Reshaping Egypt’s Agriculture
Reshaping Egypt’s agriculture from the ground up
Green energy and technology can combine to solve Egypt’s biggest agricultural problems – and finance will enable the changes
“There is a huge government push to expand Egypt’s agricultural sector, to make it more sustainable, efficient and profitable by 2030”
Agriculture accounts for a large slice of the Egyptian economy, generating 10.6% of the country’s GDP. It creates 18.8% of all jobs and more than 55% of employment is in the southern part of the country, known as Upper Egypt.
Egypt’s agriculture sector is a strong contributor to its exports. The country exports 350 different agricultural products to more than 150 countries. In the first five months of 2022, 3.5 million tons of agricultural goods were exported, mainly fruit and vegetables.
The country is the largest exporter of citrus fruits in the world and oranges account for approximately 80% of its total citrus crop.
Stable growth and strong demand have always been key strengths of Egyptian agriculture. Yet the sector is still dominated by smallholder farmers using traditional practices and operating within an infrastructure that is much in need of updating – particularly when it comes to water and energy use.
The sector is also underfunded, and farmers and business owners have limited access to suitable financing solutions. And given the global economic situation, a rise in input prices is now worsening the outlook and the country’s macroeconomic situation.
At the start of 2021, the agricultural sector suffered from increasing prices of main inputs, especially energy and fertilisers, prompting the Egyptian government to raise the prices of subsidised fertilisers by 50%.
Sustainable farming by 2030
The Egyptian government is behind a huge push to build the country’s agricultural sector, to make it more sustainable, efficient and profitable by 2030. The aim is to enable the country to feed all its citizens and protect them from external price inflation while maintaining strength in exports.
The 1.5 million feddan reclamation project aims to increase the area of agricultural land by 20% by 2030 – in Al-Moghra, West Minya, West Minya Extension, Old Farafra, Toshka Wells and Al-Tur. It also intends to modernise farming systems such as irrigation, machinery, logistics and energy creation.
Two smaller, more focused projects in Toshka and New Delta aim to reclaim 500k feddan per project (about 2,100 sq km) for the production of wheat and strategic crops. Other projects are in the pipeline.
The water-management system across the country is in urgent need of an update. This need is growing as demand for Nile water intensifies and Ethiopia continues construction of the Grand Ethiopian Renaissance Dam.
Water-intensive crops such as rice are suffering – a situation indicative of what is to come for other crops if the issue remains unresolved.
Egypt is investing in the creation of fresh water from seawater along its coastline. The Egyptian sovereign wealth fund has issued tenders worth USD2.5bn to build 17 solar-powered desalination plants (adding to the 25 already in existence), which will help quadruple the country’s desalination capacity over the next five years.
The government also aims at enhancing water management and distribution through canal linings, to ensure water is delivered to all rural areas and to minimise seepage into the land.
Two initiatives from the Egyptian government intend to bring the benefits of technology to agriculture. An electronic smart card system for farmers is designed to build a database of agricultural landowners all over Egypt, providing accurate insights about the sector and allowing for more focused planning and targeted funding. So far, more than 3.5 million cards have been issued across the country.
And a smart mobile app called Hudhud uses AI to disseminate knowledge and help farmers manage problems such as crop disease.
The impact of finance
To tackle the underfinancing of Egypt’s agricultural sector, the Central Bank of Egypt (CBE) has launched a plan aimed at reviving the Agricultural Bank of Egypt (ABE). It has also extended to different sectors, including agriculture a soft loan scheme (lending up to EGP100bn) that offers private-sector companies subsidised interest rates.
In parallel, the ABE has launched an initiative to mitigate the negative impacts of Covid-19 by settling or rescheduling non-performing loans for about 45,000 customers, principally individuals and small enterprises working in the agricultural sector.
ALEXBANK has increased its attention towards the agricultural sector, putting to use its wealth of experience with funding agricultural producers such as those in the Delta region and Upper Egypt.
In 2018, ALEXBANK started providing agri-finance solutions for its customers in the small business segment who are investing in livestock activities. In 2019 it expanded its activities to include micro-financing. These efforts led to growth in the small business portfolio of 173% between 2018 and April 2022.
ALEXBANK also enjoys strategic alliances with major public sector partners. This started in 2018 when the bank assisted the ministry of agriculture in financing livestock activities, and continued in 2021 with a new alliance with the Egyptian Countryside Reclamation and Development Co, which is set up to finance the beneficiaries of the 1.5 million feddan reclamation project.
In 2020 the bank also allied with the World Food Programme (WFP), supporting small farmers in keeping livestock as part of the WFP’s land consolidation initiative. This is designed to enable smallholder farmers to consolidate their land properties for better use and returns. This agreement has been subsequently extended to provide a group lending solution for the purchase of PV solar powered pumps.
The future of agriculture in Egypt begins today, with a concerted push from the financial sector and government to improve water and energy inputs, infrastructure and processes.
The plan is to achieve in the longer term a thriving, robust and self-sufficient agricultural sector that will sustain generations to come.