One of the features of Post-Tahrir Cairo are long lines, most dramatically the long lines of large lorries and mini buses that are stretched out periodically, and increasingly in recent months, along the sides of roads and highways waiting for hours, often all night for diesel fuel. Sometimes, driving on the Ring Road out to the American University’s new out-of-town campus, I have counted more than 50 vehicles stretched out along the highway; when most are large lorries it makes for a dramatic scene. It is a scene repeated across the country, because there is a shortage of diesel fuel. Essam al-Haddad , who is President Mursi’s senior adviser on foreign relations and international cooperation says that the new Minister of Supply, a member of the Muslim Brotherhood (MB ) who replaced the previous (and non-MB) minister in a fairly recent cabinet reshuffle, estimates that nearly 30 percent of the total government subsidy that keeps all fuel costs, including diesel, down, was being supplied to “virtual” phantom gas stations over the past few years. The supplies would then be exported and sold abroad according to the advisor. Criminal charges are being brought against some of the suppliers, according to al-Haddad in an interview I recently shared with the editor-in-chief of Arab-West Report. But some of the fuel is also siphoned off, literally, to be sold at a significantly higher cost on Egypt’s diesel black market. The problem has to do with corruption and the collapse of security since the earliest days of the Tahrir Uprising.
Aside from anger which spilled over last week when many mini-bus and lorry drivers blocked the Ring Road as well as another highway, the periodic reduction of commercial road transport impacts the price of food delayed from getting to the market. It also lowers productivity of workers depending on the vast fleet of mini buses to get to work, Fuel shortages (which also means power cuts, usually at night) and the resulting black market are also part of the reason for long lines forming in front of those bakeries in poor neighborhoods that buy subsidized wheat (more than half of which is imported) from the government at a startlingly low price of 160 EGP for a wholesale sack that sells in the market for 2,826 EGP – a price that keeps going up. The price is rising due to global commodity costs and the declining value of the Egyptian Pound. The bakers buying subsidized wheat sell a single flat loaf for five piasters which in dollar terms is less than a penny to all comers. That’s part of the problem – anyone willing to stand in what have become long lines, can buy as many of these heavily subsidized loaves as they care to, and they are allowed to buy, regardless of their level of income. Many of those who keep chickens in the city, along with farmers in the countryside, feed their flocks with subsidized bread – it is cheaper than standard chicken feed, while owners or employees of thousands of street stalls and small shops selling fava bean sandwiches— foul medammes -that most basic staple of the Egyptian diet, also line up for the subsidized loaf. Many of these bakers, to increase their low profit margin calculated by the government at two to three EGP per subsidized sack, have over the years cut back on their production to divert part of these subsidized supplies to sell to free market bakers (who sell a flat loaf for 50 piasters) at a mutually attractive price lower than the market price, given the wide margin in pricing. Some of these bakers also reduce their production costs by adulterating the wheat.
Rising unemployment and subsidized bakeries
Meanwhile rising unemployment propels more people to stop buying from the free market bakers and to join the line at the subsidized bakers, meaning longer lines and increased demand Nearly a week ago hundreds of these bakers in the industrial city of Helwan as well as some of the poor neighborhoods in the southern suburbs of Cairo staged a one day strike, closing down their bakeries to protest the shortage of subsidized fuel which has increased their production costs and demanding the right to raise the price of the subsidized loaf from five piasters to 25 piasters. The following day the bakeries reopened but hundreds of bakers stormed the Ministry of Supply in protest and did so again yesterday. This time the protest is against government plans to end the subsidy, eliminate the two tier system of subsidizing the cost of wheat and substitute in its stead, a rationing system using a smart card for each household based on proof of low income and which will set the limits to the number of loaves sold to a customer by a determination of the size of the household. Machines that can read the smart cards will be supplied to the bakers. If it works, the government says this would save Egypt 11 billion dollars a year.
Up front the Bakers Federation is threatening a nation- wide bakers strike, shutting down production of subsidized bread if the government doesn’t back down. And the government says it will take legal action against any bakers that do so, since a stop in production will threaten the security of the people . A Ministry of Supply spokesman says that negotiations with the Bakers Federation are actually underway ; the new loaf will sell for 35 piasters but those who qualify for the smart card – any household whose monthly income is less than 1,200 EGP – and with it can buy its quota of three loaves of flat bread per family member -- will still pay only five piasters per loaf. Short term, the real issue is how much the government will pay the bakers to cover their real costs per loaf and that is the issue at hand for negotiation.
The periodic reduction of commercial road transport impacts the price of food delayed from getting to the marketAbdallah Schleifer
In the long term the real issue is whether smart card rationing will work. Is three loafs of bread per person per day sufficient for millions of households so poor that bread makes up an incredibly high amount of food consumed? And how will the millions of the urban poor who work as day laborers or street peddlers provide proof of the amount of their income given their lack of fixed income? And what of those people who do not hold a government issued I.D card ,which would qualify them for the an existing “supply card” that already rations a quota to each household for necessities – cooking oil, rice, etc.
When Egypt's late President Anwar Sadat tried to reduce subsidies, the bread riots of 1977 got so out of hand that the army had to be brought in to restore order and the attempt to reduce the subsidies was abandoned. In Egypt bread is called ‘ aisch’ which means life. For millions of poor Egyptians access to cheap bread can be a matter of life or death. How this critical issue plays out could be the issue that makes or breaks this government.
Abdallah Schleifer, Professor Emeritus at the American University in Cairo and former Al Arabiya bureau chief in Washington DC, is a veteran American journalist who covered the region for many years before joining the AUC faculty where he founded the Adham Center for TV Journalism. Schleifer served as NBC News Cairo bureau chief ; as Middle East .correspondent for Jeune Afrique based in Beirut ,and as special correspondent for the New York Times based in Amman.