Monday,23 October, 2017
Current issue | Issue 1347, (1 - 7 June 2017)
Monday,23 October, 2017
Issue 1347, (1 - 7 June 2017)

Ahram Weekly

The cost of living in Ramadan

More and more people are becoming more resourceful in countering the high cost of living in Ramadan

“My income is LE5,000 a month, from which I pay LE1,700 in rent. I have three children and spend LE2,000 on private tutoring. Then there is LE500 for petrol, LE200 for electricity, and LE150 for maintenance. My salary has vanished, without spending anything on food, medicine, pocket money for the kids, clothes or outings. And I’m luckier than many.”

Mohamed Ezzat works at a software company in Cairo, and he has always believed he has a bright future and knows his situation is better than that of many others, especially since his wife also works.

“My wife’s salary is LE3,000 per month, which is how we get through the month. It is enough, even if it gets very tight in the last few days of the month. But four months ago after the floating of the pound, prices shot up astronomically. She now spends half her salary on transport, and we are left with just LE1,200. That is not even enough for food because prices for that are also climbing every day. One kg of chicken now costs LE30, lentils are LE30, and even the price of bread has gone up. Naturally, we cannot afford extras such as Ramadan treats or vacations or Eid clothes. We can’t even get sick now because we can’t afford the price of medicine,” he says.

Ezzat is one of millions of people whose standard of living dropped after recent price hikes brought about, according to many, by the government’s economic decisions. Although he has a higher standard of living compared to thousands of other families in Egypt, this became almost irrelevant because of skyrocketing prices when the Egyptian pound was floated last November and prices in many cases doubled.


The cost of living in Ramadan



Inflation reached almost 30 per cent in January this year, up five per cent over the previous month, driven by the floatation of the pound and the slashing of fuel subsidies enacted by the government in November. The moves were part of a reform package to secure an IMF bailout loan of $12 billion, desperately needed to overhaul the economy and encourage foreign investment.

But immediately after the floatation, the pound lost over half its value on the international exchanges, resulting in the worst inflation in a decade since Egypt relies on many essential imported goods whose price has now doubled. This has left many people on a grim search for ways to tighten their belts and make ends meet. Food and drink have seen some of the largest increases, costing nearly 40 per cent more since the floatation, figures from the state statistics agency show. Some meat prices have leapt nearly 50 per cent, while medicine prices have also soared, and some have even become unavailable.

Since nearly a third of Egypt’s population of 92 million people lives under the UN-estimated poverty line, many people have had to cut down on already meagre spending, using public transport more, moving children to less expensive schools, avoiding meat, using electricity more thriftily, and supplementing some purchases with food handouts from the army. In the meantime, many families have also resorted to finding other sources of income to keep up with the price hikes, especially as Ramadan approaches, a month that requires a budget all by itself.

In order to supplement their incomes, many working women or even homemakers have started projects on the side, such as cooking and selling food on the Internet or through social media apps. Others have learned how to crochet or knit to make items for sale, or even how to clean and prepare vegetables to sell on social media. Men have been supplementing their incomes by working a second job with the Uber or Careem driving services, though this has only been possible if they have a car in good shape to drive people around for good pay. Those who don’t have such a car often work additional shifts after work to make ends meet.


The cost of living in Ramadan

SHRINKING MIDDLE CLASSES: Refaat Abdel-Basset Al-Ansari, a professor of social studies at Helwan University near Cairo, believes the middle classes have felt the greatest impact of the changes and have been most harmed by the rising prices.

“The middle classes are society’s point of equilibrium because the upper class has money and power and cannot be easily impacted, the poorer classes are deprived and suffer from low social and economic standards, whereas the middle classes are the backbone of society,” Al-Ansari said.

He explained that the middle classes had emerged in Egypt after the 1952 Revolution. Before then, society was controlled by the “half per cent”, a reference to those connected to the former royal family or collaborators with the colonial powers. The introduction of free education after the revolution largely created the middle classes, he said.

“Under former president Hosni Mubarak, the middle classes were already gradually diminishing because of the marriage of power and money that took place under his regime,” Al-Ansari continued. “The economy began working to the advantage of the rich alone at the expense of the middle classes. Today, the middle classes are vanishing because of the jump in the price of the dollar and the slashing of the value of the pound. This has created an enormous economic gap that has primarily impacted the middle classes, many of which had become used to a relatively comfortable lifestyle. Today, after their purchase power has been slashed in half, these classes are being asked to abandon some of their basic needs.”

“The middle classes paid their way, including by sending their children to private schools and going to private hospitals, but they still paid their taxes to the state. Today, they are having to shoulder extra burdens because of the devaluation of the pound, causing many of them to sacrifice the basics, while others are still trying to hold on to their positions. So, we see some in the middle classes and even the upper middle classes driving cars for Uber and Careem, or making food at home to sell, or selling various products on social media without embarrassment, because for many of them the high prices and the threat of poverty eliminate any concerns about shame.”

Ezzat said he had jumped on the Uber bandwagon six months ago, two-and-a-half years after the Internet application began operations in Egypt. In November 2014, Uber launched in Egypt by offering an alternative to hailing a taxi on the street. Since then, there have been several other apps, such as Careem and Osta.

“Since I began working with Uber, I go to work in the morning and finish at 5 pm. Then I work with Uber at night, driving clients and averaging an extra LE3,000 per month. This helps a little, but it still gets tight sometimes, and there is no luxury spending,” Ezzat said. “If I had been making this money before the rise in prices, I could have saved some of it. Now it is barely enough to cover the basics.”

Several foreign news reports, including one in the US newspaper the Wall Street Journal, have warned that the middle classes are vanishing in Egypt because of inflation and economic problems. The devaluation of the pound has raised the price of imports, and introducing the new value-added tax (VAT) has raised the cost of living in general, for the middle classes especially.

Mohamed Abdel-Hai, a professor of economics at the Institute of National Planning in Cairo, believes Egypt is experiencing unprecedented price hikes. “Floating the pound five months ago is the main reason for the rise in prices, especially since there has been no concomitant rise in production,” Abdel-Hai said. “The government says the country’s foreign reserves are growing, thinking this is the gain from floating the pound. But the reality is that the increase in foreign reserves has come at the expense of destroying the Egyptian pound, which is now worthless on the foreign exchanges. This has harmed Egypt’s economy and Egyptian citizens.”

“Foreign investors make more profit than before because of the devaluation of the pound. When they convert the money into their national currency the difference is huge. Due to the economic dire straits, everyone is looking for ways to supplement their income in order to offset the price rises. This form of ‘peripheral economics,’ in addition to regular work, partially resolves the crunch, but it will grow in the future because of the high prices, especially since inflation is at more than 30 per cent — an astronomical figure.”

“Inflation at this sort of level inevitably leads to the redistribution of income for those with variable incomes and erodes the middle classes as a result of high prices,” he said.

 

EXTRA JOBS: “My cooking is delicious — everyone says so. So I thought of making home-cooked food and selling it. I began with people I knew, and they promoted my cooking and suggested my name to anyone who wanted homemade food but did not have the time to make it themselves. I created a group on WhatsApp for this project,” Amany Bekheit, 52, a civil servant, said, adding that she had never known inflation at the current levels.

“I started two months ago. I had not thought of taking on extra work earlier since my husband is employed and has a second job in the afternoon. But when the prices went through the roof, I said I must do something or we would starve.”

“Overnight, prices skyrocketed. I’m not even going to talk about the price of chicken or meat. Even fuul [fava beans] is more expensive, and the average cost of vegetables is LE6-LE7 per kg. My salary and my husband’s salary added up are no more than LE4,500. I have one daughter in college and a son in middle school, and we need to pay rent, electricity, water and transportation for the four of us, as well as food, medicine, private tutoring, school and college fees. Our salaries barely cover anything, and if you don’t supplement your income you will go hungry,” she said.

Bekheit hopes her project on the side will help alleviate her family’s financial problems, especially since she is a good cook. “I learnt how to cook from my mother who was a great cook. When I was talking with my colleagues at work about our financial difficulties, they suggested I should make food and sell it because my food is delicious. I thought this would be a good way to improve our finances a little, and it would not take much effort compared to if I started work at a second job. My idea spread by word of mouth and the ball is now rolling. But I still don’t save any money because we spend everything until the next pay cheque comes round.”

“Ramadan is also now upon us, and we have not been able to buy the usual special nuts and dried fruit. We used to buy these treats every year, but because of the high prices we will not buy any this year, especially since I have heard that the price of chicken will skyrocket during Ramadan. We will cook only three days a week, and the remaining days we will get through somehow. God will send help, I am sure. I am counting on Ramadan being a month of high demand for food when I will be working at my business more. God willing, maybe I’ll be able to save some money for school and college fees,” she said.

According to Fathi Qenawi, a professor at the National Centre for Sociological and Criminological Research, it is not surprising that people are looking for ways to improve their living standards. “People are always trying to increase their incomes. Fifty years ago, civil servants would already work a second job to supplement their incomes, such as doing accounting for a bakery or some such. Old films portray this. The main goal of extra work is extra income. At times of prosperity, people may hold on to the extra money to spend later, but with the current prices extra work is necessary to afford even basic needs. That’s the difference we are seeing today,” he said.

Qenawi added that the growing number of people working in peripheral jobs along with their main jobs “is a matter of ratios. As the population grows, extra work grows compared to previous years.”

This extra work is sometimes termed work in the “alternative economy”, a new addition to the already existing informal or parallel economy. There is no consensus on the size of the latter, including small workshops, street vendors and manual labour, because it is difficult to tally. Some estimate its size at LE1 trillion, according to figures from the Federation of Egyptian Industries. An unofficial tally by economist Hernando de Soto puts the size of the informal economy in Egypt at LE2.6 trillion. The chairman of Banque Misr told the media recently that informal economy activities in Egypt accounted for more than 70 per cent of the country’s GDP.

Egypt has also long been a largely cash-based economy, and it has long had a history of unofficial economic activity and many workers not covered by any form of social protection. After the 25 January Revolution, which put an end to the 30-year old rule of former president Mubarak, the informal economy thrived even more as the state weakened. For many people, the informal economy was the only resort for those suffering the economic repercussions of the political instability that had hit the country.

Unofficial figures estimate that around 85 per cent of small and medium-sized enterprises were informal before the revolution, but the breakdown in state authority after it made it even more attractive for both buyers and sellers, the former finding better prices in the informal markets than in regular stores. Everything from food to home appliances is now available on the Internet, and some experts have described the spike in informal activity as a form of “revolutionary entrepreneurship”.

“The alternative economy is now an essential part of the informal economy, and it includes service-providers such as plumbers and retail workers such as street vendors, etc,” explained Abdel-Hai. “It is a large sector that is unquantifiable and there are no real figures for it. This form of economy, involving in its alternative form extra work as a second job whether in cooking or handicrafts, grows and develops very quickly. It is growing today because of the high cost of living and individuals wanting to supplement their incomes to meet their basic needs. I believe it will expand further and become a cornerstone of almost every Egyptian home.”

Abdel-Hai said the state could benefit from the alternative economy to improve the formal economy without harming those who are trying to improve their lot and cope with the high prices. “First, we must understand that the alternative economy will not shrink. In fact, when the cost of living rises, people look for ways to increase their incomes. Women look for ways to supplement their incomes and think of their own sets of skills, preparing or cooking food and selling it. They may realise they can sew or knit, so they sell their handiwork as well. Men also see that they have a car and can drive it themselves to be sure it is in safe hands, so they sign up with a driving service like Uber. Every day that prices go up, there will be new types of work as a result.”

“This is where the state can step in and benefit from these activities and merge them into the formal economy to improve the overall economy and increase economic development. But it must deal with the issue intelligently and give incentives to those working in this sector through tax exemptions, for example, giving them health insurance and adding them to the food subsidy system.”

“These are incentives that can enable the state to take control of an economy that is growing beyond its reach. At the same time, workers can benefit because once the state is more in control this guarantees that there is more oversight of the products being sold, such as handicrafts, or quality control for food products, or standards of service. Official steps can be taken because workers are known to the state.”

Such solutions, sometimes radical in themselves, could help the state to regulate what is likely to become an ever-growing part of the overall economy and a mainstay of many middle-class households.

add comment

  
 
 
  • follow us on