Egypt is on the cusp of launching a succession of megaprojects at the heart of the country’s make-or-break economic strategy, which was launched last week with the “$8.6 billion” (R110 billion) expansion of the Suez Canal. No expense was spared on opening the highly symbolic project and marketing it as a watershed in Egyptian economic history.
Thursday, August 6, was declared a public holiday and an elaborate ceremony involved flyovers by military jets and helicopters, a massive choir of children waving Egyptian flags, fireworks and a performance of Verdi’s Aida opera on the bank of the canal. Local newspapers reported on little else all week. The canal project ( is the cornerstone of the economic plans of the government of Abdel Fattah al-Sisi, who was elected president last year after leading a military coup against the elected government of Mohammed Morsi, whose Muslim Brotherhood briefly emerged after Egypt’s longtime ruler, Hosni Mubarak, was toppled in 2011.
Despite now being a civilian president, Sisi attended the Suez launch in full military regalia.
Cairo was decked out in nationalist pageantry, with countless buildings – from malls to mosques – sporting huge Egyptian flags and banners featuring Sisi and the canal.
Security at the launch was so tight that a busload of invited international media, including City Press, was denied access at the last minute and sat it out at a military roadblock.
The expansion had actually been announced by deposed president Morsi, but Sisi made completing the expansion within one year instead of the planned three his first major economic goal after being elected.
Although the widening of the canal was indeed finished in a year, this is really only half of the original New Suez Canal project.
Half the $8.6 billion budget is still unused and is earmarked for a set of six tunnels for road and rail traffic that will go underneath the canal – a far more ambitious engineering endeavour.
Officially, the expanded canal will change Egypt’s economic fortunes all by itself.
Government projections are that ship traffic through the canal will double, while revenue will shoot up from almost $5.5 billion last year to $13.2 billion in 2023.
These ambitious numbers were repeated without explanation at almost every mention of the canal in the local press.
The canal is then meant to form the basis of enormous new industrial zones and logistics hubs, plans that have been revived from the 1970s.
The claims about doubling the amount of ships per year, however, use 2014 as a base, while the canal had actually far surpassed last year’s traffic of 17 148 ships before the economic crisis, tolling a record 21 415 ships in 2008.
That means the canal was not even operating at full capacity before the upgrade.
The predicted traffic and revenue seem to assume full daily use of about 97 ships a day, which is unlikely, given the state of the global economy.
The state-owned Suez Canal Authority has resolutely held on to the forecast increase of Suez revenue.
The revenue matters because the funding wasn’t cheap. In a costly show of independence, Egypt refused to use foreign funding and instead mobilised an astonishing amount of domestic capital in a week-long fire sale of bonds last year.
The five-year, tax-free Suez bonds pay 12% interest a year, meaning total repayments to investors of about $12.8 billion, a figure comparable to the cost of the Medupi power station in South Africa.
The tax-free Suez bonds were only available to Egyptian individuals and companies, with about 82% of the financing coming from households, in essence making the canal the national piggy bank.
Commentators have warned that this bond blitz was a one-time weapon that Egypt cannot possibly use again for the simple reason that the Suez Canal has already sucked up much of the country’s liquid savings.
The Suez bonds make up 3% of the Egyptian banking sector’s assets, according to analysis by Ezzat Molouk Kenawy, an economist at Egypt’s Kafr El-Sheikh University.
The official slogan for the opening was “Egypt’s gift to the world”, but not everyone necessarily wants the canal, and the planned industrial zone next to it, to succeed. The planned logistics hubs will directly compete with the United Arab Emirate’s Dubai, while the other major global trade routes through the Panama Canal and around the Cape of Good Hope are vying for the same traffic Egypt is chasing.
The use of ever larger ships, as well as Suez increasing fees and insurance premiums, was making the far longer route around the Cape of Good Hope competitive again, said Mark Gregg-Macdonald, Transnet’s group executive: planning & sustainability.
That did not really mean much for South Africa because this traffic did not stop here, he said. Van Rensburg’s trip was sponsored by
the Suez Canal Authority