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SMEs: Small-Minded Enterprises?
**Non-financial support of small and medium enterprises could be key to changing Egypt’s economic future.**

By May Kaddah

A mid fierce international competition and the challenges posed by globalization, the nurturing of small and medium enterprises (SMEs) is key to continuing economic development. For the past four years, a joint initiative between the Canadian International Development Agency (CIDA) and Business Development Services Support Project (BDSSP) has been investing in a program targeting the heart of the Egyptian economy. The program aims to change challenging economic conditions facing many small and medium businesses being overshadowed by the high towers of Egyptian industry.There is a strong rationale for supporting SME development: SMEs account for 75% of employment and around 80% of GDP, according to the UNDP 2008 Egypt Human Development Report.

This importance has been visible during the economic chaos of the last year. When many large firms and multinational companies were cutting back staff and production under pressure from the international market, the SME sector, mainly serving other domestic businesses, was a stabilizing force, providing employment, even to unskilled laborers, the most vulnerable in times of crisis.

Unsurprisingly then, the more performance of smaller businesses can be enhanced, the more economic development is achieved.

Energizing SMEs across all sectors is key to providing jobs and raising income levels, particularly in areas outside Cairo and Alexandria.

More than just soaking up Egypt’s huge and growing labor force, small establishments put idle capital into circulation by providing individuals the opportunity to channel their personal savings or inheritance into revenue generating projects, generating great benefits for the economy as a whole.

With adequate guidance and support, SMEs could also be the platform for developing entrepreneurial skills, a trait which large corporate bureaucracies often fail to develop, and one that is in short supply in Egypt.

Dr. Salama Fahmy, former BDSSP director, explains the importance of SMEs. “It’s important to the economy as a whole to support SMEs, because, as we have learned from other countries, it is a driving force of economic development. It also deals with equity pay, employment, women entering the workforce and environmental issues.”

Fahmy says that every dollar invested in SMEs brings back an estimated $25 to the government in the form of taxes, increased sales and job creation, among other benefits. He bases this claim on statistics provided by the Small Business Administration in the United States.

On a Mission

With clear economic goals and 20 million Canadian dollars funding from CIDA, BDSSP aims to create and develop a number of bodies within Egypt that could help existing SMEs and inspire new graduates and unemployed citizens to start their own ventures.

The organization is not interested in providing financial aid but rather concentrates on building the capacity of businesses by working with partners; mainly specialized non-government organizations (NGOs), businessmen and women’s associations and universities. In turn, these NGOs create a Business Development Service (BDS) center with each project undertaken, specifically catering to the needs of the beneficiary (in this case the SME).

The goal is to build the capacity of third party organizations that would in turn work directly with SMEs long after the BDSSP has disappeared.

The overall program — which has has an extensive presence all over Egypt including in Sohag, Qena, Minya, Alexandria, Damietta and Cairo — aims to increase income and employment opportunities.

Finding proper and effective ways to help SMEs is key to their development, says Fahmy.

“What makes a business successful? This is the question on which the BDSSP efforts are based. The answer is not just about the business idea or capital, but most importantly, it is the know-how,” he says.

“In developing countries there is a problem with people getting money for projects and then not using it properly or not knowing how to use it to enhance their business,” says Azza Kandil, BDSSP’s field director.

“The type of help that BDSSP offers is not financial, but more technical assistance and business consultancy, among other things,” Kandil says.

Salama explains: “Unfortunately, people here think that if you have money you can start a business. The truth is that if you have money you have the possibility to start a business, but that doesn’t mean it will be successful. To make the business successful you must have the know-how, you must understand how to run a business. Most people do not have this gift.”

BDSSP also works with the government to development sustainable SMEs.

“Our job is to demonstrate to the government how other countries have supported SMEs,” says Fahmy.

“For example, Asian countries that are economically successful have not performed a miracle, but have worked to support SMEs throughout the last 30 or 40 years. They had a plan and have built institutions and programs to nurture SMEs. The key is that they recognized the importance of investing in SMEs. Now, we are trying to convince Egyptian policymakers to do the same.”

Extensive Partnerships

The backbone of BDSSP’s work is a chain of extensive partnerships it has created to implement its goals.

“In order to get something accomplished ,it must be an Egyptian entity that is carrying out the work and not a temporary foreign one,” says Kandil, based on the experience of working with third-party funded projects. “Most importantly, the concepts of partnership must be adhered to.”

Kandil says that for it to be most effective a partnership must be fostered from the very beginning, even at the stage when a project idea is still being formulated.

Partnerships with the BDSSP cover every step of the project, including cost sharing, training and planning.

BDSSP’s has a range of long-term partners, from the Arab Women Alliance to the General Authority for Investments and Free Zones (GAFI).

Kandil explains that many partners were in fact cut over time. “We kept certain partners because we felt that they understood the concept of technical assistance, not financial aid, and kept that at the core of their mission. We also considered development, value added to the market and cost recovery.”

The relationship between the development bodies and SMEs remains a closely monitored one. “There is a project officer from BDSSP who works with the NGOs all the time and there are quarterly reports on how many SMEs they served, how many clients repeated orders and the development that has been made in the services offered and the revenue generated.”

In 2004, the BDSSP team chose to begin implementing its activities in Minya and Alexandria governorates. In 2005, it expanded its work to Damietta, Sohag and Qena and then to Buhaira in 2006. The choice of their locations was based on the high numbers of SMEs, high unemployment and high numbers of immigrants coming from surrounding areas looking for jobs.

The program approached a wide array of existing businesses with an aim to improve their products and infrastructure, helping them to become more competitive.

Creative Consultancy

Ongoing fieldwork by BDSSP has found that the key to successfully developing SMEs is to provide technical support and to focus on developing proper business management skills. Enter the role of consultants.

“Egypt has lots of consultants, however, they all ask for high fees, and SMEs are a segment of the economy that either cannot afford to hire such consultants, or are not even aware that they need one in the first place,” says Fahmy.

Kandil adds: “There is no program in Egypt to build the capacity of SME business advisors and we are looking to fill a niche in the market for this specialization.”

On the international level, the BDSSP team shopped around for a program specifically designed for this purpose, selecting the SME Business Advisor Program (SBAP) from Singapore, which focuses on consultants for both start-up and established businesses.

“The program is a great opportunity for consultants to meet, network and share ideas because no one is specialized in everything,” says Kandil.

Continuity has also been a major concern. Along with a foreign trainer from the SBAP, potential Egyptian advisors were also trained, so in the long run business consultancy would be a service by Egyptians for Egyptians, as opposed to regularly bringing in foreigners.

Government Support

“In 2004, law number 141 was passed, stating that SMEs should be awarded no less than 10% of government procurements. However, until now, this law has not been implemented nor followed up,” says Gamal Mossalam, a former technical advisor to BDSSP.

Mossalam says that as part of the plan to help SMEs, BDSSP has been following up on this law. The organization approached the General Authority for Governmental Services (GAGS), which operates under the umbrella of the Ministry of Finance. GAGS has two major roles: inspecting all institutions that contribute to governmental services; and supporting and training people to follow Law number 89, which sets the rules for conducting public bids for governmental purchases ensuring that they comply with Law number 141.

With only two years remaining of the seven-year time span for the BDSSP project, Mossalam says; “we are not trying to create new laws or make new plans because we don’t have time, so we are trying to think creatively about how to help SMEs use what’s already in the mandates. By implementing the law, especially numbers 141 and 89, SMEs could benefit endlessly through recycling and fixing old objects,” he says.

“Government purchases reach 20 billion pounds each year,” adds Kandil, “If the law is implemented and 10%, which is at least two billion pounds, goes to SMEs, imagine what that would do to SMEs and in turn to the economy.”

Mossalam continues: “We have found that there are some 318 items that the government buys that could actually be purchased from SMEs that are registered in the social fund.

“At this point, BDSSP is a match maker between the major stakeholder, which in this case is the social fund because it has access to SMEs and GAGS. We are trying to link them together and eventually withdraw.”

Socially Sensitive BDS

As the BDSSP program is funded by CIDA, socially sensitive issues such as child labor, gender equality, women’s empowerment, and environmental concerns have to be addressed.

“These issues must be mainstreamed,” says Kandil, “and even if they are not directly addressed, they are definitely not violated.” To do so BDSSP sets up units that survey and attempt to tackle those problems.

BDSSP’s collaboration with the Alliance for Arab Women has been a way to develop SMEs and deal with the issue of gender equality. A unit has been set up with the goal of enabling women to earn an income by helping them establish a small or micro business that is often home based.

“The goal of this unit,” explains Lamiaa Ahmad, technical manager in the Alliance for Arab Women Minya branch, “is to empower women economically and give them the chance to own a project that generates an income.” The range of businesses that the unit assists in developing varies from tailoring and hair dressing to cultivating mushrooms and making handicrafts.

Now, two years after establishing a Support Center for Women, Ahmad says the unit has gained a solid reputation and many women, see the results, now approach it for help.

Child Labor Unit

Another issue addressed by the BDSSP is child labor. In Minya, a child labor unit was established to directly address working children’s problems and to create awareness for their protection.

“Unfortunately, child labor can’t be eliminated,” says Kandil. “Their economic environment doesn’t permit it and many families are dependent on their income. So instead of going against a reality that already exists and can’t be changed, we tried to make sure that the children are working in a safe environment.”

Magda Zaghlool and her colleague Shweekar, who work in the unit, offer support to children between the ages of nine and 16.

“After surveying the area, we reached out to boys who work as assistants to mechanics fixing cars in workshops and girls who work in macaroni and halawa factories. They don’t attend school or know how to read or write although they are enrolled. The parents just pay at the end of the year so they pass to the following grade.”

Children are often physically challenged by the type of work they do. Shweekar says they are fighting against the employment of boys in quarries because of the physical and health risks involved.

Shweekar and Zaghlool explain that the unit established in Minya offers classes for children to catch up on their reading and writing, classes for manners — because the children are used to both violent handling and language — a “know your rights” class that educates children about their rights on the job, a class for boys that teaches about cars and electricity, and finally, a much-welcomed balanced meal.

Indeed, many of the factory owners were persuaded to ameliorate working conditions for children.

The unit also made goodwill gestures including providing uniforms and shoes to the children and building ramps in the macaroni factories and shelves in the halawa factories so girls would not have to carry heavy bags for long distances or bend down constantly to arrange containers. In this instance, the product also improved, as it was not being exposed to elements on the ground.

Zaghlool and Shweekar initially managed to round up 25 children of each gender and now, with a solid reputation, more parents are seeking to enroll their children.

The most effective elements of the program for the children, says Zaghlool, are literacy and etiquette classes.

“When they write their name for the first time, it’s like they see a newborn baby and they become very happy,” she says. “As we go down and inspect the workshops and working areas, we are elated to hear from their employers and families that the children have better manners and are more content with their lives.”

A Questionable Future

More than four years into the project, the question of whether BDSSP will find continued funding for its far-reaching SME projects remains. CIDA is reducing support to Egypt because of economic advances made in foreign investment and changes in business strategies. According to Salama, come FY2010/11 the money will be reduced and CIDA will be prioritizing its financial aid to poorer countries.

Now, the BDSSP aims to develop strategies for the survival of the units operating on the ground and the existing business methodologies it has worked so hard to establish, especially after seeing promising results in a number of projects.

Fahmy says that whether there is funding or not, SME awareness needs to be raised.

“It is the big businessmen who have the government’s ears and not the small ones, and they have very different needs from SMEs,” Fahmy says.

Unfortunately, most of the projects sponsored by the government or major institutions, such as the Industrial Modernization Center, a program partially funded by the European Union to support development, are directed toward larger market players. Furthermore, the social fund remains under political pressure to create 700,000 jobs regardless of their quality. According to Salama, 90% of these jobs are extremely precarious; there is a high mortality rate for startups and most have disappeared.

Although BDSSP acts as a temporary catalyst — ensuring existing privileges granted to SMEs are implemented — it also aims to provide non-financial support, and to change government perspective on dealing with SMEs. It is vital that SMEs in turn demand assistance and support from the government.

Four years after implementing the project, some SMEs have begun to pressure the government for support and have realized the importance of non-financial support.

Kandil says that the change in mindset of SME business owners who did not realize that paying for consultancy could prove beneficial, is a major achievement.

“People are not used to paying for help because there are other programs that help SMEs for free and because consultancy is not a tangible service. However, we insist that they pay because they must learn to respect the service provided and appreciate its benefits.”

Whether the BDSSP project continues or not, a model has been established showing how to instigate a valuable and far-reaching initiative. It sheds light on forgotten SME laws that could push the economy in a positive direction. It has instilled hope in many unemployed and new graduates that the future is not as bleak as it seems, and has shown that a bit of initiative and skill can go a long way. bt

By the Numbers

A ccurate statistics are hard to obtain because of the informal nature of many establishments in the SME sector.

The UNDP estimates that there are 2.4 million micro establishments — defined as those with less than 10 workers — employing 5.2 million workers in Egypt.

According to a 2005 UNDP policy brief, the number of small and micro enterprises — defined as those employing up to 50 workers — was around 3.3 million in 1998, compared to 2.9 million in 1988. In 2004, the number of workers in this sector had grown to 8.3 million and has continued to rise at an average rate of 2.8% annually.

The 2008 UNDP Egypt Human Development Report states that the percentage of micro and small enterprises receiving financial aid to expand their working capital grew from 3-5% in 1998 to 15-20% in 2006.

However the UNDP considers that outreach to SMEs is still limited. The report also states that only 0.5% of all SMEs have received non-financial services, and that donor-supported programs often prove unsustainable and of limited effect.

In an October 2008 report, the Egyptian Center for Economic Studies (ECES) raised the concern that although small enterprises constitute 78.7% of total formal industrial establishments, compared to the 4.5% large enterprises account for, they are only responsible for 4.2% of local sales, whereas large enterprises have a 64% share.

The ECES also highlighted the high level of competition between SMEs and large enterprises in almost all sectors, including food and beverages, electronics manufacturing, furniture manufacture and textiles.

Based on a 2004/05 industrial census, the report estimates that small enterprises produced 12.8% of textiles, medium enterprises produced 29.3% and large ones 57.9%. And whereas large enterprises exported 57.6%, small enterprises exported only 26.7 % and medium enterprises 15.7%.

A Concept of Self-Sustainability

With the goal of demonstrating how small businesses could become self sufficient, one of BDSSP’s major ongoing contributions is to the honey and molasses industries through collaboration with the Business Enterprises Support and Tool foundation (BEST), established by the social fund and the UNDP.

BEST approached BDSSP for funding to provide improvements in the production of honey and molasses and in the process aided all SMEs in the sector.

Most of these activities are centered in Minya, where honey and molasses production had been suffering across the board. In this context BDSSP and BEST provided services for apiaries and owners of sugar cane processors to improve their product, decrease costs, train personnel and open new marketing channels.

One of the major achievements in improving honey production was setting up a lab to provide proper medication to treat diseases that attack hives.

Also established was a center for the provision of apiary supplies such as masks, a provision that did not exist before.

Another important step was the creation of a laboratory to test the quality of honey and molasses. New marketing channels for products sold outside of Minya were also opened with the aim of avoiding monopolization and providing an incentive to improve the product and increase profit.

A new packaging line was established that labeled the product more effectively and avoided mislabeling or cheating. Most importantly, an advocacy role was adopted to change regulations and laws for honey and molasses production.

In the field of molasses production, conditions were even more desperate. The use of Mazzot and sugar cane waste in achieving the high temperatures required to produce molasses pollutes the environment, and the cauldron in which the sugar cane is boiled is usually made of iron, as opposed to stainless steal, which results in residues in the molasses. BDSSP hopes to alleviate these sources of pollution in partnership with SMEs.
- 15 Sep 2009, 4:57 pm
Dr. Nilgün Birgören wrote: > **Non-financial support of small and medium enterprises could be key > to changing Egypt’s economic future.** > > By May Kaddah > > A mid fierce international competition and the challenges posed by > globalization, the nurturing of small and medium enterprises (SMEs) > is key to continuing economic development. For the past four years, a > joint initiative between the Canadian International Development > Agency (CIDA) and Business Development Services Support Project > (BDSSP) has been investing in a program targeting the heart of the > Egyptian economy. The program aims to change challenging economic > conditions facing many small and medium businesses being overshadowed > by the high towers of Egyptian industry.There is a strong rationale > for supporting SME development: SMEs account for 75% of employment > and around 80% of GDP, according to the UNDP 2008 Egypt Human > Development Report. > > This importance has been visible during the economic chaos of the > last year. When many large firms and multinational companies were > cutting back staff and production under pressure from the > international market, the SME sector, mainly serving other domestic > businesses, was a stabilizing force, providing employment, even to > unskilled laborers, the most vulnerable in times of crisis. > > Unsurprisingly then, the more performance of smaller businesses can > be enhanced, the more economic development is achieved. > > Energizing SMEs across all sectors is key to providing jobs and > raising income levels, particularly in areas outside Cairo and > Alexandria. > > More than just soaking up Egypt’s huge and growing labor force, small > establishments put idle capital into circulation by providing > individuals the opportunity to channel their personal savings or > inheritance into revenue generating projects, generating great > benefits for the economy as a whole. > > With adequate guidance and support, SMEs could also be the platform > for developing entrepreneurial skills, a trait which large corporate > bureaucracies often fail to develop, and one that is in short supply > in Egypt. > > Dr. Salama Fahmy, former BDSSP director, explains the importance of > SMEs. “It’s important to the economy as a whole to support SMEs, > because, as we have learned from other countries, it is a driving > force of economic development. It also deals with equity pay, > employment, women entering the workforce and environmental issues.” > > Fahmy says that every dollar invested in SMEs brings back an > estimated $25 to the government in the form of taxes, increased sales > and job creation, among other benefits. He bases this claim on > statistics provided by the Small Business Administration in the > United States. > > On a Mission > > With clear economic goals and 20 million Canadian dollars funding > from CIDA, BDSSP aims to create and develop a number of bodies within > Egypt that could help existing SMEs and inspire new graduates and > unemployed citizens to start their own ventures. > > The organization is not interested in providing financial aid but > rather concentrates on building the capacity of businesses by working > with partners; mainly specialized non-government organizations > (NGOs), businessmen and women’s associations and universities. In > turn, these NGOs create a Business Development Service (BDS) center > with each project undertaken, specifically catering to the needs of > the beneficiary (in this case the SME). > > The goal is to build the capacity of third party organizations that > would in turn work directly with SMEs long after the BDSSP has > disappeared. > > The overall program — which has has an extensive presence all over > Egypt including in Sohag, Qena, Minya, Alexandria, Damietta and Cairo > — aims to increase income and employment opportunities. > > Finding proper and effective ways to help SMEs is key to their > development, says Fahmy. > > “What makes a business successful? This is the question on which the > BDSSP efforts are based. The answer is not just about the business > idea or capital, but most importantly, it is the know-how,” he says. > > “In developing countries there is a problem with people getting money > for projects and then not using it properly or not knowing how to use > it to enhance their business,” says Azza Kandil, BDSSP’s field > director. > > “The type of help that BDSSP offers is not financial, but more > technical assistance and business consultancy, among other things,” > Kandil says. > > Salama explains: “Unfortunately, people here think that if you have > money you can start a business. The truth is that if you have money > you have the possibility to start a business, but that doesn’t mean > it will be successful. To make the business successful you must have > the know-how, you must understand how to run a business. Most people > do not have this gift.” > > BDSSP also works with the government to development sustainable SMEs. > > “Our job is to demonstrate to the government how other countries have > supported SMEs,” says Fahmy. > > “For example, Asian countries that are economically successful have > not performed a miracle, but have worked to support SMEs throughout > the last 30 or 40 years. They had a plan and have built institutions > and programs to nurture SMEs. The key is that they recognized the > importance of investing in SMEs. Now, we are trying to convince > Egyptian policymakers to do the same.” > > Extensive Partnerships > > The backbone of BDSSP’s work is a chain of extensive partnerships it > has created to implement its goals. > > “In order to get something accomplished ,it must be an Egyptian > entity that is carrying out the work and not a temporary foreign > one,” says Kandil, based on the experience of working with > third-party funded projects. “Most importantly, the concepts of > partnership must be adhered to.” > > Kandil says that for it to be most effective a partnership must be > fostered from the very beginning, even at the stage when a project > idea is still being formulated. > > Partnerships with the BDSSP cover every step of the project, > including cost sharing, training and planning. > > BDSSP’s has a range of long-term partners, from the Arab Women > Alliance to the General Authority for Investments and Free Zones > (GAFI). > > Kandil explains that many partners were in fact cut over time. “We > kept certain partners because we felt that they understood the > concept of technical assistance, not financial aid, and kept that at > the core of their mission. We also considered development, value > added to the market and cost recovery.” > > The relationship between the development bodies and SMEs remains a > closely monitored one. “There is a project officer from BDSSP who > works with the NGOs all the time and there are quarterly reports on > how many SMEs they served, how many clients repeated orders and the > development that has been made in the services offered and the > revenue generated.” > > In 2004, the BDSSP team chose to begin implementing its activities in > Minya and Alexandria governorates. In 2005, it expanded its work to > Damietta, Sohag and Qena and then to Buhaira in 2006. The choice of > their locations was based on the high numbers of SMEs, high > unemployment and high numbers of immigrants coming from surrounding > areas looking for jobs. > > The program approached a wide array of existing businesses with an > aim to improve their products and infrastructure, helping them to > become more competitive. > > Creative Consultancy > > Ongoing fieldwork by BDSSP has found that the key to successfully > developing SMEs is to provide technical support and to focus on > developing proper business management skills. Enter the role of > consultants. > > “Egypt has lots of consultants, however, they all ask for high fees, > and SMEs are a segment of the economy that either cannot afford to > hire such consultants, or are not even aware that they need one in > the first place,” says Fahmy. > > Kandil adds: “There is no program in Egypt to build the capacity of > SME business advisors and we are looking to fill a niche in the > market for this specialization.” > > On the international level, the BDSSP team shopped around for a > program specifically designed for this purpose, selecting the SME > Business Advisor Program (SBAP) from Singapore, which focuses on > consultants for both start-up and established businesses. > > “The program is a great opportunity for consultants to meet, network > and share ideas because no one is specialized in everything,” says > Kandil. > > Continuity has also been a major concern. Along with a foreign > trainer from the SBAP, potential Egyptian advisors were also trained, > so in the long run business consultancy would be a service by > Egyptians for Egyptians, as opposed to regularly bringing in > foreigners. > > Government Support > > “In 2004, law number 141 was passed, stating that SMEs should be > awarded no less than 10% of government procurements. However, until > now, this law has not been implemented nor followed up,” says Gamal > Mossalam, a former technical advisor to BDSSP. > > Mossalam says that as part of the plan to help SMEs, BDSSP has been > following up on this law. The organization approached the General > Authority for Governmental Services (GAGS), which operates under the > umbrella of the Ministry of Finance. GAGS has two major roles: > inspecting all institutions that contribute to governmental services; > and supporting and training people to follow Law number 89, which > sets the rules for conducting public bids for governmental purchases > ensuring that they comply with Law number 141. > > With only two years remaining of the seven-year time span for the > BDSSP project, Mossalam says; “we are not trying to create new laws > or make new plans because we don’t have time, so we are trying to > think creatively about how to help SMEs use what’s already in the > mandates. By implementing the law, especially numbers 141 and 89, > SMEs could benefit endlessly through recycling and fixing old > objects,” he says. > > “Government purchases reach 20 billion pounds each year,” adds > Kandil, “If the law is implemented and 10%, which is at least two > billion pounds, goes to SMEs, imagine what that would do to SMEs and > in turn to the economy.” > > Mossalam continues: “We have found that there are some 318 items that > the government buys that could actually be purchased from SMEs that > are registered in the social fund. > > “At this point, BDSSP is a match maker between the major stakeholder, > which in this case is the social fund because it has access to SMEs > and GAGS. We are trying to link them together and eventually > withdraw.” > > Socially Sensitive BDS > > As the BDSSP program is funded by CIDA, socially sensitive issues > such as child labor, gender equality, women’s empowerment, and > environmental concerns have to be addressed. > > “These issues must be mainstreamed,” says Kandil, “and even if they > are not directly addressed, they are definitely not violated.” To do > so BDSSP sets up units that survey and attempt to tackle those > problems. > > BDSSP’s collaboration with the Alliance for Arab Women has been a way > to develop SMEs and deal with the issue of gender equality. A unit > has been set up with the goal of enabling women to earn an income by > helping them establish a small or micro business that is often home > based. > > “The goal of this unit,” explains Lamiaa Ahmad, technical manager in > the Alliance for Arab Women Minya branch, “is to empower women > economically and give them the chance to own a project that generates > an income.” The range of businesses that the unit assists in > developing varies from tailoring and hair dressing to cultivating > mushrooms and making handicrafts. > > Now, two years after establishing a Support Center for Women, Ahmad > says the unit has gained a solid reputation and many women, see the > results, now approach it for help. > > Child Labor Unit > > Another issue addressed by the BDSSP is child labor. In Minya, a > child labor unit was established to directly address working > children’s problems and to create awareness for their protection. > > “Unfortunately, child labor can’t be eliminated,” says Kandil. “Their > economic environment doesn’t permit it and many families are > dependent on their income. So instead of going against a reality that > already exists and can’t be changed, we tried to make sure that the > children are working in a safe environment.” > > Magda Zaghlool and her colleague Shweekar, who work in the unit, > offer support to children between the ages of nine and 16. > > “After surveying the area, we reached out to boys who work as > assistants to mechanics fixing cars in workshops and girls who work > in macaroni and halawa factories. They don’t attend school or know > how to read or write although they are enrolled. The parents just pay > at the end of the year so they pass to the following grade.” > > Children are often physically challenged by the type of work they do. > Shweekar says they are fighting against the employment of boys in > quarries because of the physical and health risks involved. > > Shweekar and Zaghlool explain that the unit established in Minya > offers classes for children to catch up on their reading and writing, > classes for manners — because the children are used to both violent > handling and language — a “know your rights” class that educates > children about their rights on the job, a class for boys that teaches > about cars and electricity, and finally, a much-welcomed balanced > meal. > > Indeed, many of the factory owners were persuaded to ameliorate > working conditions for children. > > The unit also made goodwill gestures including providing uniforms and > shoes to the children and building ramps in the macaroni factories > and shelves in the halawa factories so girls would not have to carry > heavy bags for long distances or bend down constantly to arrange > containers. In this instance, the product also improved, as it was > not being exposed to elements on the ground. > > Zaghlool and Shweekar initially managed to round up 25 children of > each gender and now, with a solid reputation, more parents are > seeking to enroll their children. > > The most effective elements of the program for the children, says > Zaghlool, are literacy and etiquette classes. > > “When they write their name for the first time, it’s like they see a > newborn baby and they become very happy,” she says. “As we go down > and inspect the workshops and working areas, we are elated to hear > from their employers and families that the children have better > manners and are more content with their lives.” > > A Questionable Future > > More than four years into the project, the question of whether BDSSP > will find continued funding for its far-reaching SME projects > remains. CIDA is reducing support to Egypt because of economic > advances made in foreign investment and changes in business > strategies. According to Salama, come FY2010/11 the money will be > reduced and CIDA will be prioritizing its financial aid to poorer > countries. > > Now, the BDSSP aims to develop strategies for the survival of the > units operating on the ground and the existing business methodologies > it has worked so hard to establish, especially after seeing promising > results in a number of projects. > > Fahmy says that whether there is funding or not, SME awareness needs > to be raised. > > “It is the big businessmen who have the government’s ears and not the > small ones, and they have very different needs from SMEs,” Fahmy says. > > Unfortunately, most of the projects sponsored by the government or > major institutions, such as the Industrial Modernization Center, a > program partially funded by the European Union to support > development, are directed toward larger market players. Furthermore, > the social fund remains under political pressure to create 700,000 > jobs regardless of their quality. According to Salama, 90% of these > jobs are extremely precarious; there is a high mortality rate for > startups and most have disappeared. > > Although BDSSP acts as a temporary catalyst — ensuring existing > privileges granted to SMEs are implemented — it also aims to provide > non-financial support, and to change government perspective on > dealing with SMEs. It is vital that SMEs in turn demand assistance > and support from the government. > > Four years after implementing the project, some SMEs have begun to > pressure the government for support and have realized the importance > of non-financial support. > > Kandil says that the change in mindset of SME business owners who did > not realize that paying for consultancy could prove beneficial, is a > major achievement. > > “People are not used to paying for help because there are other > programs that help SMEs for free and because consultancy is not a > tangible service. However, we insist that they pay because they must > learn to respect the service provided and appreciate its benefits.” > > Whether the BDSSP project continues or not, a model has been > established showing how to instigate a valuable and far-reaching > initiative. It sheds light on forgotten SME laws that could push the > economy in a positive direction. It has instilled hope in many > unemployed and new graduates that the future is not as bleak as it > seems, and has shown that a bit of initiative and skill can go a long > way. bt > > By the Numbers > > A ccurate statistics are hard to obtain because of the informal > nature of many establishments in the SME sector. > > The UNDP estimates that there are 2.4 million micro establishments — > defined as those with less than 10 workers — employing 5.2 million > workers in Egypt. > > According to a 2005 UNDP policy brief, the number of small and micro > enterprises — defined as those employing up to 50 workers — was > around 3.3 million in 1998, compared to 2.9 million in 1988. In 2004, > the number of workers in this sector had grown to 8.3 million and has > continued to rise at an average rate of 2.8% annually. > > The 2008 UNDP Egypt Human Development Report states that the > percentage of micro and small enterprises receiving financial aid to > expand their working capital grew from 3-5% in 1998 to 15-20% in 2006. > > However the UNDP considers that outreach to SMEs is still limited. > The report also states that only 0.5% of all SMEs have received > non-financial services, and that donor-supported programs often prove > unsustainable and of limited effect. > > In an October 2008 report, the Egyptian Center for Economic Studies > (ECES) raised the concern that although small enterprises constitute > 78.7% of total formal industrial establishments, compared to the 4.5% > large enterprises account for, they are only responsible for 4.2% of > local sales, whereas large enterprises have a 64% share. > > The ECES also highlighted the high level of competition between SMEs > and large enterprises in almost all sectors, including food and > beverages, electronics manufacturing, furniture manufacture and > textiles. > > Based on a 2004/05 industrial census, the report estimates that small > enterprises produced 12.8% of textiles, medium enterprises produced > 29.3% and large ones 57.9%. And whereas large enterprises exported > 57.6%, small enterprises exported only 26.7 % and medium enterprises > 15.7%. > > A Concept of Self-Sustainability > > With the goal of demonstrating how small businesses could become self > sufficient, one of BDSSP’s major ongoing contributions is to the > honey and molasses industries through collaboration with the Business > Enterprises Support and Tool foundation (BEST), established by the > social fund and the UNDP. > > BEST approached BDSSP for funding to provide improvements in the > production of honey and molasses and in the process aided all SMEs in > the sector. > > Most of these activities are centered in Minya, where honey and > molasses production had been suffering across the board. In this > context BDSSP and BEST provided services for apiaries and owners of > sugar cane processors to improve their product, decrease costs, train > personnel and open new marketing channels. > > One of the major achievements in improving honey production was > setting up a lab to provide proper medication to treat diseases that > attack hives. > > Also established was a center for the provision of apiary supplies > such as masks, a provision that did not exist before. > > Another important step was the creation of a laboratory to test the > quality of honey and molasses. New marketing channels for products > sold outside of Minya were also opened with the aim of avoiding > monopolization and providing an incentive to improve the product and > increase profit. > > A new packaging line was established that labeled the product more > effectively and avoided mislabeling or cheating. Most importantly, an > advocacy role was adopted to change regulations and laws for honey > and molasses production. > > In the field of molasses production, conditions were even more > desperate. The use of Mazzot and sugar cane waste in achieving the > high temperatures required to produce molasses pollutes the > environment, and the cauldron in which the sugar cane is boiled is > usually made of iron, as opposed to stainless steal, which results in > residues in the molasses. BDSSP hopes to alleviate these sources of > pollution in partnership with SMEs.

Egypt Business Network

SMEs: Small-Minded Enterprises?