Construction of the Grand Ethiopian Renaissance Dam is nearing completion. How can the friction between Egypt and Ethiopia over it be resolved? Addisu Lashitew and Haim Kassa suggest a solution that could benefit all countries in the region
Egypt and Ethiopia are on a collision course over the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile, which is set be the largest hydropower dam in Africa. The two countries have heated up the rhetoric and taken the dispute to the international diplomatic arena.
The falling-out became clear when Ethiopia walked away from US-mediated negotiations in late February. Ethiopia first requested more time for deliberation, but later released a statement saying that the US was putting pressure on it to sign an agreement that was not in its interest.
Egypt, which had hoped for a quick resolution from the US-mediated negotiations, was flummoxed by Ethiopia’s withdrawal. It subsequently elicited the support of the Arab League, which joined the fray by demanding Ethiopia respect Egypt’s historical rights over the Nile waters.
A major sticking point between Ethiopia and Egypt is on the pace of filling the GERD’s reservoir, which will hold about 74bn cubic meters (BCM) of water, equivalent to a year-and-half’s worth of the Blue Nile’s flow. Ethiopia wants to fill up the reservoir over the course of about seven years, while Egypt wants Ethiopia to extend the period to 12-21 years.
With Ethiopia planning to start filling the reservoir in July 2020, the time to reach an agreement is ticking away. Ethiopia and Egypt should be ready to make significant concessions to avoid a catastrophic escalation in this seemingly intractable dispute.
Initiated in 2011, the GERD is a $5bn project that will have a transformative effect on Ethiopia. Upon completion, it is expected to generate close to 16,000 GW hours of electricity and double Ethiopia’s current power generation capacity. Currently, only 44% of Ethiopia’s households have access to electricity, with a quarter of these relying on off-grid solutions (by contrast, Egypt has already achieved full electricity coverage).
The GERD will hence put Ethiopia on track to meet one of the key provisions of the UN’s Sustainable Development Goal 7, which calls for universal access to affordable and reliable sustainable energy by 2030.
In spite of its obvious benefits to Ethiopia, the GERD is seriously contested by Egypt, a desert nation that heavily relies on the Nile for its fresh water needs. Unlike Egypt and Sudan, Ethiopia has limited irrigable land, and is unlikely to use the river for water-consuming agricultural production.
It is, however, keen to develop its potential for generating hydroelectricity in the Nile basin. Since some experts estimate that as much as 84% of the Nile water reaching Egypt originates in Ethiopia, Egypt has legitimate fears for its water supply.
Extending the filling period of the GERD to more than 12 years, however, would entail significant economic losses to Ethiopia. At a price of about 7 cents per KW hour, the annual revenue from the power generated by the GERD at full capacity will be close to $1bn.
Ethiopia’s economic loss would run into tens of billions of dollars if we count the direct loss of revenue from electricity sales for five to 10 years, plus the indirect cost of reduced production in manufacturing and other key industries that would continue to suffer from electricity shortages.
Trade and economic integration
Egypt and Ethiopia should consider the potential value of GERD to advance regional trade and economic integration. Ethiopia does not have major petroleum and mineral resources, but has a vast potential for electricity generation, amounting to almost 45,000 GW. It thus has a capacity to export electric power to Eastern African countries that are connected to the Eastern Africa Power Pool.
Egypt and Sudan will enjoy a special priority in terms of power exports from the GERD, according to a 2015 declaration of principles between Ethiopia and the two downstream countries. For Ethiopia, revenues from hydropower exports will help alleviate pressing economic challenges such as shortage of foreign currency and a buildup of the national debt burden.
The GERD will also help alleviate the loss of revenue that businesses in East Africa face due to electric power interruption. Among the three countries involved in the GERD negotiation, Ethiopia loses the most at 6.9%, followed by Egypt at 6% and Sudan at 1.2%. Even a reduction of these losses by half would lead to significant economic gains in these countries, potentially contributing to improvements in productivity, employment creation, and export performance.
Access to electricity is an important driver of poverty reduction, economic growth, and industrial production. An effective utilisation of the GERD, therefore, is likely to boost economic growth in the energy-hungry Eastern African countries.
Regional integration and stronger interdependence will in turn reduce the risk of conflict in the region. Egypt should acknowledge these regional benefits as well as Ethiopia’s right to an equitable utilisation of its natural resources.
Egypt and Ethiopia will need to arrive at a negotiated solution on the filling of the GERD, in a manner that addresses Egypt’s concerns on the dam’s potential effects on its power production and water supply.
Egypt’s massive reservoir at the High Aswan Dam on the Nile has a holding capacity of 169 BCM, equivalent to two-year’s worth of the main Nile’s flow. Compared to Ethiopia, which relies on natural rainfall to meet its water demand, Egypt will have greater readiness to cope with minor changes in the flow of the Nile.
If the GERD is filled over a period of seven years, the reduction in the Nile’s flow will be less than 11 BCM, which is equivalent to 11% of the main Nile’s flow and just 6% of the water stored at the Aswan High Dam’s reservoir.
These changes seem moderate and reasonable, considering Egypt’s ability to absorb the temporary shortfalls by releasing water from the Aswan High Dam, and the great demand for energy in Ethiopia.
The two countries, however, need greater coordination to ensure a shared responsibility during years of low rainfall and prolonged drought. Such an agreement could shield Egypt from unnecessary loss of electricity production if the water stored at the Aswan Dam’s reservoir falls below a certain minimum threshold.
Any fall in Egypt’s hydroelectricity production will only have a modest effect since only about 7% of the country’s total energy supply comes from hydroelectric power (the remaining coming from gas and steam-fired power plants). The risks Egypt faces from the construction of the GERD, therefore, can be easily mitigated through an effective coordination of the GERD and Aswan High Dams.
The GERD offers an opportunity for greater regional collaboration, and does not have to be a cause for regional destabilisation. A fair and equitable utilisation of the Nile River benefits all parties and creates a potential for long-term development and cooperation in the region. Ethiopia and Egypt should realise that everyone loses from a conflict and should be ready to resolve their differences at the negotiating table.
Addisu Lashitew (email@example.com) is a research fellow at Brookings Institution. Haim Kassa (firstname.lastname@example.org) is an assistant professor at Miami University.
The article first appeared on the African Business Magazine