The Egyptian government is due to award $3 billion worth of contracts next year for the establishment of 21 desalination plants, Sovereign Fund of Egypt (SFE) CEO Ayman Suleiman said earlier this week.

Over 200 companies expressed interest during the prequalification process which took place in late November. The plants target a capacity of 3.3 million cubic metres of water per day. Egypt currently produces one million cubic metres a day from desalination plants in coastal areas.

The first batch of contracts is part of a broader plan targeting 8.8 million cubic metres of desalinated water daily by 2050. In total, around $8 billion in private sector investments are expected to be directed to developing seawater desalination projects.

The Ministry of Housing assigned the SFE to oversee the prequalification process and assess the expressions of interest and credentials of investors. Successful investors will be invited to submit tenders for the construction of plants, a source who preferred to remain anonymous told Al-Ahram Weekly.

The programme is designed to help secure the water resources needed to keep up with population growth over the next 50 years, President Abdel-Fattah Al-Sisi said earlier this week. Egypt is looking to unconventional sources to help bridge its water deficit, a desalination expert who preferred to remain anonymous told the Weekly. Egypt is currently suffering severe water poverty, with less than 500 cubic metres of water per capita a year, the source said.

Desalination plants are essential to avoid a refugee crisis that could see as many as 30 per cent of Egypt’s population leave the country in search of access to water, says Irina Tsukerman, president of Scarab Rising, Inc, a media and security strategic advisory group. She warned of the impact of the Grand Ethiopian Renaissance Dam (GERD) on the Nile, the river that provides Egypt with 95 per cent of its renewable water resources. GERD could have a lethal impact, she said. A drop of 1 bcm of water could cause the loss of a million jobs and $1.8 billion in economic production annually.

Egypt will employ reverse osmosis technology in its desalination plants, the desalination expert told the Weekly. RO is more energy efficient compared to thermal technology which needs five times more electricity to produce water.

The plants will utilise renewable energy, facilitating access to competitive interest rates from institutions such as the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD).

While investors are enthusiastic, and have been reassured that the Ministry of Finance will act as sovereign guarantor of the projects, they remain concerned about how the value of the pound will impact on their investments. Even before the war in Ukraine and the March floatation the government was finding preliminary offers expensive. Now, because of the exchange rate situation, investors worry about how they will be paid, and are unlikely to accept payments denominated exclusively in Egyptian pounds.

The projects will be built on a build, own and transfer (BOT) basis, with the private sector bearing the upfront cost of establishing plants and operating them, and the government paying for the service.

“It is like paying for the projects in installments,” said the source.

Desalinated water is too expensive to be used for any other purposes apart from potable water, and even then the end user will not be paying the full price. For agriculture, reused water such as that produced by the agricultural wastewater treatment plant in Bahr Al-Baqar in northwestern Egypt, is a more affordable option.

According to the source, the cost of a cubic metre of desalinated water ranges between $1 to $1.6, depending on location and the infrastructure needed. It is more costly to desalinate Red Sea water because of its higher salinity, and the plants must dispose of the brine, or reject water, safely to avoid polluting the environment.

Egypt will have to exercise particular care, says Tsukerman. International institutions are pushing for net zero and prioritising high-cost environmental policies in African countries at a time when economic troubles, even with international cash infusions, show no sign of abating.

“Driving up costs of construction with excessive environmental regulations is undesirable. Egypt will need to strike a balance that meets its immediate needs,” she cautioned.

It will also have to bear in mind questions of national sovereignty, ensure that the projects generate jobs for local workers and that the bulk of investments are domestically sourced.

“Becoming dependent on foreign states when it comes to priority projects such as water provision could quickly become a national security issue,” she said.

*A version of this article appears in print in the 8 December, 2022 edition of Al-Ahram Weekly