Displaying items by tag: Egypt - Afro-Middle East Centre

The economic collapse in Egypt

  • Dec 09, 2019
  • Published in Egypt

By Yehia Hamid

All economic indicators in Egypt point to the fact that the country has entered a phase of serious economic collapse, for which it and its people will pay for many years, and which will have an impact on a large proportion of its people.

Indicators from the Egyptian Exchange show that it has lost 30 per cent within two years, and 27 billion Egyptian pounds ($3.4 billion) within only two weeks. Egypt’s feeble exchange is expected to continue its nosedive.

Egypt’s foreign currency reserves reached their worst levels since Egypt received nearly $50 billion from three Gulf states after the July 2013 coup in which General Abdel Fattah El-Sisi seized power. Most of these funds have been squandered. About $16.4 billion remain, and this amount is not sufficient to pay for the importation of basic commodities for more than two months.

Sisi, now president after being ‘elected’ in a sham election, requires $1.5 billion a month in order to remain in power. Reaching this target is becoming increasingly difficult because donor countries themselves face tough global economic circumstances, and because one of the main donors, Saudi Arabia, seems no longer to have the appetite to throw money Sisi’s way. The United Arab Emirates, the other big donor, is also tiring of the squandering f its money and of being treated like ‘an ATM machine’. Even if these countries were to continue to provide minimal support, that will not halt the economic decline that is felt by Egyptians.

Egyptian exports in general have fallen by 25 per cent, and the export of petroleum products has fallen by 19 per cent compared to the same period in 2014. Such numbers are due to a failure by the government on an economic level, the war it has waged on the private sector, and the monopoly of the political elite over all government tenders – completely shutting out smaller contractors.

Over the past two years, the government went further. It also fought against the activities of the ‘parallel economy’, which represents about 30 per cent of all economic activity. This battle has taken different forms in order to force small private businesses into the official market so as to reap taxes from these small workshops and their small unofficial activities. As a result, tens of thousands of people have lost their seasonal jobs, and around five million Egyptians served by these economic activities have been deprived of their services.

The business sector in Egypt, employing more than 300 000 Egyptians, is experiencing an extremely difficult time. It has suffered power shortages, a reduction in natural gas, and non-approval of funding required to renew necessary machinery and tools. Consequently, the situation in the sector has worsened as a result of a plan by the government to cripple these vital companies and force them to sell, thus benefiting from their cheap sale price or the cheap prices of their properties. Notable examples of this are the steel factory Najaa Hammadi Aluminium Factory and Al-Mahallah Textile Factory.

The country stands at the threshold of a collapse in the value of the Egyptian pound, which has lost 20 per cent of its value over the past two years and will likely be further devalued by the new Central Bank governor, Tarek Amer. The government, in the meanwhile, insists on collecting money from the Egyptians in a variety of ways – either through failed projects such as the Suez Canal water way extension project, or by hiking interest rates on saving certificates to 12.5 per cent, which are likely to rise even higher.

All the government’s ‘giant projects’ have either been cancelled or have failed. The Suez Canal expansion project, for which $8 billion was collected from citizens and for which a mandatory $1 billion of interest will have to be paid annually, is an example. The canal has already suffered a drop of 9.7 per cent of its revenues due to recent declines in world trade. In other words, the Suez Canal will this year likely attract a revenue of under $4 billion, compared to $5.4 billion in 2014 – despite the expansion project.

This failure is related to the complete absence of any legislative regulation or system of accountability. Sisi has purchased $8 billion worth of weapons, some of which are partly funded by regional powers while some will be paid for at a later stage by Egyptians, either through new taxes or through deductions from foreign aid.

The tourism sector suffered another collapse with the regime failing to protect it. Tourism were already low but were worsened recently with the killing of twelve Mexican tourists, and the deaths of 224 people in the Russian plane crash last month as a result of a security breach. The plane crash represented the beginning of a virtual freeze in tourism at the most crucial time – the commencement of the main tourism season of the year. Around two million Egyptians work in the tourism sector, either directly or indirectly, and more than eight million citizens will be affected by the failure of the government to salvage this important economic sector.

As if these indicators were not bad enough, the banking system is no longer able to save people’s money due to the Central Bank of Egypt lacking any independence or transparency. The bank’s current governor, Hisham Ramez, whose term ends at the end of November, was responsible for concealing billions of dollars of foreign funds that entered Egypt, had banned the publication of any credible information about the currency reserve, and refused to devalue the Egyptian pound in order to attempt to rescue the economy.

* Yehia Hamid is a former minister of investment in Egypt

By Al-Jazeera Centre for Studies

 

Late on Sunday, 25 January 2015, hundreds of protests broke in various Egyptian cities and towns, followed by attacks on public administration buildings and branches of the Interior Ministry; the burning of dozens of police and security vehicles; blocking of roads and railways all over the country; and even armed attacks on security patrols, with security personnel being ambushed and attacked at roadblocks. Some of these activities continued well into the following morning, with the death toll including more than twenty-five civilians and four security personnel, and with hundreds injured and hundreds more in custody.

This article is an initial reading of the events of that day, and their implications for the futures of both the popular opposition and the regime. It also discusses how regional and global forces view the regime.

Growth of the popular movement

Given the sheer number and spread of protests around the country, it would be nigh on impossible to estimate the number of participants in the popular movement with any measure of accuracy. It is clear, though, that Egypt last week witnessed the largest popular anti-regime gatherings since the sits-in at Rabaa al-Adawiya and al-Nahda squares were quelled in August 2013.

There are various reasons behind this escalation by the opposition, not least of which is the prevailing political climate in the country more than one and a half years after the birth of the 3 July 2013 regime. It has also became apparent just how big a reversal Egypt has suffered, from an unstable but free democratic situation to one of oppression, where the iron fist of security routinely slams down on opposition and strangles political freedom, with no sign of stability on the horizon. The acquittal, and subsequent release, of several figures of the Mubarak regime, including Mubarak and his two sons, only reinforce the general feeling that Egypt is rapidly slipping back under the old regime, even if the names of those at the helm have changed. Moreover, the devaluation of the Egyptian pound and the continuing deterioration of the economy have resulted in the strengthening belief that the regime, despite considerable financial support from certain GCC states, is no longer able to contain the runaway economic crisis.

In this climate, different sectors of the population are increasingly joining the opposition movement. But the situation is not confined to growth in the popularity of the movement. In the larger cities, especially Cairo, there are growing signs that some political groups, such as the April 6 movement, the radical left, and opposition student movements have become more willing to take to the streets and participate with the anti-coup National Alliance Supporting Legitimacy in popular demonstrations.

On the other hand, the successive changes in the leadership structure of the Muslim Brotherhood, both within the country and abroad, have boosted confidence among the Brotherhood’s rank-and-file, bolstering the ability of the movement and its sympathisers to mobilise, and reinvigorating its determination to continue its activities against the regime.

However, despite the massive mobilisation, and the sheer number and spread of the demonstrations, it would be premature to suggest that the balance of forces between the opposition and the regime has tilted in favour of the former. A significant majority of Egyptians is still wary of participating in the opposition, either out of fear of the regime and its oppressive machine, out of a collective desire to see a return to stability, or because of support for the regime. Some have been disillusioned by the lack of a viable alternative after the failure of the first attempt at democratic change and the crumbling of the revolutionary masses, while others actually support the regime fearing that Islamists might return to power. In other words, large swathes of the population have yet to reach a sufficient level of discontent to prompt them to go out to the streets and demand the downfall of the regime.

The armed option

The change in the disposition of the popular movement opposing the 3 July 2013 regime is undeniable. Even though the Muslim Brotherhood (the main force behind the anti-coup alliance that has led the opposition throughout the past nineteen months) and its partners in the alliance have adhered to completely peaceful methods in their opposition to the regime, there are some groups in various parts of the country that are resorting to different methods. The subtle indicators of this shift began to appear about a year ago, but by 25 January 2015 they had grown so strong that they can no longer be ignored.

These indicators fall into two main categories:

  1. Vandalism and the destruction and arson of government institutions, police and security stations and vehicles, telecommunications towers, and electric power transformers, as well as the cutting off of roads and railways. More recently, the banking sector was targeted, with calls for people to withdraw their money from various banks.
  2. Organised armed attacks on police and security stations and checkpoints, and attempts on the lives of security officers, judges, prosecutors and informers thought to be involved in the crackdowns.

The goal of the first category is to compromise the regime’s ability to govern and to cripple the state, while the motives of the second are revenge and settling of scores.

There are three groups that have openly claimed responsibility for such actions at different times. The first, Ajnad Misr (Soldiers of Egypt), went public a year ago with a black flag that resembles that of the Islamic State (IS) group. If a relationship, whether direct or indirect, between Ajnad Misr and IS can be confirmed, the group, which operates mainly in the governorates along the Nile Valley, would be the second to declare its allegiance to IS and its jihadi-oriented interpretation of Islam. The first was Ansar Bait al-Maqdis (Supporters of the Holy House), which is active in northern Sinai.

The second group, Harakat al-Iqaab al-Thawri (Revolutionary Retribution Movement), announced itself on 24 January 2015, claiming to have active cells in fifteen of Egypt’s twenty-seven governorates. Despite the obvious difficulties in verifying that claim, the wording of the announcement seemed free of the usual hallmarks of jihadi discourse, suggesting that the group has no jihadi leanings. However, the sheer magnitude of operations for which the group has claimed responsibility is astounding, since these occurred throughout the country, including in Cairo, Alexandria and cities along the Suez Canal.

Both Ajnad Misr and Harakat al-Iqaab al-Thawri appear to have no qualms about carrying out deadly attacks and bombings using triggered devices and time bombs, either targeting specific people or randomly killing security and police personnel. Despite the glaring contrast in discourse between the two, they clearly share the belief that armed violence is part and parcel of dealing with the regime, and that violence is the only course of action to bring about change in Egypt.

The third group, Al-Muqawama al-Shaabiya (Popular Resistance), emerged about six months ago. The wording of its statements suggests a generally jihadi leaning, with close ties to the popular movement. Al-Muqawama al-Shaabiya is inclined more towards vandalism and road-blocking. To date, it is not known to have executed any armed attacks on security forces, even though it has been known to protect protesters from attacks by groups of thugs and criminal gangs believed to be affiliated with the regime’s security apparatus.

Unlike northern Sinai, which has witnessed almost open warfare between the armed forces and Ansar Bait al-Maqdis since the 3 July coup, the magnitude and frequency of vandalism and armed attacks in the governorates along the Nile Valley have not yet reached sufficient intensity to be described as an armed struggle. Unlike in Syria, where the popular movement receded as the armed struggle escalated, armed resistance in Egypt has not even reached a level that it could cripple the state or negatively impact the popular movement. Nevertheless, the magnitude and scale of events that took place on 25 January 2015 did cause the regime’s leaders serious concern.

The illusion of stability

The military officers who led the 3 July coup, and most of the civilian politicians who supported them, were hardly oblivious to the fact that they were desecrating the democratic process, nor were they unaware that their actions were – at least at the time – unwelcome to Egypt’s US and European allies. Washington and various European capitals certainly wanted to tame the rule of President Muhammad Mursi, but they also wanted the change to come about legally and constitutionally. On the other hand, the leaders of the 3 July regime were betting on the huge financial, economic and political support of some GCC countries, especially Kuwait, Saudi Arabia and the UAE, as well as Israel’s welcoming of the coup. The generals gambled on the probability that these countries would eventually help change the western stance and build legitimacy for the regime. They also wagered that they would quickly be able to establish stability, thus providing a climate for continued Arab support and a gradual shift in the western stance. It would be safe to say that that objective of achieving stability as rapidly as possible became such a high priority for the regime that it made the ill-advised decision to brutally break up the Rabaa and Nahda sits-in in an attempt to end the manifestations of popular opposition and social discord.

During the past eighteen months, the pro-regime GCC governments have pumped more than US$40 billion into the Egyptian treasury and economy. With support from the West, these countries helped the regime to gradually normalise its relations with the USA and Europe. Over the past few months, the regime appeared to be slowly but surely achieving its aim of building an image of stability for the country, despite the repressive actions of the security sector and the tyranny of the judiciary which is aimed at quelling the opposition. But the events of 25 January 2015 demonstrate that the dream of stability is far from being a reality, that the regime is no longer capable of breaking, or even containing, the popular political opposition, and that the country is entering a phase of worsening tension that could be far more destructive than anything it has witnessed over the past year-and-a-half.

Western media outlets have generally displayed substantial interest in that Sunday’s events. Spokespersons for the US State Department, the European Union and a number of European countries expressed concern over the death toll among protesters. The impression of instability will make European governments hesitant to offer Egypt direct financial or economic assistance. Likewise, there are growing signs that the enthusiasm with which some Gulf countries offered direct financial assistance to Egypt has waned since a year ago, either because of the proverbial black hole of corruption that exists deep within the structure of the Egyptian state (as the UAE believes), or due to the rapid, successive changes in the country’s political leadership (as Saudi Arabia has just experienced), or because of the dramatic decline in oil prices (as Kuwait fears). The decline in direct financial support is the only explanation behind the Central Bank’s inability to keep propping up the value of the national currency, and the subsequent dramatic freefall of the Egyptian pound’s value against the US dollar.

Losing control

Since 3 July 2013, the Egyptian regime has repeatedly gambled on the security option to quell opposition and impose stability, and on the financial support of some GCC states to shore up the economy. However, at the fourth anniversary of the uprising, it finds itself staring down the barrel of instability, with more and more segments of the populace trying to cripple the state’s control of the country, and with a rapidly dwindling cash lifeline from the Gulf, which has weakened the Egyptian pound, causing buying power to drop and prices of imported goods to skyrocket, and making the lives of ordinary Egyptians increasingly difficult.

The bottom line is that the growing violence of the opposition and the state’s dwindling ability to build a popular base will inevitably lead to more unrest and lawlessness, which in turn will chip away at the state’s institutions and pave the way for violence to tear into the very fabric of society.

 

*This article was published in terms of a partnership agreement between Al-Jazeera Centre for Studies and AMEC

 

 

Public Lecture

The Afro-Middle East Centre and the Department of Political Studies, WITS University, invite you to a seminar:

Topic: Egypt and the struggle over democracy

By Na'eem Jeenah 

Everywhere people have been fascinated with how rapidly, and with such resolve, the people of Tunisia and Egypt have overthrown repressive regimes, inspiring others in the Middle East to contemplate the same. Na’eem Jeenah gives the background to this revolt and reflects on its meaning for the Middle East and Africa generally.

Muhammad Bouazizi, a 24-year-old vendor, had repeatedly been assaulted by police in the town of Sidi Bouzid in Tunisia’s poverty belt. Police insisted he must apply for a licence. When he was last assaulted in December 2010, Muhammad could not have imagined that his desperate decision to pour petrol on himself and set himself alight outside the local municipal office would light the flames of popular anger in a way that would bring down the dictator in his country and inspire protests across the Middle East as people demanded freedom and democracy.

By Na'eem Jeenah

The revolutionary fervor that swept across North Africa and the Middle East is leaving discernible imprints on the political and social landscape of South Africa. For many South Africans, the Tunisian and Egyptian uprisings gave new hope for the possibilities of what could be achieved through mass action.

For a people who had engaged in a long struggle for justice and freedom , but who had subsequently become largely demobilised, the idea of a despotic government being toppled through people's power had become a distant idea tinged with the kind of romanticism that suggests it could not be replicated. That changed when other peoples on our continent,took to the streets, faced down the might of brutal security services and armed forces, and succeeded in forcing out their dictators. In South Africa, activist organizations, think tanks, and even businesses hosted events to discuss the events, and a protest was held outside the Egyptian embassy, with protesters shouting 'irhal' (Leave) as Husni Mubarak was still trying to cling to power.


As happened in other parts of the world, protesters in the small South African town of Ermelo, demonstrating at the same time as their Egyptian counterparts, began referring to the site of their protests as 'Tahrir Square'. The Ermelo protests represented one of a plethora of 'service delivery' actions throughout the country. Thousands of such protests take place every year in South Africa, with people from poor, deprived communities demonstrating against their lack of or inadequate housing, electricity, water, jobs, and so forth. At the beginning of 2011, calls for global solidarity grew in light of the universality of the complaint against service delivery- joined especially by people in the north of our continent - of people demanding more equitable socio-economic conditions, opposing corruption, and insisting that the government fulfilled its responsibilities to those who had been, and remain, the most marginalised in our society. These were people who had believed the ruling African National Congress' (ANC) promise of a 'better life for all' but became disillusioned when the ANC failed to deliver on its promises. That failure had resulted in a lack and weakness in the delivery of services such as electricity, water, and housing, as well as jobs to poor people, resulting in daily 'service delivery protests' taking place all over the country. In Ermelo, these service delivery protesters, who often face the force of the South African police, took heart and courage from those they now viewed as their fellow travelers in Egypt and Tunisia. It was as if a certain energy had begun flowing from north to south across Africa, spreading and hoping to awaken the masses of oppressed and exploited people on the continent. The uprisings also began a debate in South Africa - not yet exhausted - about whether South Africa was moving towards its 'Tunisia moment', if it did not properly address the huge challenges of poverty, inequality and lack of service delivery.

In what many in southern Africa are referring to contagion from North Africa, normally calm Malawi erupted in protests at the end of July, leaving 18 people dead, and much destruction of property. Analysts and observers in the region, and Malawian activists themselves, have been referring to these events as being part of the wave of the wave of uprisings in the north. The protests came in the wake of attempts by the ruling Democratic Progressive Party to have President Mutharika's brother succeed him when his term ends in 2014, rising unemployment, and a host of other socio-economic grievances.

When civil strife broke out in Libya a few months ago, the debates took a new turn. South Africa, a non-permanent member of the United Nations Security Council, supported Resolution 1973, which called on member states to implement a no-fly zone over Libya - ostensibly to protect civilians. However, within three days, the South African government explained that it did not support the manner in which the resolution was being implemented. After NATO began providing one side in the war with air cover, bombed the country, and even tried to assassinate Gaddafi, public opinion turned against the South African government's position, and even the ruling party's youth league publicly attacked the president for the UN vote. 'South Africa voted in favour of imperialists,' said Julius Malema, president of the ANC Youth League, calling NAT action 'killing of fellow Africans imposed by our former masters.' The NATO mission had become an imperialist war whose prize was the country's oil and natural gas, and was viewed in a different category to Tunisia and Egypt.

The situation in Libya was also of concern to many South Africans. Unlike Ben Ali's Tunisia and Mubarak's Egypt, Gaddafi's Libya had made its commitment to Africa and the African Union clear - in rhetoric, involvement, and financial support. When the International Criminal Court issued its warrant of arrest for Gaddafi, not only did it undermine the possibility of a political settlement, but it also confirmed the suspicions of many Africans that Africans are particular targets for international justice.

Whatever the outcome in Libya - and there are many indications that it will result in an entrenchment of imperial, especially European, power - the effects of Tunisia and Egypt will be long-lasting in the southern part of Africa. Not only people demanding better services in South Africa, but also those demanding an end to the absolute (and brutal) monarchy in Swaziland, and those demanding an end to Mugabe's tyranny in Zimbabwe have been inspired by our comrades in the north. And while the immediate effects of the courage and determination from the north might seem somewhat muted here, the long-term effects could very well bring down one or two dictatorships down south as well.

* Na'eem Jeenah is the executive director of the Johannesburg based, Afro Middle East Centre

** This article was first published on the Al-Akhbar English ://english.al-akhbar.com/content/north-south-africa-echoes-uprising" >website

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