Egypt remains highly reliant on agricultural imports, particularly grains, to meet its domestic food requirements. This is not only costly; Egypt’s annual food and grain import bill has reached nearly USD20 billion, but also exposes the country to volatility in the global food supply chain. While Egypt’s precarious food security situation has long-been a concern in the country, the issue has been exacerbated by the Russia-Ukraine conflict.
Russia’s invasion of Ukraine in February 2022 has severely disrupted global food supply and driven up the cost of agricultural imports, particularly for staple grains such as corn and wheat. The UN’s FAO Food Price Index (FFPI) rose to the highest level in a decade in mid-2022. While price pressures have abated slightly since then, agricultural prices will likely remain at historically high levels going into 2023. The primary reason for this impact on prices is due to the reduced supply from both Russia and Ukraine, which are among the world’s largest grain exporters. Russia was the world’s largest wheat exporter in 2021, while Ukraine was the world’s third largest exporter of corn and fifth largest exporter of wheat.
In the case of Egypt, almost half of its grain imports were sourced from either Russia or Ukraine in 2021, exposing the country to significant disruption and high import costs in 2022. This has stoked inflation and compounded food security concerns in the country. While this issue has affected the wider North African region, given it is the world’s largest grain-importing sub-region, Egypt remains the largest importer of grain in the region.
The push for self-sufficiency driving agribusiness initiatives and technology adoption
These dynamics, combined with the political sensitivity of rising food prices in Egypt, and the North African region more generally, is encouraging governments in the region to increase investment into food self-sufficiency. In Egypt, the government has launched a number of initiatives aimed at boosting domestic crop production. One flagship project is the “New Delta” megaproject, which was announced in April 2021. The initiative aims to cultivate roughly one million acres of land, and create a modern agribusiness hub. It includes the establishment of new agricultural and urban communities, and industrial complexes based on agricultural production, thus paving the way for investment across Egypt’s agricultural sector from both the public and private sector.
Besides launching projects that are directly aimed at boosting local crop production, the Egyptian government will also focus on adopting technologies into the domestic agricultural sector that aim to improve yields and reduce the risks related to climate change and water scarcity. Egypt’s Sustainable Agriculture Development Strategy 2030 places a significant emphasis on digital transformation in the agricultural sector to improve food security in the country.
This adoption of “agritech”, in areas such as automated irrigation, vertical farming and biotechnology, will see the deployment of technologies such as IoT, AI, drones, robotics and automated vehicles. In line with this, in December 2021 the Ministry of Agriculture and Land Reclamation (MALR) and the Ministry of Communications and Information Technology (MCIT) launched the “Hudhud” smart application, which uses AI to help farmers identify and treat pests. This push towards agritech will create another investment stream for companies operating in the agribusiness sector in Egypt.
Gulf firms well-placed to provide ‘agritech’ solutions in Egypt
Gulf Cooperation Council (GCC) firms are well-placed to sell agritech services in Egypt, due to the extensive experience they have built up from launching initiatives in their domestic markets. Furthermore, Egypt remains a key investment destination for the GCC given the vast growth potential of the Egyptian economy and the role the country can play in promoting regional stability.
GCC countries have paved the way for agritech adoption in the MENA region. This has been encouraged by acute water scarcity concerns, limited arable land and high levels of digital maturity in the Gulf. The UAE and Saudi Arabia in particular stand out as outperformers in the agritech space, underpinned by conducive government policy towards the sector and ongoing funding support. For example, the Abu Dhabi Investment Office has established a USD100 million programme to fund agritech research and development aiming to transform the emirate into a regional agritech hub. Meanwhile, in Saudi Arabia, the government’s Vision 2030 places a significant emphasis on sustainable agriculture and technology adoption.
This supportive policy environment has fostered agritech start-ups in both countries. As a result, the UAE and Saudi Arabia are now home to several companies that have the necessary expertise, skills and technology to launch agritech initiatives in their domestic markets and internationally. These include Emirates Bio Farm (UAE), Masdar Farms (UAE), RNZ (UAE), Red Sea Farms (Saudi Arabia) and Pure Harvest (UAE). Companies such as these will be well-placed to target the varied and abundant growth opportunities present in the Egyptian agritech sector.
Favourable business climate further boosting investor sentiment in Egypt
Investor sentiment towards Egypt’s agricultural sector will be further strengthened by the country’s generally improving business environment. The government is very keen to attract FDI into the country and it will continue to advance the second phase of its economic reform programme (launched in April 2021), which aims to incentivise investment, liberalise trade and promote greater flexibility in the labour market. In addition, in October 2021, Egyptian authorities signed a three-year programme with the OECD to receive support for the implementation of key structural reforms to improve the business environment and attract foreign investment.
Most recently, on 16th December 2022, the IMF approved a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt, of USD3 billion. Requirements of the policy package include preserving macroeconomic stability, restoring buffers, and wide-ranging structural reforms to reduce the state footprint and strengthen governance and transparency.