CAIRO: Africa’s economic growth rate is projected to hit 6 percent this year, the highest level in over twenty years, the African Development Bank reported last week. Growth was strong in Egypt, says the bank, which is one of the continent’s strongest economies. Gains are projected to be large in South Africa, Algeria and Nigeria, Africa’s other three big economies.
Continent-wide, growth was fed by strong demand for oil and other natural resources from China and other fast-developing nations, said the bank. It also pointed to increased investment, good weather for agriculture, and sound macroeconomic policies as factors in the generally strong economic climate.
In Egypt, economic growth is projected to hit a robust 7 percent this year. This boom has been led by an expansion of the oil sector; an increase in foreign direct investment in housing, telecommunications, and tourism; and record high revenues from the Suez Canal.
There has also been increased foreign investment in the industrial products sector such as in garments, steel, and cement, as the country continues apace with a controversial privatization program.
“Up until now the main sources of foreign direct investment have been in the privatization program such as the privatization of Alexandria Bank last October, and the privatization of Omar Efendi last August and September, says Magdy Sobhy, an economist at the Al Ahram Center for Political and Strategic Studies.
There has been an increase in investment from Italy, which purchased Alexandria Bank, and India, which has made inroads in to the textile industry. But it is Gulf Arab countries that have led the way in foreign direct investment in Egypt, and several Emirates-based companies have made headlines by breaking ground on a number of high-profile projects.
Among these projects are the acquisition of a license for a third mobile phone service in Egypt, awarded to Etisalat, and the construction of a major new North Coast beach resort and upper middle class housing project in Muqattam, by Emaar Holdings of Dubai.
Such investments highlight the fact that most of the country’s economic growth has disproportionately favored the wealthy, and very few of the benefits trickle down to the average Egyptian, says Sobhy.
According to the government, the country’s unemployment rate has dropped 1 percent this year, to 9.2 percent. Independent estimates disagree, though, with most placing the figure above 12 percent.
“Up until now there has been no positive correlation between high growth and people’s incomes, he says. “A lot of the investment we have seen has been in housing aimed at the upper middle classes and other wealthy people. Of course this has created some jobs, but they are not lasting [permanent] jobs. Mostly investments like these create temporary jobs like construction work, and these jobs always end as soon as the project is finished.
Additionally, says Sobhy, inflation in Egypt is over 12 percent, which has led to a decrease in people’s real income.
Despite Egypt’s strong growth figures, he says, not everyone is benefiting. In order to make economic development work for more people, big challenges remain.
“The main challenge that Egypt faces is how to direct investment towards more reliable sectors like industry, Sobhy says. “This would offer people more permanent jobs and a more secure income, and might help reduce the inflation rate as well.
“The growth we have seen so far is a good thing, he added, “but it is not enough to create real benefits in people’s lives.
