Value-Chain Analysis of Egyptian Aquaculture
Graeme Macfadyen , Ahmed Mohamed Nasr Allah , Diaa Abdel Reheem Kenawy , Mohamed Fathi Mohamed Ahmed , Hussien Hebicha , Ahmed Diab , Samy Mohmed Hussein , Ramadan Mohamed Abouzied , and Gamal el Naggar .
Executive Summary
Egypt’s aquaculture production (705,490 tonnes in 2009) is by far the largest of any African country and places it 11th in terms of global production. The aquaculture sector makes a significant contribution to income, employment creation and food security in the country, all of which are national priority areas given low per capita income levels, rising population, worsening food security indicators, and official unemployment levels which have remained at around 10% for the last ten years.
Despite the fact that the aquaculture sector in Egypt is now a mature one, having developed over a period of more than 30 years, the economic performance of the sector is not well understood or documented. To help improve this understanding this report presents the outputs of a value-chain study for the sector. The study focused on four of the most important governorates in terms of aquaculture production: Kafr el Sheikh, Behera, Sharkia, and Fayoum. Individual interviews and focus group discussions with fish farmers, traders/wholesalers, and retailers, were used to collect quantitative and qualitative information about financial performance, employment creation, and the critical factors impacting on the performance of each sub-sector of the value-chain.
The farmed fish value-chain in Egypt is strongly based on the production of tilapia, with mullet a key second species, and with small quantities of carp and catfish also contributing to farm production. Some key features of the value-chain are that:
• There are virtually no exports of farmed fish, and so the value-chain is a short and simple one compared to aquaculture value-chains in some other countries;
• There is no processing at all of farmed fish i.e. all fish is sold in whole form, with no value-addition either through primary processing into fillets or into other secondary processed products (e.g. ready meals, etc);
• Most fish are sold either fresh on ice (in summer months or if sales are made far from farms) or fresh with no ice (in winter months and/or if sales are made close to farms). There is a growing trend however for the sale of live tilapia, motivated by the fact that fish prices have fallen in real terms over the last ten years and higher prices can be achieved for live product;
• There is a very short time-period from harvest to final consumption by the consumer (due to the live/fresh nature of all sales), and very low rates (<1%) of post-harvest losses (which is in contrast to many wild fisheries value-chains in developing countries); and
• Direct employment creation throughout the value-chain is significant, at around 14 full-time equivalents for every 100 tonnes of fish produced and sold. This employment is fairly evenly divided between those over and under 30 years of age, and is mostly accounted for by men, although some female employment is created in the retail sub-sector. Considerable additional indirect employment creation results from sector activity through jobs created through the production of inputs used by the value-chain i.e. jobs in feed mills, hatcheries, ice plants, suppliers of vehicles, water pumps and generators, building contractors, and manufacturers of boxes used during transport.
Constructing costs and earnings models for each link in the value chain, allows for a comparison across the various sub-sectors, and for performance to be assessed both individually in each governorate and across all governorates. Some key findings from the data analysis made possible by the fieldwork completed during the study are:
• Fish farmers obtain a high percentage (72%) of the final consumer price, due to the lack of any exports, the short-supply chain, and the lack of value-addition in the value-chain;
• The average total production cost across all fish-farms is LE 7,769/tonne. This represents the break-even weighted sales price i.e. the average price of all fish sold by a farm must be more than LE 7,769/tonne if the farm is to make a profit;
• Feed costs represent a very high percentage in all governorates of operational costs for the farming sub-sector (67% of operational costs);
• Operational costs represent a very high percentage of total costs for all sub-sectors in the value-chain i.e. fixed are relatively small;
• In the farming sub-sector operational profits are 29% of sales and net profits 22% of sales. Corresponding figures for the trader/wholesaler sub-sector are 4.1% and 3.9%, and for the retail sub-sector are 7.1% and 6.8%; and
• Operational profits generated throughout the value-chain are LE 4,460/tonne of fish produced/sold, net profits are LE 3,736/tonne, and value-added (net profits plus wage earnings) is LE 4,619/tonne, with the farming sub-sector contributing more than 60% of total profits/value-added for all of these indicators.
While the above figures confirm that the industry is sustainable and generates considerable profits and employment, this study suggests that the sector as a whole is under increasing financial pressure. Critical factors facing the sector and impacting on profitability, can be grouped into those related to inputs, those related to production, and those related to the marketing, transportation and sale of product.
With regards to inputs the price and quality of fish feed have had a critical impact on costs and profits. Prices have risen by 200-250% over the last 7 years. The poor quality of fish fry, lack of available land for expansion in many governorates and short lease periods, poor quality of water, lack of access to capital, and the lack of electricity and high fuel costs for generators and vehicles, are all additional problems of considerable importance.
At the production level, critical factors affecting value-chain performance are: poor practices with regards to feed management, farm design and construction, fish health management, and stocking densities; a growing season which is restricted to about 8 months due to the colder weather in the winter months; absence of improved strains of fish that been shown to have major impacts on production in other countries; and a widespread lack of effective representative organisations for any of the sub-sectors.
With regards to the marketing and distribution of fish, the study showed that critical factors are: declining fish prices in real terms; consumer preference for wild fish and a distrust of filleted/processed products; strongly fluctuating seasonal prices (with declines in prices towards the end of the year coinciding with the major harvesting period); poor fish hygiene and handling practices throughout the value-chain; the lack of any value-addition through processing; the lack of any exports; and in some cases poor road networks impacting on the ability to get fish to markets.
This report provides a large number of recommendations for support to the aquaculture sector in Egypt, which flow directly from these challenges and critical factors. Some of the necessary actions should be the responsibility of the sector itself, some the responsibility of government, and some the responsibility of donors and NGOs. What is clear is that for meaningful improvements in value-chain performance, substantial action and investments will be needed by many stakeholders.
Citation of this report is : Macfadyen, G et al. 2011. Value Chain Analysis of Egyptian Aquaculture. Project Report 2011- 54. The WorldFish Center. Penang, Malaysia. 84 pp.