As Ethiopia’s flagship energy project nears completion, Egypt has to adapt to the potential worsening of its national water security, and the subsequent implications for its already strained power generation and agriculture capacity.
Approximately 500km north-west of the Ethiopian capital Addis Ababa lies the Grand Ethiopian Renaissance Dam Project (Gerd). Upon completion, which is projected by the government to be July 2017, the installation is set to be the largest hydroelectric power station in Africa. The project is being primarily self-financed, with Ethiopian banks ordered to buy government bonds to fund the project, and various (sometimes mandatory) attempts to encourage private citizens to purchase bonds for themselves.
The dam straddles the Blue Nile, which, along with the White Nile, is one of the two major tributaries of the Nile river. The Blue Nile’s source is Lake Tana, north-western Ethiopia, from where it flows north to the Sudanese capital of Khartoum, where it links up with the White Nile to form the Nile proper. In total, the Nile passes through 11 African countries, until it reaches Egypt and the Mediterranean Sea.
Construction of the dam officially began on 2 April 2011, when then-prime minister of Ethiopia, Meles Zenawi, placed the foundation stone. The dam’s power generation capacity will be 6,000MW, which will more than double Ethiopia’s current energy generation capacity. The dam is also intended to reduce regional flooding, and to provide a water resource to facilitate large irrigation projects. It will have the tertiary function of providing a bridge across the Blue Nile river.
Initially, Egypt responded angrily to the project, denouncing it as a violation of Egypt’s sovereignty and an assault on its water security. Numerous Egyptian officials and senior lawmakers decried it; in 2013 the Egyptian government of former president Mohamad Morsi, the leader of the Islamist Muslim Brotherhood, even went so far as to indicate it was considering a military strike against the dam.
Despite these public reservations and protestations, Egypt has made some diplomatic concessions to the project over the past year. In May 2015, the Egyptian, Ethiopian and Sudanese leaders met in the Sudanese capital of Khartoum, to sign a declaration of principles on the matter. The agreement sets out a broad accord for the three states to work together to avoid any substantial economic harm to Sudan and Egypt, and promises regional co-operation with respect to dam operation. It formalised Egypt’s recognition of the dam, and marked an end to overt attempts by Cairo to demand an end to construction.
However, the agreement ignored historical treaties, such as the 1959 Nile Waters Agreement, which divided control and rights over the Nile water flow entirely between Sudan and Egypt, and lacked specificity about the form such co-operation would take.
Egyptian water security
Cairo is concerned that the Gerd will impact its own downstream hydropower stations, primarily the High Aswan Dam (HAD), as well as its irrigation systems. HAD is currently the major Nile-based reservoir, although it will be dwarfed by the Gerd. Whether the Gerd will dramatically impact on Egypt’s own water security by reducing water flows is contingent on several factors. For example, if Ethiopia fills the dam’s reservoir very rapidly, it will have a substantial impact on Egypt’s downstream water flows. Yet, if annual release rates from the Gerd are at or over the agreed 35 billion cubic metres (BCM), then any negative downstream implications will be dramatically reduced. Furthermore, the implementation of comprehensive drought-management plans at Gerd would have a considerable impact on reducing any losses of Egyptian water security. Such plans could, for instance, instruct for an extra release from Gerd if reservoir levels at HAD fall below critical levels. If this was combined with effective policies on the Egyptian side, such as reducing water flows from HAD downstream to allow for a smaller but more consistent water flow, then it would allow for some of the climactic risks to be mitigated. For example, the HAD would still be able to function, albeit at a reduced rate, and irrigation of Egyptian farmland could be maintained.
Egypt’s reliance on Ethiopian co-operation with respect to Gerd is in itself a risk
However, Egypt’s reliance on Ethiopian co-operation with respect to Gerd is in itself a risk to Egyptian water security. The Gerd will provide Ethiopia with a powerful economic weapon to be deployed against Egypt and other downstream states, and it is all but certain that the consequences for Egypt will be a part of Ethiopia’s strategic calculus. Moreover, there are substantial benefits from an Ethiopian perspective to rapidly filling the reservoir, as it will allow faster power generation, and therefore more widespread electricity provision and the quicker execution of revenue streams from selling the excess power to regional states.
Egypt only has 20cu m of fresh water per capita, compared to over 2,200 per person in the United Kingdom. This puts it well within the United Nations Department of Economic and Social Affairs’ definition of water scarcity, which stands at 500cu m or less per capita. Certain Nile governorates, such as Kafr al-Sheikh, are already suffering severe water shortages. In May 2016, during the summer crop season, the Egyptian government declared a state of extreme emergency over the lack of water.
In some areas, this has caused outbreaks of popular unrest. In June 2016, for example, protests broke out in Upper Egypt, to the country’s south, over a lack of available water. These ranged from small-scale rallies, to cutting off roads, to even the shutting down of local water valves and forcible seizure of water resources, as occurred in the south-western governorate of al-Wady al-Gedeed during this time period.
The symbolic and practical importance of water means that if the local population is unable to source sufficient supplies, or if there is a popular perception such an event is imminent, it will have an immediate impact on Egypt’s political and security stability. This will dramatically increase protest risk and fuel discontent with the current administration, but also towards the government of Ethiopia and potentially towards black Africans in Egypt.
Companies should consider risk-mitigation strategies, to reduce the disruption that would be caused by a decline in available water. This should include ensuring adequate reserve supplies are independently sourced, and can be provided to employees. Companies perceived to be water-intensive, such as bottling plants, should be aware of the higher political and protest risks applicable to their operations, as should companies with visible links to Ethiopia.
Power generation capacity
Even minor power-generation losses at HAD would have a substantial effect on the Egyptian economy. Egypt is currently facing an energy crisis, as supply is insufficient to keep up with national demand. The World Bank estimates the Egyptian population at 91.5 million, with a 2.1 per cent growth rate, meaning that the country requires an ever-expanding energy supply. Although Egypt is working on increasing power-generation capacity, with major construction projects in Beni Suef and Burullus, these will not come online until summer 2017 at the earliest.
Although hydropower generation accounts for under 10 per cent of Egypt’s electricity production, and its market share has been steadily declining since the 1970s, any decline in power-generation capacity will have a disproportionate effect on the Egyptian economy, due to a lack of any redundancy within the electricity grid. This will in turn pose a threat to commercial operations, as brown-outs or black-outs will disrupt the ability of businesses to run effectively.
Also, such events will have an impact on domestic staff morale, which could decrease workforce efficiency. Air conditioners, for instance, place a heavy load on the power grid in the summer months, and outages that correspond with heatwaves could easily prompt civil unrest.
To mitigate this risk, companies in Egypt should ensure they have business-continuity plans to be enacted in the event of blackouts or power shortages, such as independent electricity generation through private generators. Human resources managers should also consider whether arrangements should be made for employees to ensure they are provided with energy, out of duty-of-care considerations.
Any decrease in water flows from the Nile would also have implications for Egypt’s farmers. Agriculture in Egypt is heavily dependent on the Nile, and it is around the river that the 10 per cent of Egyptian territory appropriate for farming is based. Any reduction in water flows would therefore directly impact the quality and quantity of farmland, leading to a decline in agricultural output.
Moreover, the Gerd is likely to trap large quantities of weeds and other biodegradable objects. This will cause high microbial activity, which will subsequently mean that the Nile river water that flows downstream to Egypt will be somewhat deoxygenated. This will reduce the water’s efficiency as an irrigation source, as it will increase water surface tension and therefore reduce moisture dispersal within farmland. This, in turn, reduces overall agricultural yield. As a result, the Gerd could lead to both reductions in already critically low water flows, whilst simultaneously reducing the value of that water to irrigation processes.
Any decrease in the volume and quality of water flows from the Nile will put further pressure on already strained domestic agricultural production. This will reduce crop yields, which will heighten protest risk. Furthermore, this will accentuate pre-existing food shortages. In November 2016, food insecurity worsened to the point where Egyptian military units were ordered to deploy to Upper Egypt and Sinai province, in order to disperse ration boxes to citizens. Such strategies are stop-gap measures, which do nothing to alleviate the problems of reduced capacity.
Simultaneously, challenges posed to the agricultural sector offer opportunities for companies to work alongside Egyptian partners in the agricultural sector to increase crop yield, and to effectively manage increased water scarcity. This could range from helping change current irrigation methods from surface irrigation to drip irrigation to undertaking levelling operations, which will conserve water by reducing surface run-off.