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The Marble Industry in Egypt, An Overview in Brief by marble guide



Concerning the economy of Egypt, BNP Paribas expects economic growth to hit 3.8% in 2016-17 and accelerate to 4.5% in 2017-18.

The marble industry is considered one of the oldest industries in the world. Historically, the industry moved from labor-intensive to capital-intensive with the advent of technological advancement, including development of automated production tools like cranes and diamond cutting wires. In Egypt, during the past 20 years, market entry into the industry was relatively high due to the high profit margins achieved. In addition, there was, and still is, lack of effective government regulation especially related to the marble extraction process from the quarries.

Nature has gifted Egypt with large deposits and high quality marble and granite. Since 2700 B.C., the Ancient Egyptians used granite to build their important temples and buildings. It is claimed that the Ancient Romans as early as the 3rd century B.C. acquired the Egyptian now how in quarrying and cutting the ornamental stones, especially granite. This technology was transferred back to Italy and, due to the natural endowment of Italy coupled with the acquired technical knowhow, the marble industry flourished and the Italians became world leaders in the production of marble.

Marble extraction witnessed a relative boom starting the late fifties in Egypt. This boom was mainly related to the construction of the High Dam in Aswan, the construction of which required a very solid stone to build the body of the dam. In the mid-1980s, the maximum capacity for the cutting machines in the country was 49,850m2 for all types of ornamental stones.

With the privatization trend in the early 1990s, investors started to be interested in the marble and granite industry that was flourishing with high profit margins and which seemed to have good potential for growth. Moreover, cost of quarrying was not high, due to the use of relatively cheap technology (via the overvalued currency) and relatively cheap labor (mostly unskilled). However, still, there was a high demand for marble relative to a limited supply resulting in high potential profits. In general, during the late 1980s to mid-1990s, entry level into the industry accelerated, encouraged by the high profit margins achieved coupled with the low economic barriers to entry. This motivated investors to spend on expensive and modern imported technologies.

Currently, Egypt has about 500 marble and granite factories. According to specialists in the industry, there are 3 types of factories: (1) factories that are just involved in cutting the blocks into plates of marble and then distributing them to workshops that handle further cutting and polishing, (2) factories that cut and polish the plates, and (3) factories that do the whole process until the final product is produced.



The technology used for marble quarrying and processing is very advanced internationally. Factories in developed countries are fully automated which makes the industry highly capital intensive. Though few factories in Egypt tend to acquire the latest technology, several factories still import second handed (sometimes outdated) machinery which is much lower in price. The main process that is highly automated in this industry is block cutting into plates, as doing this manually does not facilitate mass production. All other processes including polishing could be done either with fully automated equipment or with semi-automated or manual machines.

Technologies for the marble industry in Egypt are bought from Italy, Germany, Spain, India or Turkey. There are also some Egyptian machines that are produced in workshops copying the patent design of some of the imported machinery. According to Mr. Ibrahim Ghaly, who is a main dealer of Italian and German suppliers of marble production lines in Egypt, Egypt has currently about 500 factories working in this industry. 400 factories or about 70% of the industry is located in Shak El Thoban in Katameyya, Cairo as mentioned earlier. The remaining 100 factories are scattered all over Egypt, primarily in the main cities or the capital of the governorates. According to several marble factory owners interviewed, factories cannot be located besides the quarries as quarries are usually located in remote areas. Accordingly, if factories are located right besides the quarries, this will necessitate several requirements that are not feasible. Namely, the supply of water and electricity is insufficient as well as the needed infrastructure to ensure a minimal level of living standard for the workers. On the other hand, transportation of the finished product is much more complicated and risky, as the processed marble is very fragile while solid raw marble stone can be transported without concerns of fragility.

The Marble Industry is one of the oldest industries in the World. Ancient Civilizations in general and Ancient Egyptians in particular were very skillful in the utilization of the ornamental stones. In the old times this industry was labor intensive, but with the development of modern technology, this industry became relatively capital intensive and almost fully computerized in many countries of the world. In Egypt, this industry is still in development stage, in spite of its long history. Extraction of raw marble blocks from the quarries is an area that needs to be especially overviewed and regulated from an environmental standpoint. Currently, extraction practices include the excessive use of explosives which results in an enormous waste to natural resources as well as to the deformation of the extracted blocs of marble. This needs a change in extraction techniques towards using different tools such as diamond wires and automated bloc cutters to achieve standard sizes. Standardization of the size of the raw stone bloc increases the operational efficiency of the machines that handle the carrying and the cutting of the bloc, and leads to the standardization of the final product (in terms of quality) which is a requirement to meet international standards of the industry. The marble industry in Egypt has the characteristics of a monopolistic competition market structure, where there are tangible barriers to entry, a high degree of product differentiation, and competition is driven by economies of scale and relative prices.

In general, the marble industry in Egypt has a good potential to prosper and to be one of the driving forces for the country’s overall economic well-being especially as natural resources abound. Regulating this important resource of the country is mandatory for sustainable development. Moreover, improving the quality of the final product is key to invading the international markets and establishing a reputation in this field. High profitability could lead to further market entry which may prove to attract more efficient production technology. This might lead to market segmentation, where value-driven and export-oriented firms will tend towards an oligopoly, whereas local-oriented cost-driven firms with relatively low technology will tend towards monopolistic competition. In all cases, to achieve a more competitive marble industry in Egypt in the long-run, effective government regulation is essential.

The complete and extended survey titled ‘CHARACTERISTICS OF THE MARBLE INDUSTRY IN EGYPT’ is written by Mr. Azza I. Kandil and Mr. Tarek H. Selim, Senior Financial Advisor, Industrial Modernization Center and Assistant Professor of Economics, The American University in Cairo respectively.

The survey can be found here: http://www.kr-onyx.com/marble.pdf

MARBLE INVESTMENTS IN EGYPT

According to Mr. Ali Abdel Kader, head of Exhibition Committee of the Export Council for Building, Refractory & Metallurgy Industries, the volume of Egypt’s investments in marble sector is estimated at 3 billion Egyptian pounds (USD 419.7 million).

Mr. Ali Abdel Kader referred that there are 4450 companies, factories and workshops working in this industry in Egypt, which owns about 358 marble quarries and 63 granite quarries. In addition, Mr. Ali Abdel Kader points that Egypt is considered as one of the 5 largest states in marble industry among China, India, Iran, and Italy.

In 2013, Egypt’s marble and granite exports, amounted to 2.9 billion stones, had reached US$348 million, the Egyptian official noted. Egypt’s marble and granite exports to China hit US$108 million last year.

Egypt is one of the most dynamic and active African markets. The country enjoys a privileged geographical position making it a candidate for the role of hub for Africa and the Middle East.

The Egyptian Government medium term development strategy has targeted high potential sectors: infrastructure, housing & utilities (1.15 million new housing units will be built over 5 years), tourism, transport & logistics. Key objective is to improve overall infrastructure and housing quality and to bring about the transformation of Egypt’s economic base through reforms and projects that boost productivity and encourage sustainable private sector-led growth. Egypt plans to promote about 60 projects (public and private) in the upcoming years, with the aim of luring fresh investments to boost its limping economy.



PROSPECTS OF THE ECONOMY

According to a PricewaterhouseCoopers report, emerging economies could be twice the size of developed markets by 2050, growing to make up almost 50% of world GDP, “By 2050, emerging economies such as Mexico and Indonesia are likely to be larger than the UK and France, while Pakistan and Egypt could overtake Italy and Canada,” the report notes, according to the Financial Post, which views the suggestion as “brave” and “incredulous.” The results, which are based on gross domestic product purchasing power parity (PPP) terms, also project that India will replace the United States as the world’s second largest economy after China by 2050, reports. PwC expects the E-7 emerging markets of Brazil, China, India, Indonesia, Mexico, Russia and Turkey to grow at an average rate of almost 3.5% over the next 34 years. The E-7 is projected to account for about 50% of world GDP by 2050, up from a current 37%. The report cautions that this will be contingent on “[implementing] structural reforms to improve macroeconomic stability, diversify their economies away from undue reliance on natural resources (where this is currently the case), and develop more efficient political and legal institutions.”

According to a report by BNP Paribas, the general optimism on the economy continues as Egypt’s economy should bottom out and start improving in FY2016-17. “Several factors will undoubtedly have a positive macroeconomic impact, including the floating pound, improvements in foreign currency liquidity, the accelerated pace of fiscal reforms, and the start-up of production at the Zohr gas field. Yet the public and external accounts will continue to show deficits in the medium term, and the authorities will have to deal with growing social pressures at a time of high inflation. Only the return to strong growth (notably via job-rich investments in non-energy sectors) will enable the Egyptian economy to pull out of a 5-year slump,” the report says. BNP Paribas expects economic growth to hit 3.8% in 2016-17 and accelerate to 4.5% in 2017-18.

DATA RECEIVED FROM:

http://www.kr-onyx.com/marble.pdf
http://stonetileindia.com/?p=2333
http://msafrica.net/why-africa-why-egypt/
http://enterprise.press/

Kallirroi Pavlakou
International News and Markets