McLARTY FIRST TAKE: Egypt protests recede, but discontent remains

October 5, 2019

KEY POINTS

Viral videos criticizing Egyptian President Sisi have triggered an online movement that resulted in mass demonstrations in central cities.
President Sisi has a pressing challenge to tackle the public grievances that led to the protests, or risk increasing instability.
In response to the demonstrations, we expect a political shake-up, a widening of the social safety net, and for the administration to significantly downplay the military’s business activities.

BACKGROUND

While the Arabian Gulf has been capturing global attention following the Iranian attacks on Saudi Aramco oil facilities, Egypt has been undergoing significant political developments. For the last few weeks, Mohamed Ali, a self-described whistleblower, published a series of viral video testimonies online, accusing President Sisi of rampant corruption and criticizing him for overspending. Ali’s videos triggered an online movement that brought thousands of protesters to the streets of Cairo, Alexandria, and Suez in late September, where clashes erupted between security forces and protesters. In the days since, Egyptian security services have taken over the streets and arrested two thousand demonstrators, activists, politicians, and public figures to prevent further protests.

ANALYSIS

The political identity of the protesters deserves emphasizing – the majority were members of President Sisi’s own political base in his power struggle against Islamists in 2013. The fact that these protesters took to the streets against President Sisi highlights the depth of economic pressure they are facing and represents a growing peril to President Sisi’s legitimacy.

Following these protests and the subsequent arrests, President Sisi has a pressing challenge to restore credibility to his administration and make repairs to his public image. Although security forces have succeeded in subduing the demonstrations, we expect Sisi to respond to public pressure by making more material changes to address the growing discontent behind the protests.

Three developments we’re anticipating include:

A political shake-up: We expect President Sisi to make some cabinet-level changes to distance himself from the recent protests. In the Egyptian public’s mind, President Sisi is the regime and vice versa. Until additional publicly accepted figures join Egypt’s governing system, the public will continue blaming President Sisi for the current economic and political deterioration.
A widening of the social safety net: In a reversal of some IMF-mandated austerity measures, President Sisi is likely to increase wages, pensions, and food subsidies, in addition to slowing down the de-subsidization of electricity and fuel,. He has already instructed his government to revise the removal of lower-class families from the government food subsidy program, commonly known as Tamween. We expect that in light of these recent developments and since Egypt has already received the majority of the IMF loan, President Sisi’s government will delay further IMF-mandated economic reforms.
Downplaying the military’s business activities: In order to address public anger over the military’s increased role in the economy, and particularly its expansion into industries that were traditionally led by the private sector, we are advised the government may begin downplaying the military’s business operations by directing the armed forces to export significant portions of its production. Given the close relationship between President Sisi and the military, it is unlikely that the military will be asked to shrink its business operations, but rather will encourage them to export goods in order to reduce pressure on the Egyptian market, and work to change the public narrative more broadly.

While the dust has settled and internal security forces succeeded in ending the anti-Sisi protests for the immediate term, substantive changes will be required to stem their lasting political effects. By addressing these public grievances in the three ways outlined, President Sisi’s regime can begin working to restore stability and improve economic conditions in order to address the underlying causes of the demonstrations.

The situation in Egypt remains dynamic and could change rapidly. MA will continue to monitor the situation closely.