Despite steadily increasing urbanisation in recent years, the agriculture sector remains a cornerstone of Egypt’s economy today, in terms of both overall value-added and employment. In 2015 – the most recent year for which data was available – the industry accounted for around 11% of the country’s GDP, according to data from the Lebanon-based Bank Audi, making it the fourth-largest contributor to the economy for the year. In the same period the sector employed between 30-40% of the country’s workforce, according to estimates prepared by the UN Food and Agriculture Organisation (FAO). Egypt produces a wide range of crops and other agricultural products, including cereals (wheat, corn rice), fruits and vegetables, sugar, cotton, dairy products, livestock and fish, among others. Solid support for agricultural activity on the part of the government and new opportunities for domestic and foreign investors alike point to expansion of the sector in the coming years. “There are many reasons to be optimistic about the future of agriculture in Egypt,” Tony Freiji, president and CEO of the Wadi Group, a major local agri-food producer, told OBG. “For instance, the government has been investing heavily in agricultural infrastructure in recent years,” he added.
That said, the country faces a wide range of challenges with regard to the development of the sector in the coming years. Booming population growth has contributed to an increase in agricultural consumption in recent years, for instance. Consequently, Egypt is currently a major importer of a wide range of food products – indeed, imports account for around 70% of its food supply. In addition to meat and coarse grains, for instance, Egypt is the world’s largest wheat importer. According to FAO data, the nation will bring in around 12m tonnes of wheat over the course of the 2016/17 marketing year, which runs from July to June. The government and private sector alike are therefore working to address this and other ongoing issues, in order to ensure continued growth for the foreseeable future.
Ancient History
Egypt is widely understood to be one of the oldest agricultural societies. The development of basic irrigation and other early agricultural technologies enabled ancient Egyptians to tame the Nile River and grow corn, wheat, and papyrus (among other key crops) on a large scale as early as 4000 BC. Agriculture, in turn, allowed for the development of one of the world’s earliest recorded civilisations. In addition to corn and wheat, both staple crops during this early period, ancient Egyptians grew barley, root crops (garlic, onion, radish), leafy salad greens (lettuce, parsley) pulses (fava bean, chickpea and lentil) and cucurbit (cucumber, melon and gourd). Fruits produced commonly during this period included dates, figs, jujube, grapes, carob, pomegranate, olives, apples and, later on, peaches and pears. Additionally, a wide range of flowering and aromatic plants – used for a wide range of culinary, cosmetic, religious and medicinal purposes – were produced in ancient Egypt.
According to historic sources and academic accounts, ancient Egyptian farmers independently invented a wide range of cultivation technologies, including the axe, the plough, the hoe and a whole range of manual techniques and devices for mechanical sowing, irrigation, ripening, pest control and harvesting.
State Farming
Since the late 19th century, agricultural production in Egypt has been dominated by the state. Key government-led mega-projects like the Aswan Dam (built between 1898 and 1902) and, half a century later, the Aswan High Dam (built between 1960 and 1970) were developed largely for agricultural reasons. Indeed, the High Dam allowed the state to reclaim some 2m feddan of previously unfarmed land in the Delta and along the Nile basin, effectively boosting the nation’s irrigated farmland by a third. Under Gamal Abdel Nasser, president from 1956 to 1970, Egyptian agriculture was increasingly industrialised. During this period the government carried out a series of ambitious agrarian reforms, breaking up the largest landed estates and redistributing land among the rural population by selling it at high discounts. Cooperative land management agreements relied on the state to set prices on a wide range of agricultural inputs and outputs. During this period the state bought the entire annual production of certain crops from rural smallholds at prices well below international ones. Nonetheless, through the mid-1960s agriculture was the nation’s largest economic sector, accounting for 87% of all merchandise exports in 1960, in large part due to the country’s booming cotton industry.
Over the ensuing decade, however, changes in global market and domestic issues put pressure on the sector. By 1974 agricultural production made up just 35% of exports. During this period the sector attracted a considerable amount of attention from foreign aid programmes (primarily in the US and Europe), which invested in food production for the domestic market. This helped stabilise food security in Egypt in the 1990s.
Since then, however, the agriculture sector has faced a rising tide of challenges, most recently due to the economic and political pressures that have impacted the country’ economy as a whole since the 2011 overthrow of the Mubarak government. Today the industry reflects both its long history and the current environment. The sector remains dominated by smallholds, for instance, a direct outcome of Nasser-era policies, even as the current leadership works to involve a growing number of private investors and market participants. “The inefficiencies in the sector are enormous, which means there are huge opportunities for improvement,” Freiji said. “The government is increasingly realising that their job is not to operate the industry themselves, but to ease the conduct of business for the private sector.”
Oversight & Development
A wide range of government organisations are involved in regulating, developing and generally overseeing Egypt’s agriculture sector. The Ministry of Agriculture and Land Reclamation (MALR), which has been operational in the country since the early years of the 20th century, has a mandate to draw up and advance the government’s agricultural and land reclamation policies in line with national development programmes, international standards and the latest scientific consensus. Broadly, the aim of the ministry is to expand the amount of farmland and other crop-producing areas in the nation, in an effort to support rural economies and populations, many of which rely heavily on agriculture-related revenues. The ministry has been at the centre of agriculture policy – and, in many cases, agricultural development and policy implementation – for more than a century, positively impacting the country’s crop productivity, agricultural export capacity and food security.
In recent years the MALR has undergone a period of reorganisation. A significant number of additional state-run entities are involved in the agriculture sector regulation and oversight in Egypt. The Ministry of Irrigation and Water Resources, for instance, works with the MALR to efficiently distribute Egypt’s water resources, which consist exclusively of Nile river water and a few ancient aquifer reserves. The Ministry of Supply and Internal Trade, meanwhile, is involved with the movement of agricultural goods within the country’s borders, food distribution and local economics.
The Principal Bank for Development and Agricultural Credit (PBDAC) serves as Egypt’s primary lender for agricultural enterprises. In early 2016 the PBDAC, which at the time was owed around LE4bn (equivalent to $212m as of December 2016) by approximately 250,000 smallhold farmers spread around the country, entered into a restructuring. This process is currently under way and will eventually result in the bank falling under the jurisdiction of the Central Bank of Egypt, whereas previously it was managed by the MALR.
New Strategy
In February 2016 the state announced a major new long-term economic development programme for the country. Egypt’s Vision 2030 involves three key, overarching focus areas, namely economic, environmental and social development. Broadly, by the end of the project the government hopes to have boosted the nation’s annual GDP growth to around 12%, up from some 4% on average in recent years, among other targets. Since the announcement of the vision, a number of ministries and other government organisations have developed and launched concomitant plans. As of early 2017, the MALR was in the process of drawing up a 2030 development programme of its own. Though details about the ministry’s plans have yet to be formally released, recent speeches delivered by the minister and other officials have shed light on a few of the MALR’s potential priorities.
Known as the Agricultural Sustainable Development Strategy 2030, the ministry’s plan has been motivated by a range of external factors, including the unexpected jump in food prices on international markets in recent years; the growing importance of the EU for agricultural trade with Egypt, particularly with reference to the trend (in the EU and the US) towards the use of food crops as biofuel; and, perhaps most importantly, the immanent effects of global climate change and their implications for Egypt’s agricultural water supply and crop mix. Other considerations in the development of a new long-term agricultural vision for the country include the increasing prevalence of cross-border agricultural pests and diseases, such as avian influenza, and the value, to local agricultural producers, of regional trade agreements such as the Greater Arab Free-Trade Area (GAFTA) and the Common Market of Eastern and Southern Africa (COMESA).
Major Projects
While the state has yet to formalise its long-term development programme with regard to agricultural enterprises, in recent years the MALR and other federal entities have announced a handful of major initiatives focused on the sector. Among these, perhaps highest-profile is the 1.5m Feddan project, which was announced by President El Sisi at the end of 2015. Under the programme, the state aims to drill more than 1500 new wells in the mostly uninhabited Western Desert, to turn currently arid desert land into arable farmland. Eventually the project – which has thus far been carried out largely by the military – will include the development of new communities designed primarily to house the families of the large number of farm workers required to tend the land. In a related move, the government recently announced a plan to revive a similar land reclamation project at Toshka, near the southern border with Sudan. This initiative, begun under the Mubarak government in the late 1990s, stalled over the past two decades. The government of President El Sisi, however, plans to renew it. In total, initiatives under way in the south and west have the potential to expand the agricultural land bank by up to 3.5m feddan, which represents a nearly 45% increase on the current amount of farmland (see analysis).
In March 2016 the MALR announced that it had successfully established model pilot farms in three COMESA nations, namely Tanzania, Zambia and Congo. The farms, each of which are between 500 acres and 600 acres in size, represent a new approach to supplying affordable food to the domestic Egyptian market. The agreements designed by the MALR involve Egypt providing the necessary hardware, seed varieties and expertise for the farms, while the host country is responsible for supplying infrastructure, water and local labour. Underpinning the farms are trade agreements under which Egypt will be able to export its crops from COMESA countries back home at low cost. In turn, COMESA nations are expected to benefit considerably from Egypt’s long-established expertise in agriculture, among other investment remunerations. Assuming the foreign farm projects pan out, the ministry could potentially launch a large number of similar initiatives across the African continent in the coming years.
“These projects can accommodate large numbers of Egyptian workers, in addition to the possibility of providing agricultural crops cheaply to the Egyptian market,” Maher El Maghrabi, director of the COMESA department at the MALR, told local media in early 2016. In addition to the three countries already hosting pilot farms, at the time of the announcement the ministry was in the midst of negotiating similar deals with Ethiopia, Kenya and Eritrea, among others.
Arrangements of this sort, where a desert country offshores its domestic agricultural production, have become increasingly common across the Middle East in recent years. A handful of Gulf countries currently have similar deals with African nations, for instance.
Cornerstone Crops
Cotton and cereals are the single most important crops produced in Egypt. The cotton industry has, however, faced a significant number of challenges over the past decade – particularly in recent years – due to rapidly changing government policies and rising competition from other cotton producers around the world. According to the US Department of Agriculture (USDA), the amount of planted cotton in the country in 2016/17 is forecast to be 24% lower than in the previous year, as farmers move away from what is widely seen as a troubled segment. The nation’s cotton production has fallen off dramatically over the past 10 years. From annual production of 975,000 bales in 2006, for instance, production had dropped off to 745,000 bales in 2011 and 525,000 bales in 2015, for instance. Forecasts from the USDA put 2016 production at just 320,000 bales. An announcement by the government in October 2015 reversed a previously instituted policy to stop providing cash subsidies to cotton producers, which was widely regarded as a positive development for the cotton industry. As such, the USDA forecasts an uptick in cotton production in 2017, to 395,000 bales.
In 2015 Egypt produced 21.7m tonnes of cereals in total, which is slightly below a 2011-15 annual average of 22.1m, according to data from the FAO. Wheat accounted for nearly half of the 2015 total, with the state producing around 9m tonnes over the course of the year, up slightly from 8.9m tonnes on average over 2011-15. The other key cereal crops being produced in Egypt in 2015 were maize and rice, with the former totalling some 6m tonnes for the year and the latter 5.9m tonnes. An additional 815,000 tonnes of other cereals were also produced in the country during the same period. The FAO projected growth in cereal production over the course of 2016 of around 2%, with wheat and maize staying stable and rice production increased slightly to reach 6.3m tonnes for the year. Local production aside, Egypt remains the world’s largest wheat importer. In 2015/16 the country brought in more than 20.5m tonnes of cereals in total, up from 19.2m tonnes in 2014/15, 18.6m tonnes in 2013/14 and 14.3m tonnes in 2012/13, for instance. The most recent figure represents half of all domestic consumption. Some 12m tonnes of wheat alone are expected to be imported into Egypt during the 2016/17 marketing year, according to the FAO, accounting for nearly 60% of total cereal imports for the year of 20.6m tonnes.
Fruits & Sugar
Egypt is a major producer and exporter of fruit and vegetables. In the first quarter of 2016 alone fruit exports stood at 411,491 tonnes, as compared to 70,710 tonnes of a variety of fruit imports. During the same period, meanwhile, vegetable exports exceeded 174,250 tonnes, while imports were just 1372 tonnes. Major fruit and vegetable crops produced for both export and domestic consumption in Egypt include tomatoes, potatoes, olives, sweet potatoes, onions, dates, oranges, grapes, and stone and pome fruits.
Sugar production is a growing area of focus in the agriculture sector. According to the MALR, the country’s sugar production topped 2.2m tonnes in 2015/16, more than double the 1.1m tonnes produced in 2013/14. Sugar is a staple in the government’s food subsidy programme, which supplies basic commodities to Egyptians at subsidised prices. As of 2014, sugar cane took up nearly 325,700 feddans of farmland, which was equal to nearly 48% of the nation’s total farmland. As of June 2016 a handful of new sugar factories were under construction in Egypt. In Sharqiya governorate, for instance, some LE2.5bn ($132.5m) has been invested in a handful of new factories, which are slated to produce 250,000 tonnes of sugar annually when they come online in 2018. Additionally, in recent years the government of the UAE has invested some LE6bn ($318m) in upgrading and expanding existing sugar plants, according to the MALR. The dairy industry has also grown in recent years in Egypt, largely in order to meet rising demand on the domestic market. Among the most popular dairy products consumed by Egyptians, is cheese, a segment that saw growth in current value of 17% in 2015.
Outlook
Egypt’s agriculture sector faces a range of challenges. High and rising rates of inflation are an issue, with the annual food and beverage inflation rate at 13.8% as of October 2016, up significantly from 11% a year earlier. Given that the Egyptian pound was further devalued in November 2016, as of early 2017 the inflation rate was expected to continue to rise for the foreseeable future. Other ongoing hurdles to growth include the low availability and high cost of arable land, almost all of which lies along the Nile and across the Nile Delta, which is Egypt’s sole source of moving freshwater; issues related to irrigation, which is an ongoing problem in Egypt’s arid climate; and agricultural infrastructure, which remains underdeveloped by international standards. The current government has set out a series of ambitious agriculture-focused programmes, having assuming power in 2014. Many of these initiatives were designed to address the various challenges named above. Indeed, the state’s efforts to irrigate regions of the desert, to make it useful as farmland, have the potential to expand the nation’s total supply of arable land by one-sixth by the end of 2018.
Additionally, as mentioned, the state is in the early stages of developing offshore agriculture, which involves establishing Egyptian-owned farms in foreign countries – where high-quality land, water and other inputs are more plentiful and, consequently, cheaper than in North Africa – and bringing the resulting food back into Egypt to supply the local market. In 2015 alone the government’s investments in the agricultural sector as a whole grew by 10.8%, according to Bank Audi, while credit facilities to agriculture stayed level, at 1.2% of total credit issued for the year. More broadly, the agriculture, fishing and forestry sector’s GDP contribution rose by around 3% over the course of 2015.
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