x Abu Dhabi, UAESaturday 20 January 2018

Sharjah scrap metal merchant's retreat reveals painful irony

The temperature is rising, the AC is cranking up and summer is on its way. That means power cuts are just around the corner for many across the region.

In Sharjah a few days ago I saw a man on a bicycle carrying a car door on each shoulder.

I was forced to squint and look again. Was this some sort of cutting edge eco-vehicle? No, he was on his way back from a scrapyard with some priceless booty, bobbing and weaving among hundreds of other cyclists, many of whom balanced similarly precarious loads on any available part of their person.

The street, indeed the whole area, was frenetic with industry. The sounds and fumes of metal bashing, smelting, welding and cutting were overwhelming.

Lorries filled with tonnes of rusted scrap, smashed car bodies, huge bobbins wrapped with kilometres of cabling and other bits of unwanted metal tipped their loads at every corner.

It was all quite a contrast to the coffee shops of the DIFC down the road in Dubai or the silent corridors of Abu Dhabi's office blocks.

What was also instantly noticeable is that all the scrapyards, metal bashers and industrial units in this particular area are of a certain size - not too big and not too small.

There is no single industrial behemoth that dominates the landscape, rather dozens and dozens of medium-sized operations.

There is a reason for this, and it became apparent as I reached my destination - a specialist scrap metal forge that has operated in the area for the best part of a quarter of a century.

The business, which requested anonymity, is leaving Sharjah. It doesn't want to leave. It has a great location and a great client base that visits regularly. But leave it must.

The type of scrap metal forging this company specialises in is very power-hungry. So much so that it consumes all of the electricity the emirate can supply it and more besides.

Like most businesses in Sharjah it has its own back-up generators just in case of heavy demand at the factory or in case the summer heat brings power outages.

And in Sharjah, the summer heat usually does bring power outages.

But the emirate is not alone.

The silent dread that immediately follows the air conditioning shutting off and the lights going out in a city where temperatures soar above 50°C is common across the Middle East and North Africa every summer.

It seems ludicrous that a region so rich in oil and gas can be plagued with such power-generation problems.

Dilapidated generation capacity and expensive fuel are largely to blame. But there is a third cause that looms over these two demons, whether it is in Sharjah, Jeddah, Kuwait City or Cairo, it is subsidies that have sapped utilities across the region of the much-needed capital they require to invest in the machinery and manpower to keep their power stations working.

When governments promise cheap electricity with subsidies, the utility is prevented from selling power at a market price and therefore cannot make a profit.

The absence of capital also leaves the utilities unable to build new power stations to accommodate increased demand or to allow for any kind of economic expansion.

Electricity prices have been increased in Sharjah to try to bridge some of the gap, but such a halfway-house move seems to have made the situation worse if the stories of factory owners trying to operate in the emirate are anything to go by.

With slightly higher electricity prices Sewa, the Sharjah utility, hasn't raised sums significant enough to improve its generation capacity, but electricity bills have risen. This means customers are paying more for the same old service.

Spring is barely here, but the familiar spectre of fuel shortages has already begun to emerge across the region.

This week people queued for diesel in Egypt, a country already in the direst of economic straits.

In Saudi Arabia, where energy shortages really should not be a problem, the power grid is plagued with problems meaning the people of Jeddah often have to wheel out the generators. Again, if electricity was not subsidised the power-generation companies could afford to tackle the problem.

Energy subsidies have backed the entire region into a corner and we need to find a workable means of weaning the sector off them, for they cannot be ended abruptly.

In Sharjah's case, turning the problem on its head to explicitly subsidise the fuel rather than the output electricity would be a start. At least then Sewa would be able to generate some income to fund upgrades and expansions it so sorely needs.