Investing in storage (Al-Ahram Weekly (Egypt))

Khaled Hanafi, minister of supply and internal trade, signed two deals, with the Emirati Al-Suwaidan Group and the China Harbour Engineering Group, on Saturday. The companies will build a logistics centre for the storage and handling of grains and cereals in Damietta on the Mediterranean coast.The project was first proposed last year as part of plans to provide food security for Egypt’s 90 million people. Egypt is the largest wheat importer in the world. The Damietta project includes construction of high-tech storage silos for grains, and will increase Egypt’s storage capacity from its current 2.5 million tons to 7.5 million tons.
The hub will also provide logistical support and added-value activities such as packaging and processing of oil seeds, raw sugar and unrefined oils with an annual capacity of 65 million tons.
It is projected to include five industrial zones. One will be designated for wheat and will house mills to produce fine flour and bran for local consumption and export. A second will be for soy-related industries, a third for corn-related ones (including the extraction of oils, starch and fructose), a fourth for refining and packaging sugar, and a fifth for food productions such as pasta.
Each of the five industrial zones will have an annual production capacity of 1.5 million tons. The manufacturing areas are expected to boost Egypt’s food industry by producing flour, pasta, cooking oils and sugar for both domestic consumption and export to the MENA region.
Hanafi said Egypt’s geographic location makes it suitable as a central hub for international trade, especially given the presence of the Suez Canal, through which 25 per cent of international container trade passes.
The new logistics hub will cost LE45 billion ($6 billion), and will be ready within three years. It will be constructed on an area of 3.35 million square metres, of which 0.5 million will be inside the boundary of Damietta Port, while the remaining land will be located on an unused industrial area to the northeast.
The logistics centre will require construction of two marine piers, each measuring 700 metres in length, for large cargo ships, and construction of a 1,200-metre-long river pier.
Hanafi announced that a 600-km-long railway will be built from the logistics hub in Damietta Port, passing through Port Said, Ismailia and Suez to Safaga on the Red Sea, to transport food commodities and grains. This will reduce transport costs and preserve commodities and grains from potential waste. The minister added that a global investment firm has offered to take part in building the railway.
Egypt is considered a central point for trade to many countries in East Africa and the Arab and Gulf States, according to Hanafi.
Moreover, the trade agreements that Egypt has with the European Union and the Common Market for Eastern and Southern Africa (COMESA) make it a potential market for more than 1.6 billion consumers.
This was reason enough for international investors to show their interest in participating in the project. Hanafi said the ministry has received investment offers from investors in the UAE, Saudi Arabia, Kuwait, Sudan, Uganda, Japan, the US, Canada, Italy, Russia, Slovenia and the Netherlands, in addition to international banks and organisations.
Sanaa Khalifa, a professor of economics at the Agricultural Research Centre, said that although the details of the project have not yet been announced it should put an end to the problem of wheat wasted due to inappropriate storage.
“The new silos will secure appropriate storage conditions for wheat and other grains,” Khalifa said. Egypt’s total consumption of wheat is 15 million tons annually.
The facility will also give Egypt the chance to buy large amounts of wheat in the harvest season when prices are low and store them in modern silos before selling the grains when prices are higher, according to Khalifa.
Khalifa explained that Egypt could play the role of a grain wholesaler for countries on the Mediterranean as well as for its Arab neighbours, all of which are wheat importers. Egypt, the Arab world and sub-Saharan Africa represent around 15 to 20 per cent of the international grains and cereals trade, most of whose maritime routes are around Egypt.
Tarek Hassanein, head of the Grains Industries Division at the Federation of Egyptian Industries, told the Weekly that the project will help Egypt use its geographic location as a competitive advantage, as a link between importers and exporters, and at the same time building a strategic reserve for domestic consumption.
Wheat importers usually buy wheat at $300 per ton, the highest price, but it can be bought at $230 per ton during the harvest season if modern silos are available to store it. This would save more than 20 per cent of the cost, particularly because Egypt imports large amounts of wheat.
Hassanein added that the new silos will automatically keep the temperature of wheat at 14 to 15 degrees in order to keep its natural specifications for the longest possible period. According to the minister, the new silos will save 30 per cent of the cost of the grain as a result of reducing losses due to storage in the open or in dirt-floor barns.
Hassanein said that the project will mean better administration of the grains and food-supply chain and provide jobs for a large number of workers.