Swimming Upstream
Will investments in Nile basin countries be enough
to quiet the debate on water resources?
7 April, 2010 | By Maher Hamoud
--------------------------------------------------------------------------------
region, including Prime Minister Ahmed Nazif, who paid an official
state visit to Ethiopia in late 2009. At the same time, the government
and some of the country’s biggest companies have unveiled plans to
invest billions of pounds in projects that include an electricity grid in
Ethiopia and a railway in Kenya.
Experts say the push is being driven by a combination of self-
preservation and opportunism.
With the return of political stability to many East African countries, and
ready investors in nations like China, analysts believe Egypt won’t be
able to maintain a stranglehold on the lion’s share of the Nile’s water —
its overriding foreign policy concern — without a little soft power.
At the same time, a return to stability has turned some East African
countries into prime targets for investment.
“Regardless of pessimism or optimism, investing in the Nile Basin is at
the base of Egypt’s water security,” says Dr. Samir Radwan, who sits
on the board of trustees at the General Authority for Investment.
The international debate over Nile water resources has been raging
since 1894, when Egypt was granted an annual quota of 55.5 billion
cubic meters of water — typically 87% of the river’s total flow. The
nine other Nile countries have been fighting for a century for a more
balanced share of the river.
But while Cairo won’t budge on its quota, much of the investment has
widely been seen as an attempt to placate upstream countries. That
would deter attempts at water grabbing, an act that the Egyptian
government publicly considers tantamount to an act of war, and allow
Egypt to capitalize on economic opportunities in fertile developing
markets, say experts.
A Drop in the Bucket
Egyptian investments abroad surpass $100 billion (LE 550 billion),
though historically, little has gone toward the Nile basin.
Egypt invests $7.1 billion (LE 39 billion) in Sudan annually and has
assets in Ethiopia of around $1 billion (LE 5.5 billion).
Minister of International Cooperation Fayza Abul Naga has repeatedly
stressed the strategic importance of enhancing cooperation with East
African countries.
The co-chair of the American University in Cairo’s business school, Dr.
Adel Beshai, says overtures by Chinese companies should spur Egypt to
speed up that process.
“The Chinese influence is the biggest there [and] it strategically serves
their own interests,” says Beshai, calling Chinese acquisitions of natural
resources in the area a new form of colonialism.
“Although it’s late, we are in extreme need of [engagement]. Egypt
needs it more now than any other time. We have ignored these
countries for so long.”
Nazif’s 2009 visit to Addis Ababa was a landmark in relations that have
for decades been defined by mistrust. Ethiopian rains supply 85% of the
water that eventually flows into Lake Nasser. With its rapidly expanding
population of 81 million — most of which is under the age of 20 — the
country is hungry for resources.
During the three-day visit, Nazif met with Ethiopian Prime Minister
Meles Zenawi to discuss partnership in investments, trade, human
development and agriculture.
Strengthening ties between the two countries seem to have dissipated
much previous anxiety. Ethiopia recently proposed the construction of
three medium-sized dams along the Blue Nile to generate electricity, a
move that in the past would have put Cairo on edge.
The proposal, however, barely made a ripple. “We have agreed to the
offer as long as it would not affect Egypt’s Nile water quota,” irrigation
minister Mohamed Allam told media in December.
Discussions between the nations are underway for Egypt to use
Ethiopian land to grow sugarcane, and in return establish priority in
frozen meat imports.
A further sign of cooperation is the proposed $5 billion (LE 27 billion)
electricity project that would connect Egypt, Sudan and Ethiopia via a
grid slated for further developments this summer. The plan would allow
the three countries to pool renewable energy resources — hydropower
from Ethiopia and thermal energy from Sudan and Egypt.
The government is not alone in looking at investment options upstream.
Private investments from Egyptian companies have increased
substantially in recent years.
According to Omar Bedawi, head of the direct investment department
the Arab African International Bank, emerging African markets present
unique opportunities. “There are saturated industries in Egypt, while
African markets are still virgin,” he says. “Cement is a good example of
viable investment abroad. There are no new licenses issued locally and
energy prices are high anyway.”
Egyptian cable production group El-Sewedy has cornered the Ethiopian
market with its production facility near Addis Ababa. Operating with an
investment of $50 million (LE 270 million), El- Sewedy quickly became
the number one cable producer in the country. Its rapid success has
caught the attention of others ready to invest.
To that end, Hussein Sabbour, chairman of the Egyptian Businessmen’s
Association (EBA) announced the establishment of the Egyptian-
Ethiopian business council, which will include local representatives
from the private sector.
“Investing in the Nile Basin is very important, as it is simply profitable.
El-Sewedy, for example, profited from investments in Ethiopia, which
benefited the company’s local investments in turn,” says Sabbour.
The EBA’s most recent project, the African Company for Investment
and Development will serve to further regional ties.
“The company will look for investment opportunities in Africa and
provide research for Egyptian businessmen. The company will achieve
its final legal procedures soon, as its members list already includes
significant entities like major banks and other influential businessmen,”
he says.
And while Ethiopia seems to have caught the eye of many private
investors, other major companies are looking further south.
The continent’s leading investment group, Citadel Capital, recently
confirmed its 49% stake in Sheltam Railways Company, the primary
shareholder in the 2,000 km Rift Valley Railway that connects Kenya
and Uganda. The move makes Citadel the effective owner of 17.5% of
the railway.
The company is looking to inject more than $150 million (LE 820
million) in the area’s railways over the coming five years, Citadel
Capital Managing Director Karim Sadek said in February. “This is the
first of several investments we are exploring in East Africa.”
Courtesy
Will investments in Nile basin countries be enough
to quiet the debate on water resources?
7 April, 2010 | By Maher Hamoud
--------------------------------------------------------------------------------
- For close to four
decades, Egyptian
policy makers and
investors have largely
turned a blind eye to
the nine other
countries that share
the Nile River.
- But there are signs
that is changing.
region, including Prime Minister Ahmed Nazif, who paid an official
state visit to Ethiopia in late 2009. At the same time, the government
and some of the country’s biggest companies have unveiled plans to
invest billions of pounds in projects that include an electricity grid in
Ethiopia and a railway in Kenya.
Experts say the push is being driven by a combination of self-
preservation and opportunism.
With the return of political stability to many East African countries, and
ready investors in nations like China, analysts believe Egypt won’t be
able to maintain a stranglehold on the lion’s share of the Nile’s water —
its overriding foreign policy concern — without a little soft power.
At the same time, a return to stability has turned some East African
countries into prime targets for investment.
“Regardless of pessimism or optimism, investing in the Nile Basin is at
the base of Egypt’s water security,” says Dr. Samir Radwan, who sits
on the board of trustees at the General Authority for Investment.
The international debate over Nile water resources has been raging
since 1894, when Egypt was granted an annual quota of 55.5 billion
cubic meters of water — typically 87% of the river’s total flow. The
nine other Nile countries have been fighting for a century for a more
balanced share of the river.
But while Cairo won’t budge on its quota, much of the investment has
widely been seen as an attempt to placate upstream countries. That
would deter attempts at water grabbing, an act that the Egyptian
government publicly considers tantamount to an act of war, and allow
Egypt to capitalize on economic opportunities in fertile developing
markets, say experts.
A Drop in the Bucket
Egyptian investments abroad surpass $100 billion (LE 550 billion),
though historically, little has gone toward the Nile basin.
Egypt invests $7.1 billion (LE 39 billion) in Sudan annually and has
assets in Ethiopia of around $1 billion (LE 5.5 billion).
Minister of International Cooperation Fayza Abul Naga has repeatedly
stressed the strategic importance of enhancing cooperation with East
African countries.
The co-chair of the American University in Cairo’s business school, Dr.
Adel Beshai, says overtures by Chinese companies should spur Egypt to
speed up that process.
“The Chinese influence is the biggest there [and] it strategically serves
their own interests,” says Beshai, calling Chinese acquisitions of natural
resources in the area a new form of colonialism.
“Although it’s late, we are in extreme need of [engagement]. Egypt
needs it more now than any other time. We have ignored these
countries for so long.”
Nazif’s 2009 visit to Addis Ababa was a landmark in relations that have
for decades been defined by mistrust. Ethiopian rains supply 85% of the
water that eventually flows into Lake Nasser. With its rapidly expanding
population of 81 million — most of which is under the age of 20 — the
country is hungry for resources.
During the three-day visit, Nazif met with Ethiopian Prime Minister
Meles Zenawi to discuss partnership in investments, trade, human
development and agriculture.
Strengthening ties between the two countries seem to have dissipated
much previous anxiety. Ethiopia recently proposed the construction of
three medium-sized dams along the Blue Nile to generate electricity, a
move that in the past would have put Cairo on edge.
The proposal, however, barely made a ripple. “We have agreed to the
offer as long as it would not affect Egypt’s Nile water quota,” irrigation
minister Mohamed Allam told media in December.
Discussions between the nations are underway for Egypt to use
Ethiopian land to grow sugarcane, and in return establish priority in
frozen meat imports.
A further sign of cooperation is the proposed $5 billion (LE 27 billion)
electricity project that would connect Egypt, Sudan and Ethiopia via a
grid slated for further developments this summer. The plan would allow
the three countries to pool renewable energy resources — hydropower
from Ethiopia and thermal energy from Sudan and Egypt.
The government is not alone in looking at investment options upstream.
Private investments from Egyptian companies have increased
substantially in recent years.
According to Omar Bedawi, head of the direct investment department
the Arab African International Bank, emerging African markets present
unique opportunities. “There are saturated industries in Egypt, while
African markets are still virgin,” he says. “Cement is a good example of
viable investment abroad. There are no new licenses issued locally and
energy prices are high anyway.”
Egyptian cable production group El-Sewedy has cornered the Ethiopian
market with its production facility near Addis Ababa. Operating with an
investment of $50 million (LE 270 million), El- Sewedy quickly became
the number one cable producer in the country. Its rapid success has
caught the attention of others ready to invest.
To that end, Hussein Sabbour, chairman of the Egyptian Businessmen’s
Association (EBA) announced the establishment of the Egyptian-
Ethiopian business council, which will include local representatives
from the private sector.
“Investing in the Nile Basin is very important, as it is simply profitable.
El-Sewedy, for example, profited from investments in Ethiopia, which
benefited the company’s local investments in turn,” says Sabbour.
The EBA’s most recent project, the African Company for Investment
and Development will serve to further regional ties.
“The company will look for investment opportunities in Africa and
provide research for Egyptian businessmen. The company will achieve
its final legal procedures soon, as its members list already includes
significant entities like major banks and other influential businessmen,”
he says.
And while Ethiopia seems to have caught the eye of many private
investors, other major companies are looking further south.
The continent’s leading investment group, Citadel Capital, recently
confirmed its 49% stake in Sheltam Railways Company, the primary
shareholder in the 2,000 km Rift Valley Railway that connects Kenya
and Uganda. The move makes Citadel the effective owner of 17.5% of
the railway.
The company is looking to inject more than $150 million (LE 820
million) in the area’s railways over the coming five years, Citadel
Capital Managing Director Karim Sadek said in February. “This is the
first of several investments we are exploring in East Africa.”
Courtesy
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