The impact of boycotts on the Egyptian economy
Edited By: Vereena Bishoy
Photo Taken By: Omar Awad
Boycotts targeting major brands for supporting Israel during the ongoing Palestine-Israel war are affecting their stock market and the economy.
Consumers in different markets around the world, but especially the Arab markets, are boycotting brands that openly support Israel, including McDonald’s, Starbucks, L’Oréal, Pizza Hut, KFC, Dunkin Donuts, and Papa John’s.
It all started when some brands posted on their official social media pages that they support Israel, with some food chains like McDonald’s even sending free food to Israeli soldiers. It was then that many consumers made a statement in support of Palestine, announcing on social media platforms that they refuse to pay money to brands supporting Israel and suggesting local alternatives instead.
Some of these brands, however, are franchise-based businesses models, so the policies adopted for instance by the Israeli branches of McDonald’s often contradict those adopted by Arab branches. Yet they are affected by the boycott; for example, Maccdonalds sales dropped by 70% in the months of October and November.
“The franchised companies, the ones that people are boycotting, do send some of their profits to the mother-company abroad. That’s the part people are actually against and see it as support to the mother-company that is using part of the profit and income to support other companies,” explains Dina Abdel Fattah, assistant professor and the chair of the Department of Economics.
Abdel Fattah says that it is still early to decide whether this boycott will help or harm the local economy now as there has been a surge in demand for local products after October 7, but it is impossible to predict the long-term results.
As the sales drop, however, the immediate strategy to save cost is to lay off workers, which means the short-term effects of the boycott will be many people losing their jobs.
Egyptian producers who sell raw materials to these companies will also be affected as the demand on their products drop, eventually leading to losses.
Abdel Fattah explains that the layoffs and decreased demand on local raw materials could be mitigated if the local market is able to absorb these investments and add their productivity and sales.
“Local firms announcing that they have the capacity to absorb anyone who would lose their job in McDonald’s or Starbucks” yet that’s an immediate reaction, but in the long term it will add cost to the firm, explained Abdel Fattah.
If the local market can expand quickly, only then will this boycott be in favor of the Egyptian economy.
“It’s not going to be an automatic thing; it will require some changes and some adaptability procedures to make sure that the changes are more sustainable and more long term rather than an immediate reaction,” said Dina Abdel Fattah.
