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Toshka: A new deal for Egypt - Daily News Egypt

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Toshka: A new deal for Egypt

By Amira Salah-Ahmed CAIRO: Kingdom Agricultural Development Holding (KADCO), part of Saudi Prince Alwaleed bin Talal’s Kingdom Holding Co, will invest LE 500 million to further develop Egypt’s Toshka project, the firm’s CEO said Wednesday. A day after bin Talal revised the contract with the Egyptian government for desert land allocated to KADCO, company executives detailed …


By Amira Salah-Ahmed

CAIRO: Kingdom Agricultural Development Holding (KADCO), part of Saudi Prince Alwaleed bin Talal’s Kingdom Holding Co, will invest LE 500 million to further develop Egypt’s Toshka project, the firm’s CEO said Wednesday.

A day after bin Talal revised the contract with the Egyptian government for desert land allocated to KADCO, company executives detailed their agricultural development plans for Toshka.

Ahmed Halwani, Kingdom Holding’s executive director for private equity and international investments, and Daniel Leroux, chief executive officer of KADCO Egypt, asserted their commitment to moving forward with the controversial 11-year-old project despite facing what they called harsh criticism and constant attacks by the media and the Egyptian public for years.

Halwani derided Egyptian businessmen and investors for shying away from the “national project” out of fear, while Leroux said that contrary to public opinion, Toshka is no longer a dream but “a reality more Egyptians need to believe in.”

Under the new deal, KADCO gave 75,000 feddans of the original allocated land back to the Egyptian government while retaining 10,000 feddans and cultivating 15,000 more, of which it will take ownership at a later date.

KADCO will invest LE 60 million annually for the next eight years.

The new deal, Halwani said, is the first such settlement between a local or foreign investor and the Egyptian government over disputed state land sales sealed under the regime of ousted president Hosni Mubarak.

In 1998, KADCO purchased 100,000 feddans at Toshka as part of a plan to irrigate reclaimed agricultural land near the Sudanese border with a longer-term target of making this part of Egypt both cultivable and livable.

A few years later, there was little progress visible to the public eye, which began heavily scrutinizing the billions of pounds spent by the government on what quickly became a national joke, viewed by many as just another far-fetched dream and empty promise of the Mubarak regime.

Well into the 2000s, as far as the Egyptian public could tell, the area — 1,200 kilometers away from Cairo — was nowhere near equipped with the appropriate infrastructure to house crops or communities.

Halwani and Leroux, however, touted the technical successes of the agricultural project; a testament to which are the holding company’s undeterred investments over the years and the speed of the new deal.

Prime Minister Essam Sharaf said the new contract marks the government’s intention to rectify “mistakes” in investment and trade deals signed by previous governments.

Meanwhile, KADCO said one of the many challenges it has faced over the years is the lag in implementing infrastructure developments in the area — more or less, previous governments failing to meet their end of the deal.

The company said it has invested LE 400 million so far while not recording any profit, instead losing LE 15-20 million a year, a situation that will likely continue over the next three years but will not change their plans moving forward.

It takes LE 50,000 to develop one feddan, Halwani said.

The Egyptian government, meanwhile, has pumped LE 6 billion into the project.

“There were guarantees with the first contract with the government that pushed us forward along with the entrance of a strategic investor, an Egyptian public bank,” Halwani said.

In 2003, Al-Ahly Bank pulled out saying that long-term investment were not in line with their strategy. “This prompted other investors to pull out, but we continued after investing $30 million at the time without complaining or accusing anyone in the media,” he said.

Two years later, the firm put out a private placement memorandum to Egyptian and regional investors but to no avail “because the Arab media was busy covering the ‘failure of the project’ and accusations of ‘squandering public funds,’” he added.

The holding company lost $8 million in 2008’s financial crisis but decided to maintain investments in Toshka.

“If we pulled out, the project would have died completely and all those investments would have gone to waste,” Halwani said.

Challenges and achievements

Leroux said the project has “big potential but many challenges. [Still], this company is not going to stop. Kingdom Holding never stopped investing, whatever the conditions globally or locally.”

Echoing Halwani’s sentiment, Leroux asked, “Where are the Egyptian investors? They are pushed to go to African countries to invest [in agriculture projects], facing the same challenges we do at Toshka, they need to at least visit the site and see the potential.”

He added that they already have the irrigation system design to feed the total 25,000 feddans. In early 2000s, the company spent LE 35 million on a water pumping station in the area.

One of the main problems is the lack of transportation besides roads, which are risky, he said, underlining the need for river or train transport. This also poses a problem for bringing equipment and materials as well as workers to Toshka.

Since housing units and the appropriate facilities were never completed as planned, the company has resorted to building makeshift housing units for its workers. Still, with no hospitals, schools or police stations and basic utilities, workers cannot bring their families to the site.

There are currently 130 permanent workers in the area and anywhere between 200-750 casual laborers.

He also said that since electricity prices are still a problem, it’s cheaper to operate on generators.

As far as the land, the fact that it has never been cultivated before and its remoteness, he said, means that it takes years to study the area and determine what kinds of crops are suitable.

Leroux said the “soils may look the same from the surface but aren’t at all homogenous,” adding that thorough studies must be conducted before irrigation systems can be put in place.

Halwani said LE 28 million were spent on such studies alone.

The climate — hot in the summer and very cold in the winter as well as dry and windy — means off-season vegetables cannot be cultivated.

“The climate changes almost every year, this year there was a long winter while last year we had almost no winter,” Leroux said.

So far, grapes have been successfully cultivated and exported to the European market, vegetables for the local market as well as with dates, alfalfa, corn, barley and peanuts.

The company is also cultivating a forest of Polonia trees which in seven years can see the trunk grow to 35-40 cm in diameter.

Its private free zone status stipulates that at least 50 percent of crops must be exported.

One of the criticisms Toshka has faced over the years was not providing wheat to the local market, an expectation that the public had at the onset. But wheat cultivation has proven problematic.

“We plant wheat, you can grow wheat in Toshka, but it’s not the best product to grow…climate makes it not the most suitable,” Leroux said, adding that new varieties of wheat must be explored and new seeds imported that are more tolerant to the area’s climate.

“The kind of wheat for bread is not ideal,” he said.

Halwani added that wheat cannot be transported overland, and since there is no other mode available at the moment, it is not the ideal crop.


Ahmed Halwani, Kingdom Holding’s executive director for private equity and international investments.

Topics: toshka

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https://wwww.dailynewssegypt.com/2011/06/08/toshka-a-new-deal-for-egypt/
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