Thursday,23 November, 2017
Current issue | Issue 1165, (19 - 25 September 2013)
Thursday,23 November, 2017
Issue 1165, (19 - 25 September 2013)

Ahram Weekly

How to defeat poverty?

Poverty rates in Egypt have risen since the 25 January Revolution, forcing a rethink of how this scourge can be ended, writes Hayat Yehia

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Al-Ahram Weekly

Sabrine cleans homes for a living. She commutes daily to an upscale district of Giza from her rural neighbourhood on the outskirts of town. Her husband has just lost his job as a driver. Now Sabrine has to support him and her three children.
“I feel terrible when my youngest daughter asks me to buy her a bar of chocolate or a packet of potato crisps. I can’t buy them. If I don’t spend LE1 on chocolate, I can buy 20 loaves of subsidised bread instead, which may be all we have for food for days,” she said.
The dire situation Sabrine describes is shared by many people in Egypt. According to 2011 figures from the Central Agency for Public Mobilisation and Statistics (CAPMAS), almost 25 per cent of Egyptians live under the poverty line, some analysts believing that the reality is much worse than this figure suggests.
A recent report by Egypt’s Food Bank, an NGO, claimed that 42 per cent of the country’s 85 million inhabitants live under the poverty line. Heba Al-Leithi, a professor at the Social and Economic Studies Centre in Cairo, believes that 40 per cent of the population at least is poor. It may be true, she says, that only 25 per cent of the population live under the poverty line, but another 22 per cent or so live so close to that line that they deserve to be included in the official definition of poverty.
“There have been no official figures for poverty rates in 2012 and 2013, but I have no doubt that poverty has risen since 2011,” Al-Leithi remarks.

SHEER SURVIVAL: A poor person, according to the World Bank definition, is someone living on less than $1.25 per day. Al-Leithi maintains that in Egypt the equivalent is someone living on less than LE3.75 a day, based on purchasing power parity in the US and Egypt.
She is not convinced that the World Bank definition offers an adequate understanding of the complex issue of poverty, but says it has been useful for making international comparisons.
CAPMAS chief Abu Bakr Al-Guindi speaking recently to journalists said that more than half of Egyptians could be considered poor by World Bank standards. “The poverty line is LE256 per month. So for a family of four the poverty line is four times as much as that,” Al-Guindi remarked.
“The number of people in this category is about 60 per cent of the population. These are people who only have enough for to survive and nothing more,” he added. Al-Guindi noted that the poor often have no education or access to healthcare either
According to Al-Leithi, poverty can be characterised as a situation in which an individual is unable to afford proper food, housing, transportation and healthcare. As such, it is a phenomenon that is not just confined to poor countries, but can also exist in affluent societies, such as in the US and the oil-rich countries.

CAUSES OF POVERTY: In Al-Leithi’s view, the primary cause of poverty is unemployment, which has grown exponentially in Egypt since the 25 January Revolution. Due to the economic stagnation that has taken place, nearly 4,500 companies have closed down, while many others have downsized.
According to CAPMAS, the official unemployment rate rose to nearly 3.5 million by the end of 2012, compared to 2.3 million before the 2011 revolution. Currently, joblessness in Egypt stands at 3.6 million, or 13.2 per cent of the work force.
Experts say that the problem started with privatisation, when the government began selling off state-owned companies to private investors — a practice that has been marred with corruption.
Privatisation caused many workers to lose their jobs, as the new bosses who bought the companies often closed down factories, preferring to use the land for other purposes. After the 25 January Revolution, the courts annulled some of these privatisations over government objections, one of those opposing the return of privatised companies to public ownership being current Prime Minister Hazem Al-Beblawi.
Among the companies whose sale was successfully challenged in court was the Omar Effendi department stores, which were bought by a Saudi businessman, and Tanta Textiles.
Mohamed Gamie, a professor of economics at Cairo University, has argued that the joblessness figures in Egypt are approximate at best. They are subject to seasonal fluctuations, and they fail to calculate the real size of the work force.
Egypt needs to create 850,000 jobs per year in order to cope with the increase in the population. For the economy to generate that many jobs, it has to grow by upwards of 5 per cent, Al-Leithi says. But growth itself is not enough to combat poverty, unless it is also coupled with fair distribution.
In the three years before the 2011 revolution, the economy grew at seven per cent annually, but unemployment remained high. Those who benefited most from the economic boom were people having close links to the former regime.
In 2008, the UNDP Human Development Report for Egypt said that 20 per cent of Egyptians owned 80 per cent of the wealth in the country, though even within the top 20 per cent of the privileged classes, differences were great. One per cent of the rich owned half of the wealth in this class, and there is little reason to think that the situation has changed much since then.
Desperate for employment, young Egyptians often resort to companies that promise them jobs abroad, or at least a chance to travel, often illegally, to European countries, such as Italy and Greece. Some drown at sea while doing so in well-publicised tragedies, but the exodus still goes on uninterrupted.
In the Arab countries, Egyptians sometimes end up working in conditions that are often humiliating, as Hassan, a teacher in Saudi Arabia, noted.

INFLATION: Since the 25 January Revolution, the Egyptian pound has lost nearly 12 per cent of its value against the US dollar, which has led to an increase in prices in local markets. CAPMAS estimates that between June 2012 and June 2013, inflation was running at 10.9 per cent. During the same period, food prices went up by 13.8 per cent.
Al-Guindi pointed out that inflation was 8.7 per cent in the first half of 2013. The increase in fuel prices, he stated, had led to price increases across the board, and he is worried about the impact of higher food prices on standards of living. “Higher food prices increase the intensity of poverty, as households are forced to dedicate a larger portion of their incomes to food,” he said.
According to a report by the UN Office for the Coordination of Humanitarian Affairs in Egypt, the diet of children in the informal sections of Cairo is protein-deficient, and poor people are increasingly unable to afford fresh fruit and vegetables.

HEALTHCARE: Al-Leithi believes that the Egyptian subsidies system is also failing the poor. Egypt spends LE120 billion on fuel subsidies, but 100 factories use most of this. Almost one third of subsidised flour finds its way onto the black market.
Ahmed Shukri, an economics professor at the American University in Cairo (AUC), has studied the relationship between access to healthcare and poverty in Egypt, noting that healthcare expenses drove 7.4 per cent of Egyptian households below the poverty line in 2010.
Egyptian families, Shukri says, spend more on healthcare than any other nation of comparable income. Because the state spends so little on healthcare, families have to seek private treatment, and families faced with health emergencies can easily descend into poverty. One woman is cited in Shukri’s study as saying that “when my husband got sick, it was as if a catastrophe had struck at home.”
However, state expenditure on healthcare has also increased over the past two years. Health spending rose to LE34.1 billion in the 2013-2014 budget, compared to LE28.6 billion in that for 2012-2013.
Yet, economists still say that the allocations are disproportionate to needs. The government is trying to put together a general health insurance scheme, and it has allocated funds towards this aim in the current budget. But judging by how long the scheme has been on the drawing board, it may be many years before it comes to fruition.

THE UNDERPRIVILEGED SOUTH: Before the 25 January Revolution, economists were warning that the widespread poverty in the country could lead to bread riots. Southern Egypt, where poverty is widespread, was a major candidate for such riots.
However, when the revolution took place, the first sparks were in the governorate of Suez, not the poorest part of the country though close enough.
At present, governorate by governorate poverty data is lacking, though one report released recently by a civil society group indicates that the least privileged zones of Egypt are in the south.
Assiut is the poorest of all governorates, with nearly 69 per cent of its inhabitants living below the poverty line. Sohag is second with 59 per cent, followed by Aswan with 54 per cent, Qena with 51 per cent and Fayoum with 41 per cent.
These figures do not differ much from those in the most recent Human Development Report published by the National Planning Institute in cooperation with the UNDP.
This report, released in 2010, said that more than 43 per cent of the country’s poor lived in southern Egypt, with the poorest governorates being Minya, Sohag and Assiut.
Of Egypt’s poorest 1,000 villages, 726 are in southern Egypt, and the highest proportion of poor villages is to be found in Malawi near Minya.
In the governorate of Minya itself, nearly 183 remote settlements have no access to basic amenities. Another 130 have been labelled “informal”, an epithet indicating lack of planning, public amenities, and government services.
According to the report, the children of the poor have less access to education and jobs than the rest of the nation. Nearly 20 per cent of the poor don’t send their children to school. Poverty means less education, and less education means continued poverty.
The government has been trying to address this situation through boosting public spending on education, and the former finance minister, Momtaz Al-Said, said that budget allocations for education had increased from LE49 billion in 2011-2012 to LE64 billion in 2012-2013.
But spending is not everything, and Mustafa Al-Sayed, head of the Development Partners Research Centre, argues that educational reform is about processes, not just about money.
Education allocations in the 2013-2014 budget stand at LE81 billion.

CIVIL SOCIETY SOLUTIONS: As the government has struggled to address poverty, private initiatives have also been in evidence. One such is the Food Bank, an NGO, which hopes to help eliminate hunger in Egypt by 2020. The idea is to collect financial donations, in-kind contributions, and excess food from various companies and individuals and then use them to provide food for the needy.
The Food Bank was originally created by young entrepreneurs in cooperation with hotels and restaurants. It was launched in 2005 in an event attended by businessmen, the mufti of the republic Ali Gomaa, and representatives from various charity groups.
Similar groups hoping to fight off poverty include Resala, Orman and Masr Al-Khair.
Yet, when the economy dips, the need for charity grows, while funds are in danger of drying up. Nevine, for example, who runs an orphanage in Haram in Giza for 40 children aged five to 16, is running out of funds.
“The trouble began with the 25 January Revolution. The shoe factory my husband had endowed to finance the orphanage closed down,” Nevine said, and things got worse from then on. Such problems have been made worse by the fact that many charitable organisations are either affiliated with the Islamists or are perceived to have such an affiliation.
After the ousted former president Mohamed Morsi was removed from power on 3 July, the government prevented the president of Resala, an NGO, from leaving the country. Travel bans, bank account freezes, and the incarcerations of key Islamist figures have not been good news for the charities they supported, or even those that they did not support.
Resala has had to deny any affiliation with political Islam, and it recently added a clarification to its Ramadan television advertisement, noting that “Resala does not belong and will not belong to any political group.”
Some media outlets have also accused Neyazi Sallam, the CEO of the Food Bank, of being the main provider of meals for the Islamist sit-in at the Rabaa Al-Adaweya mosque in Cairo, forcing Sallam to place newspaper advertisements denying the affiliation.
“I swear by God Almighty,” Sallam wrote, “that the Food Bank and my family have no affiliation whatsoever with the Muslim Brotherhood and will have no such affiliation in the future.”
The Food Bank provided meals to nearly 2.8 million families last year, up from 96,000 in 2006, according to its website.

BANKING FOR THE POOR: While there are more than 35 commercial banks in Egypt, the largest of which are owned by state, including the National Bank, Banque Misr, and the Banque du Caire, most of these provide few if any services to the poor.
While some of the banks go out of their way to provide loans to major companies, they hesitate to lend to small or medium-sized projects, justifying this conduct by saying that larger loans are cheaper and more profitable.
However, recently some banks have begun setting up departments for funding such projects, though some commentators are sceptical about whether funding will in fact appear.
“The subject has become a fad,” said one banking expert who spoke on condition of anonymity. “In reality the banks are not doing much to resolve the problem.”
Mohamed, one young man who filed a request for a loan from the state-run Social Development Fund (SDF), had trouble getting a loan for his small business. The SDF, he said, makes things hard for applicants, and in the end “I had to find another alternative, after being unemployed for four years.”
Because of the widespread view that interest rates are un-Islamic, many devout Egyptians avoid borrowing from regular banks. “My fiancé refuses to borrow money to set up a carpentry shop,” said Noha, who lives in Damietta, a city known for its thriving furniture industry. “He believes that interest-bearing loans are sinful. So he works, irregularly, for various workshops instead.”
What poor people need may be an institution that will offer them small loans without asking for collateral or exacting interest. Two years ago, Hazem Al-Leithi created such a bank for the poor.
“Instead of giving the poor food, we decided to give them loans to establish projects. Instead of offering them charity, we help them make a sustainable living,” Hazem told journalists recently.
The bank, which operates through Resala, is a commercial institution operating with a license from the Central Bank. It provides loans ranging from LE500 to LE5,000, all without collateral or fees.
The idea is close to that of Grameen, the bank for the poor that Mohamed Younis, winner of a Nobel Prize in 2006, created in Bangladesh. However, there is one essential difference: Grameen exacts interest rates of up to 25 per cent on its loans, whereas Egypt’s version of the bank for the poor is interest free.

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