This issue of MEE focuses on Egypt, one of the countries in the Middle East that has experienced a transformation of political rule as part of the so-called Arab Spring. Like many countries in the region, Egypt has a fast-growing population. It is the Arab world’s most heavily populated country and one of its youngest, with two thirds of its population under the age of 30.
It is probable that a young and aspiring population was one of the key factors in the overthrow of President Hosni Mubarak. Once the euphoria has subsided, though, the reality of the challenges facing the country will re-surface – and these include the fact that the young make up 90 per cent of the nation’s 9.4 per cent unemployed. On the one hand, a youthful society provides a potentially potent workforce that could fuel the country’s economic growth. But if high unemployment levels continue, discontent is likely to emerge again.
Economic development and prosperity bring greater demand for electricity and Egypt will need to respond to this. Even before the recent uprising, Egypt was expecting an average annual growth rate for power demand of about 6 per cent. According to Business Monitor International’s latest Egypt report, electricity consumption per capita is now forecast to increase by 13 per cent between 2011 and 2015 and, coupled with a growth in population from 84.5 million to 91.7 million over the same period, this will put constant pressure on the electricity supply industry.
The Country Focus report on page 6 suggests that investors are remaining cautious about committing new funds to Egypt’s power sector, which is perhaps understandable while there remain question marks over security in the country. Certainly, Egypt’s tourism industry has been impacted by recent events and while the trials continue of several of the previous regime’s key figures, an air of uncertainly will remain. But investment in all aspects of the electricity sector will be necessary if anticipated growth patterns are to be realized.
“Any new government will need to meet the aspirations of the people and satisfy an ever increasing demand for electricity,” says Hemmat Safwat, an Egyptian power industry professional currently based in Greece, where he is in charge of power and water plant business for developer Consolidated Contractors International. “Growing power demand will make Egypt a more attractive place for international investors. With the government having to divert resources to areas like education and health, it will not be able to rely on the EPC model and we can expect to see more IPP opportunities,” argues Safwat.
The MEE report does highlight the support of some multilateral banks in lending to Egyptian power projects and, in addition, the African Development Bank recently said it would commit about $1.4 billion of new money over the next 18 months to promote energy production and green sources in Egypt.
It remains to be seen if Egypt’s policies towards electricity will change. Interestingly, Energy Minister Dr Hassan Ahmed Younes was one of the few ministers to be retained by the new rulers, signalling a degree of continuity for the time being. Younes is regarded more as an energy professional than a political figure. It will be up to the new parliament to decide if current policies are to be modified. There is some speculation that the implementation of a renewable feed-in tariff policy may be accelerated. It will be fascinating to see if the country’s approach to nuclear power generation will change, with the current policy, which was moving towards tendering for a nuclear reactor, now firmly on hold. It is likely that energy policies will still favour reducing dependency on gas, but will renewables now be favoured over nuclear?
The current caretaker government has the job of preparing for elections later this year or early next year and of ushering in a new democratically elected regime. Egyptians will expect this government to deliver on creating jobs and prosperity and to be far more consultative when arriving at policy decisions. New and expanded energy infrastructure will be a big part of this and, with the fossil and renewable resources at its disposal, can be the driving force of an exciting future for the country.