With global supply chains under strain and energy markets rattled, Egypt has been forced to make a hard choice: prioritizing electricity stability over industrial momentum.
The latest energy cuts could not have come at a worse time for factories grappling with inflation, currency volatility, and geopolitical uncertainty.
The crisis raises a critical question: Can Egypt sustain its industrial ambitions without rethinking its energy strategy?
While defensive in nature, the decision triggered widespread concern in industrial circles.
It was viewed as a severe blow at a particularly sensitive moment amid government ambitions to grow the industrial sector by 31 percent by FY2026/2027, with the sector’s growth becoming a top priority on its agenda.
Gas first: Industry feels the pinch
"The state has prioritized electricity as a national imperative. The decision, while costly to industry, is logical given the critical regional context,” Sherif El-Sayyad, chairman of the Engineering Export Council, told Ahram Online.
Similarly, Amr Fattouh, a member of the Industry Committee at the Egyptian-Lebanese Businessmen’s Association, said: "We understand this is an exceptional and temporary decision under regional crisis conditions, but its negative effects on strategic industries and the wider economy cannot be ignored.”
Fertilizers and cement hit the hardest
According to El-Sayyad, the biggest impact has been felt in industries like fertilizers, which use gas not only as fuel but also as a raw material to produce nitrogen. The same applies to cement, which is heavily reliant on energy.
"We don’t have exact figures yet, but there is clearly a direct impact on production, and possibly on factories’ ability to meet export commitments," he added.
Investor concerns
From the government’s perspective, protecting the national electricity grid and avoiding widespread blackouts was necessary for public stability.
However, Fattouh highlighted the absence of a pre-existing contingency plan, exposing a gap in preparedness: "We can't be caught off guard with every crisis. Industry needs clear and stable energy alternatives."
Fattouh added that factory shutdowns do not just mean lost output; they also jeopardize export obligations and drain foreign currency reserves.
"Losing exports means losing hard currency. We might be forced to import substitutes at higher prices,” he continued.
The damage is not just about timing but also about the broader context. Egypt has set an ambitious goal to grow its industrial sector by 31 percent by FY2026/2027 and even created a new position, deputy prime minister for economic development, to underscore its strategic focus on industry as a growth engine.
"Meeting these targets depends on two things: the duration of military escalation and the state's flexibility in managing the energy file,” El-Sayyad said, warning that these goals are now at risk.
Impact on investment climate
Egypt has been seeing rising flows of industrial investment. It is regarded as a promising market for global manufacturers, but emergency decisions that disrupt energy planning are a cause of concern.
"Such actions may lead investors to reconsider their plans in Egypt, even if government intentions are well-meaning," said Fattouh, stressing the need for clear industrial policies linked to long-term energy strategies.
In major geopolitical crises like now, the private sector remains at the mercy of government decisions.
"The private sector doesn’t have the tools to intervene—it’s an implementer, not a decision-maker," said Fattouh.
Still, some factories have begun generating electricity from solar energy, a trend Fattouh believes should be actively supported.
Supply chains under threat
The war’s impact goes beyond gas. With shipping disruptions in the Red Sea and Gulf, securing production inputs has become an added burden for Egyptian factories, most of which rely on imports from China and Southeast Asia.
"The real problem for Egyptian industry isn't the domestic market; it’s sourcing raw materials and components from abroad. Shipping delays are more dangerous than cost increases,” El-Sayyad highlighted.
"The competitiveness of Egyptian exports will suffer if the crisis drags on. But we shouldn’t exaggerate—many countries face similar challenges. The difference lies in how well each manages the shock," El-Sayyad explained.
He cautioned that rising global input prices will further squeeze profit margins in existing export contracts.
Fattouh agreed: "If the war continues, supply chains will be directly impacted, which could lead to factory shutdowns due to raw material shortages."
No Egyptian export contracts have been cancelled so far, but "silent anxiety" dominates the scene, El-Sayyad expressed.
"We’re in a monitoring phase. If the crisis lasts until August or September, the real impact will start to materialize," he said.
Geographically and economically, Egypt is well-positioned to become an industrial hub for Africa and the Arab world. However, this vision requires a strong alignment with energy policy.
"Achieving this dream needs immediate expansion in energy production, especially renewables," Fattouh said.
Renewable energy: The delayed opportunity
The crisis has reignited the debate over speeding up renewable energy adoption.
Egypt has tremendous potential in solar and wind, but much of it remains underutilized.
"We need real incentives for private investment in power generation—financing support, purchase guarantees, and simplified connection procedures," El-Sayyad stressed.
The current crisis reveals that despite its vast natural potential, Egypt has been slow in executing solar and wind projects.
Fattouh proposed a two-pronged solution:
1. Open the market for the private sector to produce and sell electricity;
2. Provide low-interest international financing for clean energy projects.
"If we don’t start this transition now, when will we? Energy security is no longer a luxury; it’s a survival need for any modern industrial economy,” he warned.
Energy security vs. industrial growth?
The crisis has exposed the critical link between energy security and industrial expansion.
"You can't build a strong industrial base without a resilient energy infrastructure. That requires long-term investments, not just emergency plans," El-Sayyad said, drawing comparison with China, which once cut back industrial output due to energy shortages and pollution.
Many of Egypt’s key export markets, Libya, Sudan, Algeria, and Syria, are in politically unstable regions, making contract security fragile.
El-Sayyad acknowledged the private sector's limited flexibility but highlighted emerging efforts.
"Most factories rely on stable state decisions, but we’re starting to see new models—factories installing their own solar stations. These initiatives must be supported,” he said.
Light at the end of the tunnel?
"Egyptian industry has weathered many crises. What we need now is a clear vision and coordinated execution between public and private sectors,” Fattouh said, expressing cautious optimism despite the regional volatility.
If tensions between Iran and Israel continue, will Egypt remain stuck in its current load-reduction policy for industry, or will it shift toward alternative fuels?
"Expanding the use of alternative fuels or renewable energy isn’t something that can happen in just a few months,” El-Sayyad clarified.
"Such shifts require strategic, long-term national plans that cover financing, legal frameworks, and supply chains,” he added.
"For example, building a large renewable energy plant can take more than a year. Even smaller private-sector solar plants need 4–5 months, especially with imported components," he continued.
"I’ve implemented such a solution in one of my factories. The results were excellent in terms of performance and cost. Expanding such models could offer a practical, scalable solution during crises,” El-Sayyad concluded.
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