Egyptian gov’t scores early success with smart cards for bread subsidies

CAIRO — The successful roll-out so far of a new "smart card" system to distribute subsidised bread has been a major achievement for Egypt's government, saving money while earning praise from families who no longer have to wake early to fight for loaves.

President Abdul Fattah Al Sisi appears to be succeeding where predecessors Hosni Mubarak and Mohamed Morsi both failed in the delicate task of reforming a system that has drained the state's finances while angering the population.

While the government still has a long way to go to roll out the new system countrywide, success so far marks an important civilian achievement for the president, a former army chief mainly known for security issues, including a harsh crackdown against Morsi's Muslim Brotherhood followers.

"In the time of Mubarak and Morsi, there was no organisation at bakeries. People fought each other. Now we all take what we need and there's bread for all," said Bakhita Ibrahim, a Cairo resident at a bakery in the Sayyeda Zeinab district.

For generations, Egypt's government has fed the public by distributing subsidised flour to bakeries, which sell bread for as little as 5 piastres a loaf, less than one US cent.

The system turned Egypt into the world's biggest importer of wheat, draining the government's foreign currency reserves: Cairo spends $3 billion a year on imports for it.

Nor has it pleased the public. Bread has been sold on a "first come, first served" basis, forcing people to queue up for hours in the morning to get it before it runs out, and sometimes leading to violence.

Those who arrive at the bakery early sometimes buy extra bread to feed to their livestock. Meanwhile, those who arrive too late can get nothing. And bakers are widely accused of siphoning off flour to sell on the black market, profiting while running up the government's bills.

Under the new system, families are issued plastic cards allowing them to buy five loaves per family member per day. Buyers no longer have to queue. Bakeries are paid for the subsidised loaves they sell, rather than being given a fixed allotment of cheap flour, making it harder to siphon off subsidies.

‘More accountable’

The cards have so far been introduced in 17 of Egypt's 29 provinces and consumption in those areas is already down between 15 to 35 per cent, Supplies Minister Khaled Hanafi, who has led the reforms, told Reuters.

Hanafi forecasts that once rolled out nationwide, the reforms will eliminate enough waste to enable Egypt to cut imports by 20 to 30 per cent, without depriving needy citizens.

While those figures could not be independently confirmed, they seemed to be born out at bakeries using smart cards in four provinces visited by Reuters, where bakers confirmed that they were making less bread due to the reforms.

The reforms have made him "more accountable", says Hamdy Eid, a baker in Suez City, scene of some of the most violent demonstrations protests during the 2011 revolt that brought down Mubarak. Customers were lined up peacefully, presenting their cards to an employee who swiped them through a card reader.

"In the past they have accused us bakers of stealing and working in the black market for flour," Eid said.

In areas where the reforms have yet to be implemented, discontent  with the old system still simmers.

"I have to wake up at dawn to get bread to avoid big crowds," said Ibrahim Osman, a grocer in the southern city of Aswan. In Fayoum, just south of Cairo, housewife Samira Moustafa said she views bakers as "cheaters".

Potent mix

Bread and politics have been a potent mix for decades in Egypt, a nation that now has 90 million people, mostly poor.

Mubarak's predecessor Anwar Sadat faced protests in 1977 after he tried to cut bread subsidies. Unrest broke out under Mubarak, notably in 2008 when the rising price of wheat caused shortages, and three years later, bread was a rallying cry for the protests that finally toppled him.

Morsi never managed to implement his plan for smart cards, blaming the bureaucracy for sabotaging reforms. Frustration and anxiety over the failure to fix subsidies helped fuel the protests that led to Sisi removing him from power.

Even now, government officials tasked with implementing it worry whether the new smart card system is air-tight enough to squeeze out middlemen working the black market.

"Those who depend on corruption are not easily going to go along with reforms," said a supplies ministry official on condition of anonymity.

Hanafi, the minister, acknowledges that the old system had its "beneficiaries". He said he had held hundreds of meetings with bakers to win over their cooperation with the changes.

"I had to convince them, I had to make compromises to reach this point," he said. "For 40 or 50 years this was a nightmare for Egyptians."