Guest Post: Egypt Street Vendor Vendetta

Guest post by Hassan Massoud, vice president at a regional private equity firm 

One of Egypt’s persistent public policy debates is “What to do about the street vendor problem?”

One of the last Ganzoury government’s last policy achievements is a hilarious solution to the “street vendor problem”: creating centralized markets for the roaming vendors. The whole point of street vendors is that they can set up shop anywhere, anytime without being chained to one place. Hilarity aside, it is worth asking first: “Is there a street vendor problem?” Perhaps not; there’s actually a good chance the only problem with street vendors is that there aren’t more of them.

[caption id="attachment_414" align="aligncenter" width="484"] Cairo, Egypt. Flickr[/caption]

Some economists estimate that Egypt’s five million street vendors sell about $5 billion worth of goods a year. To put this in perspective; an industry that employs 5 million people is just a million short of the country’s largest employer; the Egyptian government with six million employees. In a time where Egypt’s unemployment rate is at its highest in a decade (according to official government statistics 3.4 million people are now out of work), the country’s street vendors ply a hard trade that keeps the economy ticking.

Here is how our street vendors help our economy:

1 – Street vendors fight inflation.

Since they don’t pay shop rentals, trucking costs, employee salaries, utilities or taxes, street vendors can offer products at a very small mark up to their wholesale price. Say everyday a street vendor buys 20 pairs of high quality flip flops from the wholesale market at 10 Egyptian pounds ($1.6) each. All he needs is a 2 pound mark up to make a decent daily profit, and that’s assuming he sells nothing else. How much do you think a shoe store owner would charge for the same high quality flip flops? Street vendors make products available to the Egyptian public at a lower price than they otherwise would’ve had to pay.

2 – Street vendors improve traffic.

The basic premise of a street vendor’s business model is that he or she sets up shop in an area where lots of people are coming are going. If it weren’t for the flip flop street vendor, maybe 10 of his 20 customers per day would have made a special trip (or a special diversion from their daily commute) to acquire a pair of flip flops. So by making one trip to the wholesale market and retailing the flip flops downtown, we’ve saved the city’s traffic system 9 trips that would have otherwise been necessary. Imagine all the extra fuel saved, and avoided pollution.

3 – Street vendors save the government money.

In Egypt, diesel (the fuel used in most public transport vehicles) is heavily subsidized by the government; selling at about 20% of its global market price. It is one of the cheapest countries in the world to buy fuel (It comes second after Venezuela). At a microbus ticket price of 2 Egyptian pound (round trip) I estimate that the government is probably indirectly subsidizing each 2 pound trip by at least 4 pounds worth of diesel. By helping avert 9 trips every day, the street vendor has directly saved the Egyptian government 36 pounds, more than his own daily profit.

So, as a new government, unencumbered by the legacy of policies past, finds its footing, I hope they challenge the assumptions and biases of policy makers past and not view the informal sector as a problem to be eradicated.

Egypt’s thriving informal sector supports millions and is estimated to be worth about $250 billion. Instead of fighting it, perhaps policy makers should encourage and develop the informal market, let it prosper; these are tomorrow’s – formal – Small and Medium Enterprises.



4 Comments


  • Posted August 28, 2012 at 8:47 am | Permalink

    Good points. Those clamoring for their removal must want the city streets to look more like New York or Frankfurt — in other words, more like the west, the supposed benchmark of progress. But as we know, there can exists different kinds of successful cities, if we look at it from a different paradigm. That, added to the good point you make, and the fact that these street vendors probably help fend off monopiloies and price discrimination among other economic evils. If the benefits of a free market is what you want, this the street vendor is an important agent in helping to sustain it.

  • Posted August 29, 2012 at 9:25 am | Permalink

    True to some extent, but:

    1. street vendors provide unfair competition against tax-paying shop-owners, particularly when they set up shop outside their stores and sell similar goods.
    2. Street vendors worsen traffic when they are unregulated, taking over streets and parking spots in some places.

    The key thing here is that you can’t just have street vendors doing what they please, there has to be some code of conduct, protection for legitimate stores, protection for consumers, and the advantages of street vendors have to be considered alongside with their impact on the urban environment (overcrowding of public walkways and streets, etc.)

    The way in which they have overtaken many parts of Cairo in the last year is too much, in some cases they have become a law onto themselves.

    • Posted August 29, 2012 at 12:17 pm | Permalink

      Arabist,

      Thanks for your comment.

      1 – Disagree re the inequity in tax avoidance point. For tax purposes a street vendor is a sole proprietor; it’s probably safe to assume their net annual income puts them well below the lowest taxable income tranche anyway (10,000 EGP/Year, I believe). So the inequity in tax avoidance isn’t applicable to income tax. You may have a point with sales tax, but a lot of what they sell doesn’t attract a sales tax anyway.

      2 – I don’t believe business owners (stores) deserve protection from a competitor able to provide a more convenient service at a lower cost to the benefit of the consumer. Additionally, the consumer is no less protected because state intervention on quality control happens at the producer (or importer) level anyway, never the retailer; be it a shop of a street vendor.

      3 – I probably went overboard with the bold statement “Street Vendors Improve Traffic”, but their effect is definitely mixed. Calculating their net impact given different mix of sales / street positions would certainly make for a valuable engineering fluid mechanics thesis.

      Really though, the main point here is that Egyptian policy makers have always wrongly viewed the informal sector as something to be eradicated. In reality, these are engines of genuine economic prosperity for society’s poorest entrepreneurs that need to be slowly nudged into the formal economy. The most atrocious example this myopic view of informal economic activity is informal housing, but that’s an even bigger story.

  • Waad
    Posted September 24, 2013 at 10:58 am | Permalink

    What do you mean by encouraging street vendors? It is a tough unsafe unfair job that people resolve to out of need with no guarantees whatsoever of future retirement plan etc. So it sounds as if you are suggesting improving the economy on the expense of those 5 million people.



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