For a dictator who rules by fear, it’s best to take no chances. “There are no power transitions in Egypt,” says Michele Dunne, senior fellow and director at the Middle East Program of the Carnegie Endowment for International Peace in Washington. “He is ruling by coercion rather than by consent. People are really terrorised.”
Egyptians who are cowed into public silence privately believe that Sisi’s rule is unsustainable, says Dunne. The most likely fate of Sisi, in power since a military coup in 2013, is “jail or the grave.”
READ MORE Egypt: 10 years on, is its revolution an unfulfilled dream of the Arab Spring?
Under Sisi, civilian institutions such as the judiciary, the legislature and the auditing authority have lost their independence. Military control has distorted the country’s economic policy. Not enough attention has been paid to basic issues like ensuring water supply, building up manufacturing or service industries that could provide jobs, says Dunne.
Instead, there has been a spending spree on arms. Military figures have been allowed to make money in sectors as diverse as cement and the media while the private sector has been crowded out. The result, Dunne says, is a lack of productive investment, especially outside of the energy sector.
READ MORE Egypt: ‘The Muslim Brotherhood has never been more disconnected from society’
The COVID-19 is hitting the economy hard, and the relevance of the country’s oil and gas reserves is diminishing amid a global energy transition. Saudi Arabia and the United Arab Emirates have helped by absorbing excess labour power, but their economies are now also in trouble, says Dunne.
“There is no discernible economic strategy,” says Dunne. Though Sisi grasps the importance of public finances, “he does not understand how the economy works.” There has been too much emphasis on mega-projects “for the glory of Sisi” such as the extension of the Suez Canal which hasn’t paid off due to lack of demand. “Egypt can’t become a wealthy country on gas exports.”
Market Institutions
There is no necessary contradiction between military control and economic prosperity if market-based institutions are allowed to function, says Harry Broadman, chair of the emerging markets practice at Berkeley Research Group LLC in Washington. “That’s not in Sisi’s DNA. He comes at it from a political angle. The military is needed to prevent the threat of chaos,” he says.
READ MORE Egypt: Sisi’s power reinforced after passing of new law
Sisi shows “no sign of having a future reform agenda,” says Broadman. His programme is limited to personal enrichment and containing the opposition, which is “not sustainable” as a governing plan. “This is not tenable.”
Dunne testified before a US Congress sub-committee in September 2020. She told them that Egypt needs to rethink its approaches to agriculture and water use as well as devise a programme to curb population growth if food insecurity is to be prevented. Only about 3% of Egypt’s land is arable, and that is being reduced by climate change. Water is still being wasted due to outdated irrigation practices, she testified.
READ MORE Egypt’s protests reveal the deep cracks in al-Sisi’s strongman façade
Sisi is constructing a new administrative capital 30 miles east of Cairo, costing an estimated $58bn. The city is being built by the military with Chinese investment. There was no need for a new capital in the desert and the project is “extremely problematic” in terms of water consumption, Dunne told Congress. Future loans to Egypt should be conditional on reforms that roll back military privileges and allow the private sector to create jobs, testified Dunne.
Consumer taxes
Broadman expects that sound governance will loom larger as a criterion of foreign policy under the new Joe Biden administration than under Donald Trump, who called Sisi his “favourite dictator”. “Biden will introduce conditionality,” says Broadman.
That could push Egypt closer into China’s orbit, says Broadman. Yet while the regime may be sustainable in terms of external financing, Broadman sees Sisi as doomed to foment further social upheaval. The brutality of the repression, he says, shows Sisi’s lack of confidence that his rule can be sustained.
READ MORE Abdel-Fattah Al-Sisi: Egypt’s President Elect
Even before COVID-19, government revenue had become increasingly dependent on indirect taxes tied to consumer demand. According to François Conradie, senior political economist at NKC African Economics in Cape Town, tax revenue made up 78% of all government revenue in 2019, versus 65% in 2002.
Direct taxes, which made up 51% of taxes in 2007, dropped to 34% in 2019, while the share of indirect taxes climbed from 34% to 48%. Grant revenue from Gulf governments, which backed Sisi to the tune of 100bn Egyptian pounds ($6.4bn) in 2014, was negligible in 2019.
Sisi has no clear succession strategy
Though he has sought to promote his sons, they are still too young to have a high profile or be credible successors, Dunne says. If he was to die now, the Supreme Council of the Armed Forces would take over. Such is Sisi’s fear of opposition that he won’t even allow a credible opposition figure to contest and lose a presidential election.
READ MORE Egypt: Mahmoud al-Sisi, cut from the same cloth as his father
Yet even elections which are no more than charade can become a focal point for political opposition, Dunne says.
Once the worst of the pandemic is over, “the regional and global context is not going to be kind to a country like Egypt,” says Dunne. It may be possible for the regime to survive for a few more years – but not for decades.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.
