Improving Egypt's logistics infrastructure to facilitate trade

As one of the busiest passenger and cargo centres in Africa, Egypt’s transport and logistics sector is among the country’s priority drivers of economic growth. There have been concerted efforts by the government to leverage and transform the transport network via a substantial 10-year infrastructure plan, which aims to boost foreign trade, and manage urban and economic development.

These efforts will also integrate Egypt more fully into global value chains, a long-standing priority given the country’s advantageous position between Europe, the Middle East and Africa. However, financing remains a hurdle for the ambitious projects under way. To solve this, the government has continued to liberalise market access to attract private capital and close the funding gap.

Structure & Oversight

The Ministry of Transport (MoT) oversees general transport policy, including investment and strategic proposals, and manages the country’s transport needs in tandem with Egypt’s national development and economic growth plans. The MoT aims to develop integrated, sustainable and safe transport systems; enhance multi-modality and logistics services; and promote private sector investment.

In addition to the MoT, there are a number of separate government entities that are responsible for implementing policy in specific transport subsectors. These include the General Authority for Roads, Bridges and Land Transport, which manages the land transport network; Egyptian National Railways (ENR), the state national railway network, which is overseen by the parastatal Egyptian Railway Authority; and the Maritime Transport Sector (MTS), which administers sea traffic and commerce, including the issuance of licences.

While central planning of the sector is under the purview of the MoT, the country’s 27 governorates are responsible for ensuring government policies are successfully carried out within their territories. The local authorities within these governorates are responsible for district roads, waterways and the provision of local bus services.

Additional authorities not overseen by the MoT include the Suez Canal Authority (SCA), which is a public and independent authority that manages, operates, maintains and improves the Suez Canal; and the Ministry of Civil Aviation, which oversees all aspects of air transport, including managing competition between EgyptAir – the state-run airline – and private airlines. The ministry also houses the Egyptian Meterological Authority.

Development

The government has been scaling up infrastructure investment since 2014, largely driven by the country’s rapidly increasing population. A 10-year transport development plan, spanning the years 2015 to 2024, aims to transform the country into a major international centre for transport and logistics at a cost of LE1.6trn ($101.7bn). The programme covers six main areas of development: tunnels and electric traction (LE837bn, $53.2bn); roads and bridges (LE474bn, $30.1bn); railways (LE225bn, $14.3bn); maritime transport (LE115bn, $7.3bn); dry ports and logistics (LE15bn, $953.1m); and river transport (LE3bn, $190.6m).

Investment

According to data from the Central Bank of Egypt (CBE), more than LE1.2trn ($76.2bn) was spent on infrastructure projects between FY 2015/16 and FY 2019/20, with the transport sector receiving the largest share, at 31%. In line with objectives under Egypt Vision 2030, which include providing a transport system that meets the UN Sustainable Development Goals (SDGs), the transport and storage sector received the largest share of investment deployed in FY 2020/21, accounting for 15.6% of the total, according to the Ministry of Planning and Economic Development (MPED). Of this figure, 89% was sourced from public investment.

The government has sought to catalyse private investment in the sector to support social and economic development. While the transport industry has received the largest share of government investment in recent years, a 2018 World Bank report noted that Egypt would require approximately $675bn in investment over the next 20 years to meet its infrastructure needs. The bank said that the transport sector, in particular, would require investment in multi-modal freight transport and logistics, such as ports, airports, railways and inland waterways, and urban transport solutions, particularly in the Greater Cairo area.

As a result, the government has continued to open up market access to attract private investment to close the financing gap. Between FY 2015/16 and FY 2019/20 private investment accounted for 31% of total investment in the sector, growing from LE14.5bn ($921.3m) to LE21.7bn ($1.4bn). The economic fallout associated with the Covid-19 pandemic, however, resulted in a drop in investment from the private sector to 21% of the total in FY 2019/20 to around 11% in FY 2020/21.

Meanwhile, the Ministry of International Cooperation, which facilitates global partnerships to develop Egypt so that it can meet the UN SDGs, secured around $1.8bn and $1.1bn in 2020 and 2021, respectively, in development financing for the transport sector. Multilateral and bilateral development partners during this period included the European Bank for Reconstruction and Development, the African Development Bank and the World Bank.

Budget

In the FY 2020/21 budget the government allocated LE244.7bn ($15.5bn) to the transport sector – more than doubling the previous fiscal year’s sector budget. The increase in public spending went to improve infrastructure, road networks, tunnels and transport networks. In September 2021 the minister of planning and economic development, Hala El Said, emphasised that transport sector development is a national priority as it is one of the main drivers of economic and social development, and plays a major role in the country’s infrastructure projects.

The draft budget for FY 2022/23 forecasts GDP growth of 5.5% as the government continues work on expansion and development projects, according to a statement from Mohamed Maait, the minister of finance. Industry stakeholders have noted that the government plans to continue to rely on large transport infrastructure projects and the establishment of fourth-generation cities to sustain this expansion.

Performance

In terms of real GDP, Egypt’s transport and storage sector has expanded steadily over recent years, growing at a rate of 3.2% in FY 2017/18, 4.1% in FY 2018/19, 3.9% in FY 2019/20 and 4.6% in FY 2020/21, according to data from the CBE. For FY 2021/22, the MPED forecast expansion of 3.8% for the sector. Meanwhile, in terms of its contribution, the transport sector accounted for 4.6% of real GDP in FY 2017/18, at LE165.2bn ($10.5bn), 4.5% in FY 2018/19 (LE172bn, $10.9bn), 4.6% in FY 2019/20 (LE178.6bn, $11.3bn) and 4.7% in FY 2020/21 (LE186.9bn, $11.9bn). According to MPED estimates, the sector was expected to comprise 4.7% of total GDP in FY 2021/22.

Road Network

Roads, motorways and bridges form a large part of the government’s infrastructure push, which is meant to stimulate the economy after years of population growth that resulted in strained city planning. Under the 10-year transport modernisation plan, 30,000 km of new and developed roads are set to be completed by the end of 2024. Additionally, in 2020 the MoT stated that LE130bn ($8.3bn) had been budgeted to build 1000 bridges and tunnels by 2024, with around 60% of projects completed at the time of the announcement.

The LE175bn ($11.1bn) National Roads Project, rolled out in 2014, added around 7000 km of new roads between 2014 and 2020, bringing the country’s total road network to an estimated 120,000 km in 2021. Altogether, it is estimated that the government will have invested more than LE1trn ($63.5bn) in the road network between 2014 and 2024, and has been involving more private players to make up the funding gap. The bulk of the road and highway projects have been concentrated around the New Administrative Capital (NAC), located approximately 35 km east of Cairo, and other new cities and urban centres. In January 2022 Prime Minister Mostafa Madbouly announced that an additional LE33bn ($2.1bn) had been invested to build 1350 km of roads in new cities in order to attract people and investment, and create employment opportunities.

To increase exports, bolster regional development and capitalise on the launch of the African Continental Free Trade Area, the government is also leading efforts to complete a series of motorways that will support regional connectivity. These include the 10,300-km Cape to Cairo Road – known as the Pan-African Highway – connecting Egypt to Sudan, South Sudan, Ethiopia, Kenya, Tanzania, Zambia, Zimbabwe, Botswana and South Africa – at a cost of LE26bn ($1.7bn). It is set to be complete by 2024.

Bus & Monorail

As part of a wider initiative to encourage public transport use and ease traffic congestion, in May 2021 the government signed a memorandum of understanding with a consortium of local and international companies to begin the development of the Bus Rapid Transit (BRT) project on the Cairo Ring Road. Part of a larger upgrade and expansion of the road from four to seven lanes in each direction, the BRT will include 100 buses, multiple routes and stops, an e-ticketing system and integration with other transport modes at a cost of LE21.5bn ($1.4bn). BRT station construction was due to begin in early 2022, and at that time the government was negotiating with several international firms for funding and operational support.

Another project aimed at improving urban mobility and reducing traffic is the monorail rapid transit system, first announced in mid-2019. The €3bn project, partially funded by the government, is being designed and built by Egypt’s Orascom Construction and France’s Alstom, and will consist of two lines. The first will connect East Cairo to the NAC with 22 stations and a depot line, at a length of 54 km. The second will connect the Giza governorate to 6th of October City with 12 stations and a depot, at 42 km. Upon completion in 2023, the lines will be the world’s longest monorail and have the capacity to move 45,000 passengers per hour in each direction.

Railways

At nearly 10,000 km in length with 705 stations, Egypt’s railway system is one of the largest in the Arab world, and plays a fundamental role in passenger, freight and logistics transport. The ENR network moves approximately 500m passengers and 6m tonnes of goods annually. In line with Egypt’s infrastructure funding push, the ENR announced a $10bn investment in the rail network in 2014. According to a 2020 report from GlobalData, investment in the country’s rail project’s pipeline amounted to approximately $50bn, with 45% being used to finance current projects. To make up the financing gap and attract private capital, the government liberalised the railway sector in 2018, while also abolishing the state monopoly on rail ownership and operation – opening up access for private participation and investment in projects.

The largest rail project under way as of early 2022 was the $23bn, 1800-km high-speed electric railway. The first phase, worth $4.5bn, was awarded to German multinational Siemens in partnership with Orascom Construction and the Arab Contractors in January 2021. It will run from Alamein on the Mediterranean Sea to Ain Sokhna on the Red Sea, passing through the NAC, at a length of 660 km. The first connection is expected open in 2023, transport more than 30m people per year and reduce travel times by 50%. Meanwhile, three rail lines at a total cost of $14bn are due to come on-line in 2022: a 700-km Cairo-Luxor line, a 300-km Luxor-Hurghada line and a 210-km Alexandria-Cairo line.

In terms of metro systems, Cairo Metro – which transported approximately 3.5m passengers per day as of 2019 over almost 90 km of tracks across three lines and 74 stations – is in the process of upgrading existing lines and constructing three new ones with the help of private and foreign investment. In November 2020 a consortium including Orascom Construction and Japanese firm Mitsubishi signed a contract with the National Authority for Tunnels to implement the railway system, track and depot sections of the first phase of Line 4. The $800m contract will include signalling, power supply, fare collection and track work, among other components. The line is slated to be completed in 2024. Lines 5 and 6 are still in the planning phase and will be 20 km and 19 km, respectively.

In Alexandria, meanwhile, the government announced plans in September 2020 to develop a new metro system at a cost of $2.5bn. A loan agreement for the metro was approved in May 2022, which will see €250m from the European Bank for Reconstruction and Development.

Air

Egypt’s air segment benefits from the country’s geographic location. It has one of the busiest passenger and cargo centres in Africa: as of 2019 it was the second-largest international air cargo market on the continent, accounting for 15% of all air freight, according to a 2020 report from US-based aerospace company Boeing. To capitalise on this, a large-scale logistics terminal for imports and exports, Cairo Cargo City, was built next to Cairo International Airport. It spans more than 191,000 sq metres and has the capacity to process 290,000 tonnes of cargo per year. The cargo facility is operated by CACC Cargolinx and was inaugurated in 2021.

Cairo International Airport is the country’s largest airport and Africa’s second busiest, after OR Tambo International Airport in Johannesburg. It has three terminals, serves over 45 airlines, and is the primary hub for EgyptAir and Air Nile. The airport processes more than 50% of flights and passengers in the country. Cairo International Airport saw 17.5m passengers in 2018 and 19m passengers in 2019, before dropping to 7.1m in 2020 due to the pandemic. In 2021 the figure rebounded to 11.3m passengers, signifying potential for the segment.

To ease pressure and help support the tourism sector, construction of a fourth terminal was announced in 2019, which will increase annual capacity to 20m passengers. Two new airports were inaugurated in 2020 to serve the Greater Cairo area: Sphinx International Airport in Giza and the Capital International Airport near the NAC.

Ports & Shipping

Egypt’s strategic maritime location, connecting the Mediterranean Sea and the Red Sea via the Suez Canal, has greatly benefitted its economy and is a key enabler of regional and inter-regional trade. Approximately 90% of the country’s international trade relies on maritime transport and is underpinned by 48 ports: 15 on the Mediterranean coast and 33 on the Red Sea. The government’s long-term maritime strategy is based on raising the efficiency and competitiveness of Egypt’s ports, and despite the pandemic and subsequent supply chain disruptions, the segment has steadily grown over the years (see analysis). As part of Egypt Vision 2030 and its focus on infrastructure, the government plans to increase port capacity from 120m tonnes in 2016 to 370m tonnes by 2030.

Among major port projects under way is the expansion and upgrade of the country’s largest, Alexandria Port, which handles around 65% of Egypt’s trade. A new multipurpose terminal and the construction of deeper berths will increase the port’s annual capacity from 66m tonnes to 100m tonnes, and increase storage space to 1m sq metres once completed in 2024. Meanwhile, a LE10bn ($635.4m)expansion and upgrade at Ain Sokhna port, which includes the construction of a 350,000-sq-metre container yard, will increase its annual capacity to more than 1m containers, making it the largest port on the Red Sea upon completion in 2023. “Ports in Alexandria, El Dekheila, Ain Sokhna and Safaga were all undergoing expansions that will enable them to accommodate the biggest class of cargo ships,” Hussein El Dessouky, chairman and managing director of local civil engineering firm EDECS, told OBG. “At the same time, Egypt has begun to strengthen its rail network to connect these ports to industrial zones, logistics centres and metropolitan areas, facilitating access to foreign markets.”

At 193 km in length, the Suez Canal is one of the world’s busiest waterways, accounting for around 12% of global shipping traffic. It is a key logistics gateway for oil and gas, commodities and consumer goods from Asia and the Middle East to Europe, and is a major source of government income via transit fees: in 2021 revenue reached $6.3bn – the highest in the canal’s history despite the pandemic and the Ever Given blockage in March of that year – up from $5.6bn in 2020. According to the SCA, 19,000 ships passed through in 2020, averaging 51.5 per day.

A $10bn mega-project is under way to expand the canal – including extending a second channel and enlarging 30 km of the canal by 40 metres – which is expected to increase its capacity to 97 ships per day and raise revenue to $13bn annually. The project is expected to be completed in mid-2023.

Outlook

Despite disruptions that arose from the pandemic and subsequent supply chain disruptions, the medium- to long-term prospects for Egypt’s transport and logistics sector look promising due to the number of road, rail, urban transit, air and maritime projects under development. Expansion of the sector is a national priority, and the government is engaging with the private sector and foreign investors on large-scale transport infrastructure projects to sustain economic growth, and connect new urban centres and fourth-generation cities.