Publikation North Africa - Socio-ecological Transformation - COP27 El-Sisi’s “New Republic”

How the real estate frenzy in Egypt sustains the regime’s grip on power



Oktober 2022


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Der ägyptische Präsident Abdel Fattah al-Sisi besichtigt ein Modell einer geplanten Stadt während der ägyptischen Wirtschaftsentwicklungskonferenz (EEDC) in Sharm el-Sheikh, März 2015. Foto: IMAGO/Xinhau

The state seems like a body on life support, a series of tubes running in and out of it, foreign doctors occasionally administering steroidal loans or applying structural adjustment chemotherapies. We study the tubes, the infrastructure, the industrial and commercial networks running in and out of it to understand how it is being kept alive.
Omar Robert Hamilton, 2022

Some nine years after the bloody takeover of President Abdel Fattah el-Sisi, Egypt is hardly recognizable. Cranes, cement mixers, and large construction sites are ever-present. In Greater Cairo, in the Nile Delta, along the Mediterranean, and on the Sinai Peninsula, countless new roads and highways are cutting their way through densely-populated cities and the barren desert. Luxury real estate, social housing colonies, tourist resorts, and bridges have been mushrooming across the country for years. Since 2015, to the east of Cairo’s upper-class districts New Cairo and Tagamoa el-Khamis, a New Administrative Capital (NAC) for 6.5 million people is frenetically being built on a vast plot of desert land, a megaproject and by far the most important prestige venture of former army chief el-Sisi.

Sofian Philip Naceur is a project manager at the Rosa Luxemburg Foundation’s North Africa Office and works as a freelance journalist.

The president, who has ruled the country with an iron fist since 2013, inaugurates new construction projects almost incessantly, always accompanied by noisy nationalist fanfare in the state-owned and private pro-regime media and applause from international investors. For el-Sisi, his “vision” for Egypt — which he has usually dubbed the “new republic” since 2021 — embodies nothing less than the beginning of a new era, the dawn of a modern future that promises prosperity and renewal and stokes national pride.

But all of this is primarily being financed with loans and investments from abroad worth billions. Thus, this seemingly dynamic modernization attempt is far less sustainable than el-Sisi and his regime persistently suggest, rather it is built on quicksand. The house of cards is still standing. But Egypt’s economy is once again in crisis mode.

The COVID-19 pandemic and Russia’s invasion of Ukraine have plunged Egypt into a severe economic, monetary, and balance of payments crisis as the country remains heavily dependent on imports and capital inflows from abroad. Foreign currency reserves have only avoided further collapse due to large deposits by Gulf states, while the military regime is trying to counter the massively increased balance of payments deficit and capital flight from the country, triggered by both global crises.

In the run-up to the UN Climate Change Conference (COP27) to be held in November 2022 in the tourist resort town of Sharm el-Sheikh, the regime bets on greenwashing and frames the country as a new prime location for green investments and a would-be pioneer in the energy transition. While this strategy appears to be working — countless deals and memoranda of understanding on green investments by foreign governments and companies have been signed since 2021 — the regime urgently needs to raise foreign currency from other sources in the short term and is trying to turn Egypt into a hub for the export of fossil gas and green electricity to Europe. Despite the overcapacity of local fossil gas power plants, the government has even temporarily rationalized electricity consumption to allow for more fossil gas exports even in the short term.

Meanwhile, Egypt’s construction and real estate industry has been largely unaffected by the global crises and flourishes unabated. While the construction sector accounted for 7.1 percent of gross domestic product (GDP) in 2020/21, the real estate sector reached an astonishing 11.4 percent the same year and is now the fourth-largest contributor to Egypt’s economy. Both industries are irreplaceable for the latter today, as they attract significant investment and capital inflows from home and abroad, and provide millions of jobs.

But why have both sectors grown so strongly since el-Sisi’s takeover? And do the countless loan-based megaprojects fuelled by the regime, the military, and governmental and private construction and real estate companies actually have an impact on the balance of payments? Is the construction boom only driven by corporate profit interests and — as el-Sisi and government and private sector representatives constantly claim — the modernization policies of the regime? Or does the real estate frenzy also have political drivers and is directly related to the 2011 revolution?

The New Capital project is indeed creating a large city for Egypt’s wealthy elites and the state, cordoned off from the rest of the country and far from Giza’s impoverished informal districts. Even Tahrir Square, the symbol of the 2011 uprising, is far away. The Ministry of Interior, formerly located just a stone’s throw from Tahrir, was already moved to New Cairo on the outskirts of the city in 2016. The remainder of the government is now following suit, gradually moving into the NAC’s new government neighbourhood. Large parts of Egypt’s upper and middle class are to follow suit too.

The project exacerbates social segregation and draws the “iron curtain” in society a little closer. With the establishment of the NAC, the gated communities of the upper and middle classes in Cairo’s east are being transformed into a veritable gated city.

The government’s rampant construction activity is undoubtedly fuelled by the country’s increasingly significant class divisions, but is usually justified in public discourses by the need for housing in the context of population growth. But is the population increase really the pivotal reason for the real estate boom and the glaring lack of affordable housing? After all, a staggering 11.7 million homes were vacant in Egypt in 2017. While social housing programmes lag far behind demand, the market is literally flooded with high-end housing units. This overproduction has multiple reasons, summed up by urban planner Yahia Shawkat:

Housing is money. ... Local and foreign investors, as well as speculators, have taken advantage of a deregulated property market to make what they believe is a guaranteed return. ... However, this deregulation by the government has resulted in an inexorable erosion of affordability.

However, the construction boom must also be explained by the necessity for el-Sisi to tie Egypt’s elites to his regime anew after the partial regime collapse in 2011. The construction sector is again today a key tool for creating and stabilizing patronage networks within the fragmented ruling class — as it already was under former President Hosni Mubarak. Yet, the means of maintaining political loyalties under el-Sisi are appallingly akin to those of the Mubarak era. The real estate industry is consequently “too big to fail” for the regime, however it also serves to justify el-Sisi’s authoritarian rule.

In recent years, the regime has primarily pursued the ceaseless display of the army’s military power, fuelled by Western governments’ arms exports, and backed up with martial video footage of newly-acquired submarines or fighter jets. Today, the regime literally floods TV screens and social media with a seemingly endless stream of glossy footage, showcasing large construction sites and successfully accomplished projects. But the obsession with erecting megaprojects in the desert “has little to do with development and much to do with state legitimacy, the need to manufacture hope and create symbols of a New Egypt”, the urban planner David Sims writes.

With megaprojects, however, el-Sisi also aims to showcase himself as an exceptional leader and erect architectural monuments in a manner that is almost common for authoritarian regimes. Megaprojects in the housing sector are also a means to this end: “housing is political. Almost every Egyptian ruler of the last nine decades, from King Fouad to President Abdel Fattah el-Sisi, has directly associated himself with at least one large-scale housing project”, says Shawkat.

But it is not only comparisons with Egypt’s former presidents Gamal Abdel Nasser, Anwar el-Sadat, or Hosni Mubarak that are illuminating here, but also a look back to the nineteenth century.

In 1805, Muhammad Ali Pasha rose to become the new governor of the Ottoman province of Egypt and, in an era of emerging independence movements, initiated a modernization campaign of the economy and the state. Under Ali’s grandson Khedive Ismail, who reigned from 1863–1879, Egypt was converted from a colony to a tributary state, whereas Ismail, turning towards European powers at the expense of the Ottoman Empire, built hundreds of bridges, dozens of sugar mills, and countless roads, railway lines, and ports in just a few years, and increased state revenues from agricultural exports by reclaiming desert land.

However, infrastructure projects were largely financed with loans from Europe, as were prestige ventures such as Cairo’s Khedivial Opera House — renowned for the 1871 premiere of Giuseppe Verdi’s “Aida” — or Downtown Cairo, meant to imitate Paris. The country fell into the debt trap. Due to the state’s outstanding debts, Ismail was deposed in 1879 under pressure from his lenders. In 1882, the British Empire took control over the Egyptian treasury and thereby political power in the country.

Just as under Ismail, modernization policy today is supposedly initiating a departure into a modern era and strengthening national sovereignty. Under el-Sisi, however, Egypt’s foreign dependence is not so much shifting from one world power to another, but rather diversifying. Loans, deposits, and investments now flow equally from Europe, China, North America, Russia, and the Gulf states, while the regime has so far been quite successful in balancing the conflicting interests of its lenders. Nevertheless, it remains in question whether the regime will be able to sustain in the long term its modernization and construction policy, based on the disposal of state land through capital transfers from abroad and new debt.

Given the importance of the real estate sector to the economy and the legitimacy of the regime’s rule, this report aims to take a closer look at the origins and drivers behind the real estate boom, map the most important projects pursued by el-Sisi, and illustrate how the military has expanded its influence in the real estate sector since 2013, and what role the industry plays today for the stability of the status quo in Egypt.

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