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Sunday, 16 June 2019

The alternative economy in Ramadan

Ramadan is an opportunity for many Egyptian families to help make ends meet by engaging in alternative economic activities, writes Rasha Gadda

Rasha Gadda , Thursday 16 May 2019
Egyptian man prepares kunafa
An Egyptian man prepares kunafa, a traditional Middle Eastern dessert in Cairo (Phpto: Reuters)
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Along with the spiritual aspects of the holy month, Ramadan also requires an extra budget for most Egyptian households.

Since prices have been rising almost every day since the devaluation of the pound in 2016, many families are looking for other sources of income.

Many working women and homemakers have taken up supplementary work as a result, such as preparing food and selling it online and on Internet apps.

Others have learnt how to crochet, knit or make handicrafts to sell, or they have opted simply to prepare vegetables and sell them through social networks.

Male heads of households have increased their income by finding extra work, often driving for the Uber or Careem sites, depending on their economic backgrounds.

Those who own private cars in good condition do the driving themselves and make a handsome income, and those who don’t own a car can drive a shift in someone else’s car after finishing their primary work to supplement their income.

Ramadan is a generous season for those looking to increase their income. Special projects are launched during the month to produce and sell products that are only available at this time, such as handheld Ramadan fanous (lanterns), handmade abayas (robes), khayamiya traditional textile products, and other products sold in the streets.

Hundreds of sites on social media are created to market these products as part of the alternative economy to increase the income of Egyptian families and fund the extra budget needed for this month.

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Photo: Sherif Sonbol

Handheld Lanterns

At the Taht al-Rub historic site in Cairo there are many workshops manufacturing Fatimid-style lanterns and tent fabric for makeshift lantern vendors. Ahmed Aziz, who has crafted tin lanterns during Ramadan for 43 years, explained his craft and how to make a Fatimid lantern.

“The tin lantern is the oldest one around. The Fatimids made brass lanterns and placed a candle inside them to light up the streets at night because there was no other source of lighting. At first, it had nothing to do with Ramadan, but eventually things progressed, and once street lights became common we only used the lanterns in Ramadan,” he said.

“They were no longer made of brass, but of other materials as well, such as tin, metal, and coloured glass. A candle or battery-operated light is placed inside them, and today there are many kinds, including the Abu Dalaya [pendulum], Farouk, Negma (star), Lotus and Abu Eyalo.”

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Photo: Sherif Sonbol

Aziz said that lantern-making requires a great deal of skill. “The lanterns are handmade from start to finish, including cutting the metal, gluing it, and adding the coloured glass. No machines are used. The lanterns are all handmade, and it requires precision and artistry to make a beautiful lantern,” he said.

The lantern-makers also work all year round. “Some believe we only work during the months leading up to Ramadan, but this is not true. We work all year round to meet the demands of the month, whether individual orders or those for companies and institutions,” he said.

Metal lanterns dominate the Egyptian market this year as opposed to imported Chinese lanterns. “No one imported lanterns from China this year because of the high exchange rates. Everyone is working on local production, and most lantern-vendors are displaying Egyptian-made metal lanterns and only having a small corner for plastic Chinese-made lanterns from the year before.”

“It’s been like this for the past three years. There are handmade metal lanterns and khayamiya. Rarely will you find imported lanterns, and usually these come as children’s toys not as Ramadan lanterns,” he added.

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Photo: Reuters

Aziz sings the praises of the Egyptian lantern, including its durability, unlike the Chinese kind that only lasts for one Ramadan and then breaks like a child’s toy. The price of a metal lantern is much less than a Chinese one as well, although it is higher than it was last year owing to the rising prices of raw materials.

 “Tin and metal prices have gone up, and over the past three years prices have doubled and continued to climb. The price of lanterns has gone up from LE10 to LE15, but overall the pricing is reasonable and not inflated like for the Chinese lanterns. Prices are between LE10 and LE80 depending on size, and the large ones used for decoration at hotels, homes or companies are between LE300 and LE5,000,” he said.

Aziz said the profits from lantern-making vary marginally from one workshop to the next. “The standard profit is about 25 per cent of cost, sometimes a little more or less depending on the size and price of the lantern,” he explained. “Supply and demand also affect profit margins.”

Online Products

There are hundreds of sites on social media marketing Ramadan products made by women who take advantage of the season to boost their income.

 Rasha Amin, a woman in her late 30s who designs and makes clothing, finds Ramadan a good opportunity to market products designed specifically for the occasion. “I sew handmade abayas specifically for Ramadan,” she said. “Every year, there are new designs that I display on my Facebook and Instagram accounts.”

Amin has been designing and making clothes for a decade and has dedicated a room in her house to her business. She has loyal customers and ones that have discovered her through her designs on social media.

Her projects have greatly improved her social standing, since rising prices require additional income or a side business to meet basic needs, or even raise the living standards of an individual or family.

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Handmade Ramadan decoration products (Photos courtesy of Lillian Maged)

Amin said that a key factor for her entrepreneurial success has been online marketing. “Social media sites are essential for marketing because the products are displayed to a large audience without extra cost.”

While her business makes a variety of women’s clothing, the popularity of her Ramadan abayas and tunics make them bestsellers. “Ramadan has a special ambience, even in fashion. Women, even non-veiled ones, prefer to wear loose-fitting abayas decorated with Ramadan-themed designs,” she said. “That’s what I use in my designs.”

Ramadan décor is the inspiration for Lillian Maged’s “party design” page, which focuses on decorations for celebrations, birthdays and holidays. In recent years, consumers have also been flocking to buy Ramadan decorations for their homes.

“I started selling Ramadan décor three years ago, which attracted customers and gave them ideas to display their decorations in an elegant and sophisticated way,” Maged said. She said that Ramadan decorations have become particularly popular because many Arab families now live abroad.

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Photo: Lillian Maged

“In Europe and the US there is a great focus on celebrating holidays, such as Christmas. Egyptians and Arabs living abroad feel homesick and want to celebrate special occasions, such as Ramadan. Travel and the Internet have made people more focused on these aspects of celebrating, such as during Ramadan,” she said.

While families may allocate a large budget for food during the month of fasting, some years ago they also began spending more on decorations and adding new pieces.

A study by the tax committee at the Egyptian Industries Union has estimated that the parallel market or hidden economy in the country is worth LE4 trillion, or 60 per cent of annual economic transactions.

Ahmed Anwar, a sociologist, said parallel economies were often found in poorer countries and the poorer the country, the bigger the parallel economy. He said the middle classes were behind this type of economy because they feared falling into the lower class at a time when they are being squeezed economically.

News reports have warned that the middle classes in Egypt could be made extinct due to inflation, noting that the devaluation of the pound has led to the rising cost of imports, while applying the new value-added tax (VAT) and higher tariffs has led to a rise in the cost of living in general, especially for the middle classes.

Egypt floated the pound based on advice from the IMF and it was a condition of receiving a $12 billion loan. It hit people hard due to the high inflation and higher cost of living. People lost around 50 per cent of their purchasing power because the value of the pound was slashed by more than half.

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Photo: Lillian Maged

“Due to the difficult economic conditions, everyone is looking for a way to boost their incomes to offset price hikes,” Anwar said. “The type of marginal economy known as moonlighting, along with a person’s primary job, partially redresses the problem. I believe this type of economy will continue to grow due to the high prices, especially since inflation is still high and leads to additional pressures on those with fixed incomes. It also erodes the middle class due to high prices.”

“There is a direct correlation between unemployment and the parallel economy. The state is not hiring anymore and is in fact making job cuts, as is the private sector, so the trend will likely grow greatly in coming years,” he added.

Anwar said that jobs in the parallel economy were yearlong but increased during certain events. “Many women bake and sell kahk [holiday biscuits] in their homes or small bakeries,” he said.

“Others make handmade Ramadan decorations and lanterns. Some poorer families raise sheep before the Eid Al-Adha [Greater Bairam], taking advantage of time constraints and people buying no matter what their economic situation. They market their products to raise their incomes or at least to meet their key needs,” he said.

The tax committee study revealed that taxes at 20 per cent on such parallel transactions could yield more than LE1.4 trillion for the government. However, Anwar said the state could not collect taxes on them.

This hurt the economy, he said, but “if the state absorbed this labour force and exempted them from taxes on previous years and gave them health insurance, this could be an incentive for them to operate under the umbrella of the state and generate revenue for the economy.”

Food In Ramadan

“I’m a great cook. Everyone tells me that. I thought about making food at home and selling it as a result, and I started three weeks before Ramadan,” said Magda Said, who works at a children’s nursery.

“My friends and family promote my cooking and tell anyone who doesn’t have the time but wants good homemade food, especially in Ramadan when people gather often, that they should come to me. I prepare food and sell it, and I have created a group on WhatsApp for this project. God has been generous,” she added.

According to Hamdi Arafa, a professor of administration and an expert on local government, Egyptian families spend LE250 billion annually on food, or 45 per cent of their expenditure.

Ramadan takes the lion’s share compared to other months when food sales reach LE45 billion, or LE1.5 billion a day, according to figures from the Central Agency for Public Mobilisation and Statistics (CAPMAS).

Said said the current price hikes were unprecedented. “We woke up one day and found prices had skyrocketed. I’m not even talking about poultry or meat. Even fava beans, and vegetables now average LE6-7 per kg,” she said.

“My husband’s salary and mine add up to LE3,500, and I have two daughters who are engaged and will soon marry and one son who is still a student. We have to pay the bills for transportation, food, drink, healthcare and prepare for the girls’ weddings, but our income covers nothing. If you don’t find supplementary work, you will become a pauper.”

Said believes her private business could resolve the financial difficulties facing her family, especially since she is good at it. “I inherited my cooking skills from my mother, and when I was talking with my colleagues at work about our difficult circumstances, they suggested I should make food and sell it because I cook well,” she recalls.

“I agreed this would improve things a little, and it wouldn’t be too much effort for me compared to working in a second job outside the home. I don’t have any savings from the extra income, but at least it is enough to get us through the month. I’m counting on Ramadan being a good season as there will be more demand for my food, and maybe then I will be able to put some money aside for the girls’ weddings,” she said.

The alternative economy is a key component of the unofficial economy, which can include plumbers, street vendors and others. It is a large sector that cannot be measured precisely and there are no real figures on it.

But this type of moonlighting through cooking or handicrafts is quickly growing due to the high prices and people trying to increase their incomes to meet their basic needs, according to Mahmoud Abdel-Hai, an economics professor at the National Academy for Planning.

“I believe this economy will expand more and will be a necessity for every Egyptian household,” he predicted.

Abdel-Hai believes Ramadan is a good opportunity to launch and promote such projects, especially since the month has special requirements that every family is trying to meet.

“We must understand that the alternative economy will not shrink, but rather as prices continue to climb people will look for other ways to increase their incomes,” he said.

“Some women have tried to solve the problem with their skills of preparing and cooking food to sell, while others can sew and do handicrafts. Then men found they owned a car and could drive it to generate more income, so they joined ride-hailing companies. As prices climb, there will be new ideas for work. This is when the state should step in and benefit from these activities and incorporate them in the official economy to improve the overall economy and increase economic growth,” Abdel-Hai said.

“At the same time, we must handle the matter carefully and give incentives to people in this sector through tax amnesties and health insurance and integrate them in the food supply network so they can purchase goods at low prices.”

Abdel-Hai explained that such incentives could enable the state to take control of the alternative economy, which is otherwise growing beyond its reach.

At the same time, labour would benefit as well as ordinary citizens, since with greater state control would come greater regulation and quality control of economic actors.

*A version of this article appears in print in the 16 May, 2019 edition of Al-Ahram Weekly under the headline: The alternative economy in Ramadan

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