Production costs to rise with new electricity prices, consumers to bear the burden: investors

Hisham Salah
4 Min Read

The electricity price increase announced by Minister of Electricity and Renewable Energy Mohamed Shaker in early August has been met with varied responses from investors and businessmen.

Some have accepted it, some have refused it, but all have acknowledged that this increase will raise production costs for every product manufactured in Egypt.

“It’s a bitter pill to swallow,” says Moharram Helal, vice president of the Egyptian Federation of Investor Associations. He added, however, that this is the only way for the government to bridge the budget deficit, and that this price rise will improve the country’s economic conditions in the coming years.

He believes that the country and its people must bear these difficult situations for a year or two at maximum, saying that the International Monetary Fund (IMF) loan would help to improve the country.

The increase in electricity prices will raise the cost of every single product manufactured locally, said Helal, and it is the final consumer that will bear the brunt of this increase.

He doubts that the increase in the price of electricity bills will be as unfavourable as the rapid increases of the prices of goods that followed the devaluation of the Egyptian pound in March.

“The announcement that electricity prices would rise shocked everyone,” said Abou Al-Ela Abou Al-Naga who is on the federation’s board of directors.

The price of most products will increase by 20-30%, he said. This will affect the general population of course, but lower-income citizens and investors will be badly affected in particular.

Abou Al-Naga believes that the price increase will make people reduce their electricity consumption in order to pay lower bills.

He wondered how the ministry could apply the increase before actually announcing it, as he found that his July bills were already subject to the increase.

Mohamed El-Monoufy, chairperson of the company Electrostar, agrees with the price increase. Contrary to what others have said, El-Monoufy said that the company will bear the higher production costs and will not push this increase on to the final consumer.

Ali Hamza, president of the Federation of Investors in Assiut, refused the rise in electricity prices, as it puts even more burdens on Egyptian investors, who are already suffering enough given the poor economic conditions.

The government should have waited a year before applying the increase, because the people can no longer bear the high cost of living, he said. Hamza believes the rise will worsen the situation for Egyptian investors, which conflicts with the government’s desire for development.

Fouad Amin, president of the Investors Association for 15 of May City, accepted the rise as he thinks it will not severely affect the industry.

He said that the government should help investors by providing US dollars via the banks at stable prices. In return, the investors will bear the high electricity prices and other services. He believes that the crisis of low US dollar reserves is the most critical problem destroying industry in Egypt.

Khaled Gasser, chairperson of SERA for solar energy development, sees that cutting electricity subsidies is a step that should have been taken earlier.

Subsidising electricity generated from oil and gas has made potential growth in the renewable energy sector falter, he noted.

He believes that if these subsidies ceased, renewable energy would finally have an advantage in Egypt. The rates would not be higher than non-supported regular electricity prices, he added.

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