It was never going to be easy. Egypt is rapidly coming up to its second anniversary of the January 25 Revolution, and two years on the country is still grappling with the complex fallout of deposed president Mubarak’s ouster. The sheer scale and scope of the political and economic reforms needed would be challenging for any country, and as the debate over the constitutional referendum is proving, Egypt is no exception.

Some of the issues that president Morsi’s administration is now grappling with are short term and cyclical in nature — higher operating costs for retailers, for example, or depressed tourist numbers — but some are far more fundamental in nature, and far more concerning.

Perhaps among the most alarming — and one of the primary triggers for the revolution in the first place — is that of unemployment.With sluggish economic growth hovering around 2.6%, the 85 million person country is struggling to keep up pace with the increasing number of entrants to the job market every year.Thanks to depressed economic activity, in 2011 Tunisia and Egypt registered the largest increase in unemployment in the Middle East and North Africa region, rising 7% and 3.5% respectively.As of the third quarter of 2012, the official unemployment rate in Egypt stood at 12.5% or 3.3 million Egyptians according to the Central Agency for Public Mobilization and Statistics (CAPMAS), the state-run statistics agency. 

This number of course fails to take into account figures for underemployment, but even so a close examination of make-up of those 3.3 million citizens reveals a worrying chunk of qualified young Egyptians who have been left without jobs.Young people between the ages of 15 and 29 are estimated to account for nearly 70% of total unemployment. According to CAPMAS, 90% of the 3.3 million unemployed people are educated to a secondary school level, while the IMF estimates that unemployment exceeds 15% for those with a university degree. 

As in so many countries, two decades ago a university degree guaranteed employment, but as many recent graduates are finding out, this is no longer the case today. With over 2.5 million Egyptians attending the country’s universities and some 750,000 people entering the labor market every year, including 200,000 new graduates, swift actions will need to be taken to address the system’s deficiencies and face a rapidly expanding labor force. 

What makes matters worse is the stubborn mismatch between the skills graduates are equipped with and the requirements of the job market. Although the country has made significant strides in education — with improved performance on indicators such as literacy rates which increased to 86.2% in 2007 from 73.2% in 1996 for those aged between 15 and 44 — employment rates for new graduates have not grown at the same pace. 

Part of this is the result of a slow hollowing out of the middle-skilled ranks of workers. A 2013 study by the Egyptian Center for Economic Studies found that the country was not only grappling with a growing wage disparity, but also a decline in demand for middle-skilled employees relative to high- and low-skilled workers. As a result, the bulk of Egypt’s educated graduates, who make up large swathes of the middle class, are losing out to a small and highly skilled workforce at the top of the ladder and a larger proportion of low-skilled and manual laborers.

To try and not only increase employment opportunities for new graduates but also improve their employability, Egypt has sought to expand not only labor-intensive activities, such as manufacturing through the Industrial Modernization Center’s Industrial Development Strategy, while at the same time increased targeted skill training.

Vocational training is a sector that has been poorly cultivated, due in part to the unsurprising emphasis on university expansion over recent decades. Reforming vocational education is therefore key to address these problems and attract more students in the future. 

As a result, programs such as the Technical and Vocational Education and Training System Reform Programme (TVET), launched in 2005 in collaboration with the European Union, are crucial. The project aims to boost the supply of skilled labour in job-intensive sectors such as manufacturing, construction, services, and tourism, which combined account for 80% of the country’s jobs. 

The TVET, which will run until 2013, has so far trained some 50,000 job seekers and established more than 500 in-house training facilities in the garment, construction, agroindustrial and tourism industries, often in partnerships with private employers and sectoral associations. 

Just as crucial, however, have been the efforts of employers more broadly. A shrinking pool of eligible labor presents an equally pressing concern for the private sector as for the government, which has prompted a number of companies to launch programs that increase practical and technical education. CedarBridge, a regional private equity fund, signed a seven-year agreement to invest €100 million (LE 813.5 million) in a network of courses and programs that would allow young Egyptians to receive training and certification from education companies including Pearson, Festo, TUV Nord, and Plato. The program’s first graduates are expected in May 2013 and CedarBridge estimates a total of one million young Egyptians will benefit from this initiative. 

There are smaller-level initiatives as well. Last year, Euroconsult Mott MacDonald, an engineering consultancy, launched a four-year and nearly €2 million (LE 16.28 million) project to establish three schools and three training centers in conjunction with the Holding Company of Water and Waste Water in Egypt. The project aims at increasing the number of technicians in the water supply and sanitation sector and improving management at training facilities. Initial forecasts suggest the program could train up to 40,000 technicians. 

Of course, training represents only one aspect of the hiring equation. Even with improved skill sets for technical works and middle-skilled employees, without sufficiently robust growth in key industries, job creation rates will remain static. The muted performance of the economy has put a strain on the hiring capacity of businesses, most particularly in the case of small and medium enterprises (SMEs) — Egypt’s main source of employment, accounting for between 70% and 80% of all jobs. As a result, efforts are underway not only to increase the overall sustainability of SMEs but also to encourage greater entrepreneurship among new graduates. 

Certainly, there are no shortage of programs currently underway. The Egyptian Social Fund for Development (SFD) is one example.Dedicated to supporting small and microenterprises, last summer the SFD signed an agreement with Al Baraka Bank Egypt to extend SME financing to an additional 4,400 projects. A similar effort by the General Authority for Investment has seen the launch of Bedaya Centre Investment Fund for SME Development, with has a target of LE 1 billion and aims to help provide investment capital and general operating expertise for SMEs with a capital of between LE 2 million and LE 50 million.

There are also initiatives such as Egypt’s annual Young Entrepreneurship Competition, the sixth iteration of which took place most recently at the end of November. The competition aims at bridging the gap between the education system and the hiring capacity of the private sector by drawing in teams of more than 200 graduates from seven different universities to compete for seed funding for their business ideas. 

Egypt has a lot of pressing concerns that need tackling, whether it be a new constitution, subsidy reform or expanded electricity generation. At this stage, employment is only one of many issues demanding attention but if the country is to ensure sustainable growth and consolidate the progress made since the January 25 Revolution, it is one of the most important. Economic opportunity — and the lack thereof — was a key factor in prompting the unrest that led to the Arab Spring, and ensuring that the youth of today have the ability to access secure employment is crucial. Like so many of the reforms Egypt needs, it will not be easy to guarantee, but doing so will go a long way in helping the country realize its potential. bt

 

Robert Tashima is the Africa regional editor with the Oxford Business Group, a leading provider of economic and political intelligence about the Middle East, Africa, Eastern Europe, Asia and the Caribbean.