Egyptian President Abdel Fattah El Sisi increased the minimum wage for public sector workers by 20 per cent and approved salary increases worth 37 billion Egyptian pounds ($2.35bn) as the Arab world's most populous country looks to stimulate economic growth.
The national minimum wage for public sector workers will increase to 2,400 pounds ($153) a month from 2,000 pounds currently, presidential spokesman Bassam Rady said in a statement.
The directives are among several issued by the president following a meeting on Monday with Prime Minister Mostafa Madbouly and Minister of Finance Mohamed Maait to discuss the draft budget for fiscal year 2021-2022, which begins on July 1.
Egypt is the only country in Mena whose economy grew last year, according to the World Bank. However, it has not been immune to the pandemic's impact with its tourism sector particularly hard hit as movement restrictions were enforced. Unemployment spiked to 9.6 per cent in the second quarter of 2020 before decreasing to 7.3 per cent in the third quarter, according to the International Monetary Fund.
“The unusually higher minimum wage increase decision for this year was driven by the government’s perception and consciousness of the street’s pulse,” said Esmat Kamel, director of the Centre for Global Business Excellence at Cairo-based think tank Global Trade Matters.
“It also reflects a strong signal from the government's side to being committed to taking action to ease the additional burden off the citizen's shoulders, especially during the pandemic and the repercussions it has caused on low-income workers,” said Ms Kamel, who also teaches economics at October University for Modern Sciences and Arts.
Egypt increased its minimum wage to 2,000 pounds from 1,200 pounds in 2019. Prior to that, public sector wages had not increased for five years.
Pensions will increase by 13 per cent at a cost of 31bn pounds, outpacing inflation at 5.1 per cent. Around 10.5 million citizens will benefit, the head of the National Authority for Social Insurance Gamal Awad told Egyptian television station Sada Elbalad.
Other bonuses approved by the president include 17bn pounds in incentives and two allowances at a cost of 7.5bn pounds, one at a rate of 7 per cent of the basic salary for employees subject to the Civil Service Law and the other at 13 per cent for those not subject to the law.
Employees who meet promotion requirements on June 30 will receive salary increases at an estimated cost of 1bn pounds.
Finally, workers who will be transferred to the New Administrative Capital will be rewarded with a total financial incentive of about 1.5bn pounds. The new capital city, 45 kilometres east of Cairo, which has been under construction since 2015, is expected to be completed this year.
The draft budget aims to reduce Egypt's total deficit to about 6.6 per cent of GDP and achieve an initial surplus of 1.5 per cent of GDP.
Egypt’s economy grew by an annualised 1.35 per cent in the last half of 2020 and by 2 per cent in the final quarter, Minister of Planning and Economic Development Hala El Said said last week. She expects it to grow by 2.8 per cent in the first quarter of 2021 and 5.3 per cent in the second quarter.
The minimum wage for the public sector is set by the National Council for Wages, which was established in 2003 to ensure that salaries cover the cost of living. It has yet to set a minimum wage for the private sector.
“Raising the minimum wage will enable low-income workers to raise their consumption spending,” Ms Kamel said. “This, in turn, will decrease income inequalities, cause a multiplier effect on the economy and trigger knock-on effects on many other sectors to help in stimulating economic growth.”
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
The bio
Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home
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Washmen Profile
Date Started: May 2015
Founders: Rami Shaar and Jad Halaoui
Based: Dubai, UAE
Sector: Laundry
Employees: 170
Funding: about $8m
Funders: Addventure, B&Y Partners, Clara Ventures, Cedar Mundi Partners, Henkel Ventures
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