Safaga Port PPP At An Unexpected Time

The interim government in Egypt is reportedly pushing ahead with the tender for the Safaga Port PPP. The timing of this, amidst all the instability in the political environment is raising a plethora of risks for the project and its viability.

The Red Sea Ports Authority (RSPA), a section of the Ministry of Transport, will be tendering a PPP for the Safaga Port in July 2013, according to reports by local unnamed sources cited by the industry journal Infra PPP. This port is located on the west coast of the Red Sea and it serves both tourists and trade industries. In addition, Safaga is the port for ferries travelling to and from Saudi Arabia. Currently, it has a vessel capacity of 60,000 tons with daily shipping volume of 12,000 tons and depth up to 16 meters.

With an estimated cost of US$858mn, this is considered to be the third most important PPP project in the pipeline after the Abu Rawash wastewater plant and the waste recycling initiative. The project includes the development of the mining section of the port in order to upgrade from one to eight platforms. With extended capacity, Safaga will be able to host bigger vessels and serve other industries including the import of grains and livestock.

Preliminary feasibility studies for this project were funded by the Islamic Development Bank, the European Union, the European Investment Bank and the European Bank for Reconstruction and Development. Despite the unusual timing for a PPP announcement, we believe that having the support of these institutions increases the chances of this tender being completed. In addition, and contrary to what most people expected, the markets have reacted well to the army intervention in Egypt. However, this effect is not expected to last in long-term ( see ' Post-Morsi Bounce To Be Short-Lived', 05 Jul).

Following the overthrow of President Mohammed Morsi on 3 rd July 2013, an interim government headed by Adly Mansour - a top judge at the Constitutional Court - has been put in place. Presidential and parliamentary elections are expected to take place in the next twelve months but they have not been scheduled yet ( see ' 'Coup' Not The End Of Political & Economic Crises', 04 Jul). A considerable risk for this and any other PPP projects is the political uncertainty in the country. The public component of the partnership is subject to the instability that will follow in the incoming months and beyond, while a new government finds its feet.

This article is tagged to:
Sector: Infrastructure
Geography: Egypt

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