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Scenarios facing Egypt, and lessons for the rest of Africa

Scenarios facing Egypt, and lessons for the rest of Africa
  • PublishedAugust 5, 2013

Following the Egyptian coup – yes, technically this was a coup even if it was executed with the popular support of many millions of Egyptians – commentators and analysts started predicting many of the scenarios that could await Egypt. The likelihood is that Egypt will follow its own path and will create its own scenario. Nevertheless, it is worth examining the various options that have been cited and also the dynamics of the Arab spring in the context of the growing unrest we are seeing around the world today, especially in emerging markets.

One of the first cries to be heard was of Egypt descending into “Algeria 1992”. In Algeria, the Islamist Party (Front Islamique du Salut, FIS) had the year before won municipal elections and in 1992, had won the first round of legislative elections that led to the government of the day suspending the electoral process. This sparked a civil war that lasted nearly seven years and, at a conservative estimate, resulted in 100,000 deaths. The Muslim Brotherhood seem to be less sanguine, less radical, more patriotic and more respectful of constitutional frameworks than the FIS was in Algeria.

Thus this Algeria scenario is less likely. However, the way the Muslim Brotherhood leaders have been detained, and the fact that they have been removed unconstitutionally from power – in the same way as other Islamist parties around the world (Hamas, for example, in Palestine) – will only reinforce the theory that Islamists will never be allowed to win and retain power by legitimate means. Which does not bode well for the region as a whole, leading to a further polarisation and a more radical reaction from Islamist parties.

Undoubtedly central to any scenario is the economic perspective. Egypt has deep-rooted economic problems (a large budget deficit and high public debt ratios) and since the overthrow of Mubarak, the economic fate of Egyptians has, if anything, got worse, with rising prices and a stalling economy. Morsi’s management of the economy and government was at best incompetent. A research note by the Japanese investment bank Nomura warned of longer-term consequences and compared Egypt to Pakistan: “By ousting a democratically-elected – if unpopular and, in our opinion,
inept – government, the army risks turning Egypt into a latter-day Pakistan, a country where the army is prepared to use its position as the ultimate arbiter of power to oust any democratically-elected government, which might threaten its own interests – albeit, purportedly at least, in the name of the common good,” the report read.

A cycle which has been present in Pakistan since independence in 1947 only came to an end this year with the first passing of power from one civilian government to another. The note goes on to point out that military intervention in Pakistan has had an adverse effect on democracy in that country and has been an “overall negative for economic development”.

Worse, they also concluded that the lesson the Muslim Brotherhood will take from this is that if they rely on the ballot box, they will be never be allowed to govern.

Another outcome that was touted in a note by investment bank Renaissance Capital (RenCap) is the Turkey example from 1980.

When the Tunisians overthrew President Ben Ali in 2011, the same investment bank released an interesting research paper entitled “The Revolutionary Nature of Growth” where they boldly stated that “political risk can be measured and revolutions can be predicted”. RenCap, in this research paper, had charted data on political history alongside with other metrics (such as GDP, freedom etc) to establish factors which triggered revolutions and on the back of these factors the probability a country would make the shift from autocracy to democracy. In sum, their thesis identified a number of metrics by which they could predict which countries were prone to regime change.

Using these metrics as a guide, they had calculated that Egypt had a five per cent chance of regime change, and following the coup they are more prone to compare Egypt with Turkey in the 1970s.

There is a high similarity in per capita income, and another similarity they alluded to is that the coup in Turkey in 1980 was most likely the result of a deterioration in the state of the economy, identical to the situation in Egypt. 

The good news is that Turkey’s coup in 1980 saw the country regain democracy three years later. Their statistics also show that with Egypt’s per capita GDP (and with the advent of greater connectivity and more open media), it is more likely that the country will move from autocracy to democracy than the other way round. And more so when incomes are rising. So the omens are good.

What can the rest of Africa learn?

There is a common denominator in what we have seen in North Africa, and also recently in Turkey and Brazil. A growing and better-informed middle class will have higher expectations and higher demands of government. Also, rising inequality and a polarisation of society will inevitably lead to further unrest. As African economies grow, and as this growth accelerates (as we hope and anticipate), governments will have to put measures in place so that the institutional frameworks are in place and are functioning properly (RenCap had a danger zone threshold at $6-10,000).

They will also have to ensure that the growth is more equitable and that opportunities are not limited to a privileged few. Rising inequality seems to have been a bi-product of the capitalist system of the last 30 years. If anything, the gap between the rich and the poor is widening, both in the developed world and in emerging markets.

The gini coefficient (commonly used by economists as a measure of the inequality of income or wealth) is worse in emerging countries, although Egypt’s and Tunisia’s was much better than countries in sub-Saharan Africa and Latin America. South Africa has the unfortunate attribute of having the highest coefficient in the world (high indicating the least economic equality). GDP growth, which only favours the few, has been a subject much discussed by leaders in various forums, and was identified as the single biggest global threat by the World Economic Forum earlier this year.

Creating a fairer global system, including a fairer global tax regime for example, has become a central point of discussion. However, the global consensus on such issues, as our experience of the Doha trade talks or climate change debates will tell us, indicates that global agreements work in theory but are difficult to execute and put into practice.

Evolution is always a preferable path to revolution. African governments have been given plenty of warning with what is happening in the north. There has been relative calm south of the Sahara, with only minor incidents, but our leaders cannot say they have not been warned.

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