Mary J. Blige in a dress by Farida Temraz, a leading light in Egyptian fashion design
Mary J. Blige in a dress by Farida Temraz, a leading light in Egyptian fashion design

How will Egypt unleash its 'inner innovator'?

13 February 2018

The ballot papers for Egypt’s forthcoming presidential election have not yet been printed, but everyone knows who will win.

Abdel Fattah al-Sisi, the former army chief who came to power in a military coup in 2013, won 96% of the vote when he stood for the presidency four years ago and is expected to win the ballot by a similar margin at the end of March.

Now 63, al-Sisi presides over a deceptively tranquil nation. After the uprising of 2011, which toppled dictator Hosni Mubarak, and the short-lived reign of the democratically elected Muslim Brotherhood government, his prime concern has been stability. His military-backed government has marginalised many opponents – often by jailing or arresting them – and recently launched an ambitious offensive against Islamic extremists, while trying to encourage a steady economic recovery to benefit the population of 96m.

The economy is showing signs of life, growing at around 5% a year. Cairo is one of North Africa’s busiest innovation hubs – Huwaei and the UN are among the latest organisations to invest in the city’s ‘smart village’.

The government is also winning its fight against an unusual economic scourge: hepatitis C, a blood-borne infection so prevalent in Egypt that, in 2015, it cost the equivalent of 1.4% of GDP. Through local manufacture of cheap generic drugs, the government claims to have cured 1.1m sufferers. Such remarkable progress has fuelled a boom in medical tourism, with companies targeting American patients with such offers as: “For $6,000, cure your hepatitis and see the pyramids.”

Egyptian fashion designers are becoming more prominent, exemplified by Farida Temraz, who leads by example through her own work – recently worn by Carrie Underwood and Mary J. Blige – and workshops she holds for young designers at Cairo’s American University.

Egypt certainly needs its people to “unleash their inner innovator”, as the slogan for a Cairo Innovate conference put it. Inflation soared when the government floated the Egyptian pound in November 2016, to secure a $12bn IMF loan. Despite recent falls, inflation still stands at around 17%. As Temraz told Egypt News: “The price of everything doubled almost overnight so all designers suddenly faced the challenge of accommodating new prices without pushing away loyal clients.”

The recent drop in inflation probably has as much to do with reduced purchasing power as a transformational economic recovery. Hani Berzi, chairman of Edita Food Industries, one of Egypt’s largest food producers, told the Gulf Times: “We’d like to raise our prices but the market isn’t favourable right now.” One economist says consumers compensated for rising prices by shifting from meat to cheese as a source of protein.

The Economist says three commodities subsidized heavily by the state – fuel, bread and water – illustrate the country’s economic woes. Egyptian motorists pay only 59% of what it costs to fill their tanks. Yet cheap fuel is, the magazine argues, a false economy – the World Bank estimates that traffic congestion in Cairo cost Egypt 3.6% of its GDP. As only the wealthy minority can afford to buy cars, the government is effectively making the rich better off – and incentivising air pollution. Every year since 1997 a dense smoke known locally as the ‘black cloud’ has spread across the Nile Delta cities, helping to make Cairo the seventh worst city in the world for air pollution.

Egyptians can buy up to five loaves of bread a day for a tenth of their real cost. The state also subsidises sugar, cooking oil and other calorific foods, which helps to explain why 39% of Egyptians are obese.

Water – virtually free to farmers and cheap for city dwellers – is an even bigger challenge, encouraging waste the country can ill afford. “We have to dig deeper and deeper to get water,” farmer Abdel-Fattah told The Economist. “Anyone who says he’s not worried about water is lying.”

Those worries may worsen when Ethiopia completes a huge new dam on the Blue Nile, upstream from Egypt. Ethiopia, Egypt and Sudan have not yet agreed how the water from this dam, which is 60% complete, will be shared. H.A. Hellyer, at the Royal United Services Institute, a London think tank, has said that a military conflict – including the possibility of Egypt bombing the dam – cannot be ruled out.

The good news for Al-Sisi is that the Egyptian economy is about to start literally cooking on gas. Zohr, the largest natural gas field in the Mediterranean, began pumping gas ashore to Port Said late last year. With production forecast to reach 2.7bn cubic feet by the end of 2019, Zohr could save Egypt at least $1bn a year in gas imports. BP is also developing two other gas fields – Atoll and phase two of the West Nile Delta project – which could enable the country to export energy again.

That revenue could help the government confront one crisis that may, in the eyes of Mohsin Khan, a senior fellow at the Atlantic Council think tank, spark another revolution: youth unemployment. He estimates that: “Nearly 40% of young Egyptians either don’t have jobs or are working for low wages in the informal economy.”

Recognising the danger, the government has recently passed laws to ease regulations and facilitate investment in the small and medium-sized businesses that form the backbone of the economy. Cracking down on stifling bureaucracy is also a priority. In a country that invented red tape more than 5,000 years ago under the pharaohs, this will not be easy – but it is essential if the government is to attract more than $10bn a year in foreign direct investment.

Al-Sisi has also announced several mega infrastructure projects – the expansion of the Suez Canal, the building of a new administrative capital and the construction of 1m new housing units – but, so far, only the Suez Canal project has been completed. Khan welcomes such policies but fears that, without a “laser-like focus on youth unemployment”, Egypt’s future could be as turbulent as its recent past.

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