Mining to overtake tourism as Egypt main revenue source?
Middle East Times
CAIRO -- Tourism has long been Egypt's most lucrative source of
income, but that could change in the near future with the discovery
of immense deposits of minerals, including gold, in the Eastern
desert near the Red Sea coast.
A representative of Centamin, a junior mining corporation from
Australia, recently confirmed to the Middle East Times the existence
of at least ŁE21-billion ($3.7-billion) in proven gold reserves in
one area of the desert's six hills alone.
According to Sami Al Raghy, Centamin founder and chairman, mining
could take over as the primary revenue-generating sector in Egypt's
economy, with up to ŁE60 billion ($10.5 billion) per year in income.
Despite what could potentially be the nation's most lucrative
endeavor since the Ptolemaic era - 95 percent of Egypt's gold mining
occurred during the time of Pharaohs - difficulties have arisen that
have not allowed the largest companies to enter the exploration
Frank Sader, chief strategist and senior operations manager at the
International Finance Corporation (IFC), told the Middle East Times,
that current regulations are archaic and do not provide an
environment tempting enough to secure the millions of investment
dollars necessary from larger corporations, in what could turn out
to be not as optimistic a venture as early signs indicate.
"The existing legal framework is relatively old, and in fact, the
framework has never been designed for mining, so we are helping to
create a policy for Egypt and mining companies," Sader, who is
leading the project to create a new framework for mining in Egypt,
This is the major drawback for mining companies to enter Egypt.
Currently, the policy of the Egyptian government is based on revenue
sharing and joint ventures, which are not common within the mining
industry across the world. This, in turn, has limited interest to
engage in exploration to see if Centamin's optimism is well-founded,
"Their current thinking is 'why bother with the current framework.'
Through the establishment of a new framework it will allow companies
to move in and establish their own exploration of the area."
That is where the IFC comes in. Sader and his team are currently
reassessing the present mining code and the national mining strategy
in order to help establish a new code and strategy for mining
projects that is Egyptian, as well as in line with standard norms
within the mining community worldwide.
The IFC hopes to have a new code and strategy completed by the end
of this year with the goal of presenting it to parliament for
"New laws create uncertainty," Sader continues, "so we have to
educate members of parliament on what a new code would give Egypt,
such as royalty issues, taxes, and revenue-sharing as well as other
fiscal issues. MPs are going to want to make sure that Egypt is
getting a proper percentage of money from mining companies, which is
understandable, so it is a major challenge to educate them on
Despite the current hurdles that must be overcome, the overall
atmosphere is optimistic that the end of 2007 will see a new code
and mining companies should begin to enter the market sometime in
Sader points out that mining will benefit Egypt in many ways, not
simply monetarily. Mining operations will create thousands of jobs,
making available a skill base that Egypt currently does not have,
such as new engineers.
"It is simply too expensive to bring in foreigners for all jobs
necessary for everything, so Egyptians will need to be trained. That
will bring new skills to many Egyptians," Sader adds.
"We will be directly employing around 4,000 people during the
construction phase," Esmat El Raghy, field director at one of
Centamin's sights in the desert, recently told Egypt's online
monthly Business Today. "For every person we directly employ there
will be three more indirectly in terms of logistics and support
Centamin is currently building an entire city in the desert that
will house the workers at the mines. Roads are also being built to
support the mining community and it is expected that thousands of
Egyptians will flock to the new area in search of jobs.
"It is exciting to see that this whole project will create numerous
jobs outside the capital," Sader says.
The mining industry in Egypt could become the nation's top source of
Gross Domestic Product (GDP), but it depends on whether the IFC, led
by Sader, can work with the Egyptian government to create a
framework allowing larger corporations to enter the Egyptian mining
The World Bank estimates that if current assessments are correct,
mining could increase Egypt's GDP by at least 2 percent, and
possibly as much as 5 percent.