“This is a country of 90 million who need to eat, drink, and be reassured of their future.” The words were spoken by President Abdel-Fattah al-Sisi in a recent convention in Cairo. Even though the President was speaking in the context of the security and stability required for the direly needed development and investment in Egypt, he managed to put the entire problem in a nutshell.
The 2011 Arab Spring uprising and its tumultuous consequences brought Egypt’s economy to near-collapse. Today the country needs to speed up development and kickstart the economy, and the government has announced several mega-projects intended to do just that. The New Suez Canal project is already underway, and a logistics centre for cereal and grain envisioned in the Mediterranean port of Damietta on Egypt’s northeast coast.
The new project was announced after extensive technical and financial studies.
At the head of the Ministry of Supply and Internal Trade, which is responsible for the implementation of the logistics centre, is the perfect man for the job: Khaled Hanafy who was Dean of the College of International Transport and Logistics at the Arab Academy for Maritime Transport.
Meetings were held between the Egyptian side and foreign investment delegations from Russia, the United Arab Emirates, Saudi Arabia, China, the United States and Canada. Locally, the Minister of Supply met with the Egyptian Businessmen Association, the Arab League’s Council of Arab Economic Unity and a number of Egyptian business organisations.
Dr Hanafy explained that the logistics centre would turn Egypt into an international logistics hub for the storage and handling of grain. This includes conducting logistics and value-added activities such as the manufacturing and packaging of grain and oilseed, unrefined oils, raw sugar, and strategic food commodities with an annual capacity that amounts to 65 million tons. This should contribute to the food security of Egypt and neighbouring countries.
President Sisi gave the go-ahead signal for the execution of the project. During his US visit to attend the UN General Assembly in September 2014, the President met a number of US investors. Visits to Egypt by US investor delegations followed, during which the investors explored opportunities such as building modern grain and wheat storage silos. These visits led to a partnership agreement between the Ministry of Supply and Internal Trade, the Engineering Authority of the Armed Forces, and the leading US global food security firm Blumberg Grain to develop one of the largest and most advanced food security systems in the world for grain storage.
Five industrial zones
According to Dr Hanafy, the project will be constructed on an area of 3.35 million square metres, 0.5 million square metres of which will be inside the boundary of Damietta port. The remaining land will be inside an unused industrial area northeast the port. The total cost of the project is estimated at EGP15 billion; however, further studies were made to cut these costs down to EGP13 billion. The logistics centre project involves the construction of modern grain silos and storage domes in three areas allowing for an increase in Egypt’s current storage capacity from 2.5 million to 7.5 million tons. It will also require the construction of two marine piers, each measuring 700m long, for large cargo ships and the construction of a 1200 meter-long river pier. State-of-the-art technological systems will be provided to link the project’s marine, storage and industrial zones with a handling system of conveyor belts and modern equipment and an integrated electronic monitoring and control system.
The project will include five investment zones. One will be designated for wheat and will house mills to produce fine flour and bran for local consumption and export; a second for soy industries, oil extraction and forages; a third for corn industries such as the extraction of oils, starch and fructose; a fourth for refining and packaging sugar; and a fifth for complementary food industries such as macaroni and pastries based on the produce of the other four zones. Each of the five industrial zones is expected to generate an annual production capacity of 1.5 million tons.
Food and commodity exchange
The Minister of Supply visited Texas, Chicago, Iowa, Indiana and Wisconsin, and signed an agreement with Blumberg Grain for three investment projects in Egypt to the tune of EGP3.2 billion. The first is for a manufacturing plant for storage technology and modern logistics to serve the local market and for export to Arab and African markets. The second involves the establishment of 10 modern logistics zones as a first stage for the preservation of fast-decaying fruit and vegetables; whereas the third aims to replace 164 traditional barns with modern ones. Dr Hanafy said that this would shave 30 per cent off the cost of the grain as the result of eliminating losses incurred in the current practice of storage of wheat and grain in open and dirt-floor barns.
The delegation that accompanied the Minister of Supply on his US visit included Cabinet representatives as well as representatives of the Armed Forces and the Arab Contractors company. They held several meetings with the President and members of the Chicago Mercantile Exchange (CME) to establish means of cooperation and technical support in an attempt to create a similar food and commodity exchange for the first time in Egypt and the Middle East in which wheat and grain would be traded among countries of the region.
In Egypt, meetings were held with Secretary-General of the Arab League’s Council of Arab Economic Unity Muhammad Rabia, and Chairman of the AmCham’s Transport Committee Alfred Assil, to explore strategic alliances with top Arab investors and producers in the field of food and grain. Also investigated in the meetings was the possibility to make partnership agreements between the port of Damietta and other Arab ports to facilitate the trading of food commodities and grains with Gulf States and Africa.
1.6 billion consumer market
The project is expected to start operation before the coming wheat harvest season. The first phase of investment is estimated at USD28 million, and will work on expanding the grain storage network to include dry grain and cater for the needs of cold storage by using the Blumberg integrated grain storage systems. Blumberg also announced that it intends to build a “manufacturing plant and export hub to produce food security technology and systems including equipment and storage buildings for the Middle East and North Africa region.”
Dr Hanafy announced that a 600-km-long railway will be built from the logistics hub in Damietta port and through the towns of Port Said, Ismailiya, and Suez to Safaga port on the Red Sea to transport food commodities and grains to Roll-On Roll-Off (RORO) vessels in Safaga. This method reduces transport costs and preserves commodities and grains from potential waste.
The Supply Minister stressed that Egypt’s geographic location makes it most suitable to become a pivotal hub for international trade, especially with the presence of the Suez Canal which is crossed by 25 per cent of the international container trade. Egypt is also considered a launching point for trade towards many countries in East Africa from Port Said, Ain al-Sukhna and the Gulf of Suez to South Sudan, Ethiopia and Djibouti on the Red Sea and to Arab and Gulf States. The trade agreements that Egypt has with the European Union and the Common Market for Eastern and Southern Africa (COMESA) makes it a potential market for more than 1.6 billion consumers, he said.
Many in the world have spotted the obvious potential of the International Logistics Centre, and international investors been keen on participating in the project. Italy’s Ambassador to Cairo Maurizio Massari said that the Mediterranean, which links three continents, offers potential business opportunities that are as yet unexploited. It is therefore imperative, he said, to have a modern integrated logistics network that lifts existing traditional transport and trade to new levels.
Two major international Russian investment groups have offered to work on the construction of grain storage silos in the International Logistics Centre in Damietta and supply Egypt with its needs from wheat.
The American firm Dome Technology plans to build several modern grain storage domes. Dr Hanafy said that these modern domes will be the first of their kind in Egypt and the Middle East and have the advantage of storing grain for a very long time using state-of-the-art electronic control systems. He said the ministry has received investment offers from investors in the UAE, Saudi Arabia, Kuwait, the Sudan, Uganda, Japan, the US, Canada, Italy, Russia, Slovenia and the Netherlands in addition to international banks and organisations.
On a different note, the annual conference of the US Wheat Associates organisation announced that next season’s wheat harvest will no longer be stored in traditional silos but in modern silos which use the latest technology that is suitable for Egypt’s environmental conditions. New techniques for sorting and classifying wheat will be applied to secure the rights of the farmers and small producers. This will enable the extraction of high quality wheat such as Durum for international trade.
11 February 2015