Minister of Finance Mohamed Maait’s recent remarks during discussion of the budget in the House of Representatives, the lower house of Egypt’s parliament, on the decision not to raise taxes on crisps and crackers have raised questions about the state of these snacks in Egypt.
Maait explained that he had proposed a tax increase on snacks a year ago, but the proposal was rejected.
The industry is listed among the products that are subject to the value added tax (VAT) but not at the standard rate of 14 per cent, as they are charged a reduced rate of only five per cent, according to the amendments introduced to the tax law in 2021.
The House of Representatives has not raised taxes on savoury snacks since then.
“Consumers would have to bear the brunt of a tax hike on these foods,” MP Fakhri Al-Fiqi, chair of parliament’s Planning and Budget Committee, told Al-Ahram Weekly.
“Children make up the largest number of consumers of these products. If their price goes up, it will place an additional burden on Egyptian families, which are already suffering from economic strains due to the inflationary impacts of the Covid-19 pandemic and the Russia-Ukraine war.”
Al-Fiqi said that President Abdel-Fattah Al-Sisi had issued a directive that no new tax burdens should be imposed on Egyptian citizens at present and in the forthcoming period.
The crisps and salted snack industry supports consistently high domestic consumption and export volumes despite the present economic difficulties. There has also been a major increase in exports of locally produced salted snacks, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).
In the first half of 2022, exports in this category came to $26,609,000, up from $16,529,000 for the same period in 2021, an increase of about $10,080,000 or around 38 per cent.
Hani Berzi, chairman of the Food Export Council and chairman and managing director of Edita Food Industries, told the Weekly that potato crisps had a market value of LE25 to LE30 billion and that the industry was growing annually by eight to 10 per cent.
The profits of the leading chips and crisps manufacturing firms have not been affected by the economic difficulties of the past few years.
Mohamed Auf, chief operating officer of Abu Auf, a leading snack food company, said that the company had made over LE1 billion in sales in 2021.
The Auf family launched its Abu Auf brand for nuts, coffee, and health foods in 2010, opening its first branch in December that year. But soon afterwards they had to close the branch as a result of the political upheavals of 2011.
They reopened in 2012 and launched a new branch. They attribute their success to their experience in the import and wholesale trade and to their use of market research techniques, a methodology that had never previously been applied in this market in Egypt.
The net profits of Edita Food Industries, producer of a famous brand of salted crackers and sticks, shot up by 154 per cent in the first quarter of this year over the same period last year, reaching LE375 million.
A statement released by Edita attributed the success to larger sales, an increase in the average price of their products, improvements to the products, and the launch of new product lines.
Abu Auf, Edita, and other such firms are keen to expand both in exports and in domestic markets.
Explaining his company’s expansion strategy in Egypt, Mohamed Shelbaya, chairman and CEO of PepsiCo Egypt, producer of a famous brand of crisps, said his firm was “extremely interested” in pumping in more investments to support Egypt’s economic growth and opening new horizons in the food and soft drink industry.
In a statement during Prime Minister Mustafa Madbouli’s tour of a new production line in an affiliated factory in February, Shelbaya said that his firm had invested $20 million to create the new production line and that capacity would be about 25,000 tons.
According to Berzi, Edita Foods drew up a plan last year to invest LE1 billion in the Egyptian market over the next three years.
Nihal Said, general manager of Kemet for Natural Food, the producer of pretzel-like salted snacks, said that his firm exported its products to 30 countries, contributing to the growth of the Egyptian economy.
Kemet produces 19 tons of pretzels and crackers per day, half of which are destined for export. It markets its products abroad through food fairs.
The manufacture and retailing of crisps and other savoury snacks is popular among small and medium-sized enterprises (SMEs) because there is an extensive market for such products and consumption rates are relatively immune to inflation.
The existence of this demand prompted the Micro, Small, and Medium Enterprises Development Agency to conduct a feasibility study on the production and sale of cornmeal crisps and crackers. The study, published on the agency’s website, found that building a production line including the machinery, ingredients, packaging materials and other necessities would require total capital investments of LE1,200,000 and that the project would make more than LE300,000 in profits in its first year.
Explaining why the consumption of crisps and other snacks has remained constant or even increased in recent years, economist Ali Abdel-Raouf Al-Idrisi said that even though these snacks may have been hit by inflation, they are still the cheapest alternative to a midday meal for the average student, labourer, or government employee.
Chips and snacks are fast-turnover products, Berzi explained. The most popular quick snacks in Egypt are potato crisps, followed by cornmeal and tortilla chips, and then crunchy baked goods. Some companies have begun to add organic and low-calorie items to their product lines in order to cater to the growing numbers of health-conscious consumers not wanting to eat crisps fried in oil.
Regarding the description of crackers as healthy products, Magdi Nazih, a nutrition expert, said that manufacturers’ labels describing their crisps and crackers as “healthy” were not always justified.
These foods “may be suitable as a snack or a light meal two or three times a month,” he told the Weekly. “But they are not a healthy alternative. They are manufactured using various artificial flavourings and other additives. Labelling a product as healthy should be left to nutritional experts, not to food manufacturers.”
Nazih recommended that children, as well as adults, should cut down on crackers and crisps and eat light homemade meals or sandwiches instead, with these being freshly made the same day as they are eaten.
* A version of this article appears in print in the 20 July, 2023 edition of Al-Ahram Weekly