern because manufacturers and traders “can’t accurately calculate the cost of their businesses”.

Some distributors of white goods have started announcing discounts and offers to attract customers, but some others have claimed that the decision to reduce prices is not in their hands.

Mustafa Yehia, deputy general manager of a home appliances retail chain, told the Weekly that his company could not reduce prices unless their suppliers reduced theirs too.

“The recession has occurred because people are cautious about the rise and fall of the exchange rate,” Yehia said, explaining that suppliers could not be blamed because they were seeing volatile exchange rates.

From the customers’ side, volatility in prices is causing confusion as they often cannot decide whether to buy products or to wait for prices to change. Amira Suleiman, a 27-year-old graphic designer preparing for her wedding in May, said that she had delayed purchasing home appliances until April “because we heard prices would go down in response to the decline in the exchange rate that happened in February.”

Suleiman added that her sister had purchased all her home appliances for LE15,000 three years ago. That “is now the price of a single refrigerator,” she said.

Youssef Ramadan, a 29-year-old teller in a private-sector bank, said that he had opted not to wait and had already purchased appliances last month. “Prices never go down. We have never seen that in Egypt... prices are likely to increase further so I made my decision,” he said.

Some potential customers have abandoned making purchases altogether. “I was planning to change my refrigerator because I have had it for more than 15 years... but I will not do so now,” Mona Ali, a 55-year-old housewife, commented.

The high prices of imported electrical products have prompted some analysts to question whether domestic manufacturers should not try to expand. Head of the Electrical Equipment Division at the Federation of Egyptian Industries Atef Abdel-Moneim commented that even local producers imported raw materials, however.

“I don’t think the market needs new local manufacturers. The whole industry needs to be reformed to meet the challenges that have emerged after the pound’s floatation,” Abdel-Moneim told the Weekly.

To temporarily resolve the issue, Abdel-Moneim proposed that home appliances traders reduce their profit margins in order to avoid making losses.

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