Cairo finds smart way to slash food bill: bread e-cards

By Maggie Fick  /  Reuters, PORT SAID, Egypt

Sun, Mar 02, 2014 - Page 14

A device resembling a credit card swiper is revolutionizing some of Egypt’s politically explosive bread lines and may help achieve the impossible: cutting the country’s crippling food import bills.

Authorities who hope to avoid protests over subsidized loaves sold for the equivalent of US$0.01 have turned to smart cards to try to manage the corrupt and wasteful bread supply chain that has been untouchable for decades.

If it succeeds, the pilot project in the Suez Canal city of Port Said could be used as a model for food and fuel subsidy reform throughout Egypt, where bread — known in the local Arabic dialect as “life” — is the main staple.

“This is an urgent project,” said Ali Attria, an official from the Egyptian Ministry of State for Administrative Development who has helped manage the trial.

Egypt, the world’s largest importer of wheat, purchases about 10 million tonnes of the grain a year, draining its hard currency reserves to provide the poor with a disc-shaped loaf.

The government spends approximately US$5 billion a year on food subsidies, which also cover items such as rice, oil and sugar. A slide in the Egyptian pound’s value since December 2012 is pushing up the bill, as much food has to be bought for US dollars on international markets.

In addition, profiteers exploit the system, while many people feed bread to their livestock because it is cheaper than animal feed.

Despite this, one cash-strapped government after another has resisted attacking the problem, fearful that cutting subsidies could be political suicide. Former Egyptian president Anwar Sadat triggered riots when he cut the bread subsidy in 1977, while deposed Egyptian president Hosni Mubarak faced unrest in 2008 when the rising price of wheat caused shortages.

When Egyptians rose up against Mubarak’s rule three years ago, one of their signature chants was: “Bread, freedom and social justice.”

Before he was deposed by the army in July last year, Former Egyptian president Mohamed Morsi and his Muslim Brotherhood began working to ensure that bread was delivered efficiently to those who truly need it — a move designed to win over the public.

Distrustful of state bureaucracy, the Morsi administration relied on mainly Islamist non-governmental organization to clean up the bread mess. In Port Said, they decided to take a gamble by using government authorities and although Morsi is now in jail, the program is starting to yield results.

At a simple metal kiosk in front of an oven, a smart card scanner hangs on a wall between windows that open onto two orderly, gender-segregated lines of people waiting to buy bread. Those who have complaints about the new system can call a hotline — the civilized scene was unthinkable just a year ago.

“There was congestion, people were coming from outside Port Said to buy our good bread in bulk,” bakery co-owner Adel Hassan Shater, 63, said, referring to the once-thriving black market. “Now things are organized and this is better for everyone.”

The now year-old program in the port city of 650,000 has enabled Cairo to keep tabs on individual bread consumption via the electronic cards that are already used for other subsidized goods, such as rice and sugar.

Smart card-holders are allowed five loaves per family member per day, a number officials hope can be reduced eventually.

A parallel effort to issue smart cards to drivers to monitor fuel consumption is not yet operational, but is likewise aimed at gathering data that the government can refer to when drafting its subsidy reform policies.

Egyptian Armed Forces Commander-in-Chief General Abdel-Fattah al-Sisi, who ousted Morsi after mass protests against his rule, is expected to run for president and win in elections due within months.

However, even if al-Sisi, who became immensely popular after crushing Morsi’s Muslim Brotherhood, delivers on his promises of bringing elections and political stability, he will still have to carefully manage the sensitive bread issue.

The top military commander, who is also Egypt’s minister of defense and deputy prime minister, could showcase the Port Said project and spread it to other cities in the country of 85 million where poverty is widespread.

Safwat Emar, the Egyptian Ministry of Supplies’ top official in Port Said, said that the project is hitting the people at the heart of the problem: dishonest bakers.

Yet eradicating greed will not be easy in a country plagued by corruption. Bakers producing state-subsidized loaves siphon off flour provided by the government and make a killing in the black market. The federal flour is then baked into loaves sold at private bakeries at prices beyond the reach of the poor.

Bakers have long been able to cheat authorities because consumption data is hard to come by. At Port Said’s Freedom Bakery, owner Mahmoud El Kefery said he works closely with state monitors who check data registered by his smart card readers and allocates his daily flour supply accordingly.

His customers seem satisfied: “We like systems and we want things to be organized so there can be security and everyone can get their fair share,” government employee Baseema El Bani said.

After presenting her green plastic card in a transaction that resembled purchasing a latte at a coffeeshop, Bani folded her stack of loaves and placed them in a shopping bag.

Before the smart card system was introduced, the bakery would often run out of loaves by midday, before the mother of five got off work, leaving her empty-handed. Bani blamed the shortages not on low supplies, but on people who abused the system.

What is clear is that the government — short on foreign currency and in dire need of fuel imports — cannot afford to keep funding the inefficient system.

Egyptian Minister of Supplies Abu Shadi recently estimated that the nation’s food subsidies bill amounts to 35 billion pounds (US$5.03 billion) a year.

Surprisingly, the smart card effort in Port Said has not provoked protest from consumers or resistance from bakers who stood to profit from the old system, but implementing the program nationwide would be a daunting task. Attria cites bureaucracy as chief hurdle.

Port Said, known nationally for its high-quality bread, was seen as a safe site for a pilot, but progress there should still be considered an achievement.

“It is a difficult decision to change the bread subsidy system, but it is possible,” said Magdy El Hennawy, a former army officer who helped the government launch the nationwide smart card system for other commodities.