Nigeria’s Africa Finance Corporation (AFC) plans to pump more investments into the Egyptian market in 2021.
In an interview, which was conducted virtually, Ahram Online discussed with the AFC’s Executive Director and Chief Investment Officer, Sameh Shenouda, the corporation's future plans for Egypt and Africa.
Shenouda unveiled to Ahram Online that AFC is currently in talks with the government and the Egyptian Sovereign Fund to tap into investment opportunities in the Egyptian market, saying that AFC sees Egypt as a promising market and that it has all the potential to be more attractive to foreign investors.
He also said that transport, logistics, renewable energy, water, gas processing, and technology are expected to be key sectors that will drive Egypt’s growth and economic recovery.
Ahram Online: In light of the severe impacts that COVID-19 has caused to Africa, how do you see the crisis' impacts on investment and doing business in the continent?
Sameh Shenouda: Actually, the crisis has affected the African market in many ways, on macroeconomic, personal finance, and private sector levels.
For the private sector in the African market, I think it will be one of the key areas that AFC can play quite a big role in turning the current challenges caused by the crisis into opportunities through investments.
We do a number of investments; indeed, we invest alongside governments and lend them as well as lend to the private sector. So, supporting governments, the private sector, and government entities are some of our priorities based on the fact that Africa is very rich with mineral resources and primary products, including oil, gas, and basic minerals.
The disruption that we have seen in logistics, transport, and production, especially in China, is where we see the opportunity to tap. Africa exports primary products to China, while the latter manufactures the final products and then exports them back to the world.
The opportunity here is that we can build manufacturing facilities in Africa using primary products that are extracted from the continent, especially since Africa is much closer to the demand markets, which allows for selling the final products.
Thus, one of our areas of focus as a continent is to convert Africa into a production hub and add value to our primary products.
AO: So, in your perspective, how do you think the private sector in the continent has been affected by the pandemic?
SS: The extent of the repercussions in this regard depends on each sector within the private sector. I mean, a sector like tourism is one of the most hit sectors amid the crisis due to lockdowns and the associated measures that all countries have been applying.
Additionally, airlines, transport, and any activities that are related to movement have been very badly affected, which in return affects their investments and businesses consequently.
On the other hand, sectors like technology and its related activities and businesses have been positively affected by the crisis. This is the area Africa should do more in, as the crisis proves that focusing on technology is extremely important.
Out of that, we cannot say that the private sector was generally affected badly by the crisis or even positively.
AO: Which sectors are expected to drive Africa’s growth and recovery going forward?
SS: Actually, they are the same sectors that the AFC is focusing its investment on. This includes power, especially within the renewable energy field.
In this respect, I can say that Egypt, alongside two other countries in the African market, already have excess power, while most other countries in Africa have a huge demand for power to drive the economy and the energy industry itself.
So, power is a very important sector to focus on, and we plan to build a number of power platforms across the continent over the upcoming three to five years.
Oil and gas mainstream infrastructure is also expected to play a role in this regard, as there are a lot of gas fields across Africa, including the Zuhr gas field in Egypt, as well as gas fields in West Africa on the coast of Senegal, Mauritania, and Mozambique.
So, how we can convert this gas into sellable products, and how we can bring it on shore or build energy plants is really critical.
Mining is another interesting sector in Africa that can play a role in driving the continent's growth, while value addition can do more for such a sector.
Also, transport and logistics are expected to lead Africa’s recovery and growth, including constructing ports and warehouses, as well as linking them to technology to create e-logistics and e-transports.
Technology and heavy industries will contribute as well. Investing in all these fields in Africa will gain quite a lot of upsides, I think.
Obviously, investors should look to the long term, especially since we are not traders, we are, however, infrastructure investors. These kinds of projects will take some time, but we have the patient capital to do that.
AO: As AFC focuses on infrastructure investments, how do you see the actions Egypt has taken in this area over the past few years?
SS: Egypt is a very interesting market for us. We are focusing on a number of sectors in the country. Transport is a huge sector there. the major developments that we have seen in it over the past few years are impressive, and there is more to come. There is are high-speed trains and the monorail.
I have met with Egypt’s Minister of Transport Kamel El-Wazir last week and we discussed the avenues of cooperation.
Also, there is lot of potential in renewable energy, water, warehousing, and logistics in Egypt.
Additionally, I have met with the CEO of the Egypt’s Sovereign Fund (TESF), Ayman Soliman, as well as with the Minister of Planning and Economic Development, and Non-Executive Officer of the TESF Hala El-Said a few weeks ago in order to introduce the AFC and the role it can play in investing in the Egyptian market.
AO: Egypt is not among the AFC’s 28 member countries, so does the corporation have specific future plans for investing in the Egyptian market?
SS: We are very keen for Egypt to be an AFC member country and to be a shareholder. We were in talks a few years ago with the finance ministry and the Central Bank of Egypt for the same purpose and the process in ongoing.
I want to take this opportunity to push this agenda forward if possible. We invest in any African country without the need for it to be a member of AFC, but obviously, the membership helps quite a lot in making the case to invest even more.
AO: Does it mean that AFC have current investments in Egypt?
SS: Yes, we have two small investments, yet we are very keen to invest so much more now.
AO: What is the amount of expected investments that AFC plans to inject in the Egyptian market?
SS: We have the mandate to invest significant funds worth billions of EGP in Egypt.
Egypt is the second largest economy in Africa after Nigeria. We put Egypt in the centre of our attention, and we plan to expand geographically in Egypt and in the whole continent.
AO: You talked about likely cooperating with the TESF, what are the key traits of that?
SS: We are currently discussing potential partnerships in projects within the sectors that we operate in, including water, power, and logistics. They are early discussions, but we are keen on working jointly with the fund.
Actually, we are in talks with TESF, the government, and with the private sector as well.
AO: Should we expect bigger investments from AFC in the Egyptian market during 2021?
SS: Yes, we are working on that, indeed.
AO: AFC announced in January that it had doubled its lending to $2 billion to be directed to the African market in 2021 as a response to the challenges the pandemic has imposed on African countries. How is this allocation expected to be used? And what are the sectors that will benefit from this?
SS: The sum will be used as a lending facility for all African countries, even for the countries who are not members of AFC. We do not allocate a certain amount of money to a certain country; it depends on the opportunities itself and the relationships.
If we get a good opportunity in a country, we will invest in it.
AO: Out of that, AFC is a company that focuses on investing in Africa, how is the African Continental Free Trade Area Agreement (AfCFTA) expected to benefit the private sector to work much more easier in the African market and to attract more investments to the continent going forward?
SS: The AfCFTA is in a very critical point that countries and private sectors must take advantage of. AFC has access to all 54 countries in the continent and is a very strong supporter of the private sectors' companies there. We are owned by African countries and African Banks.
On the back of this agreement, we can significantly help African companies to expand regionally as well.
AO: The World Bank projected Africa’s growth to decline by 3.3 percent in 2020, with a notable slowdown over 2021. When do you expect Africa to start bouncing back and to recover from the pandemic's repercussions?
SS: It is difficult to have a blanket statement on that as we cannot look at Africa as one entity. Egypt has been doing quite well in dealing with the crisis and its associated implications, so Egypt has seen some growth, while other countries have seen a reduction in their GDP.
I think it will take time to turnround. I am guessing that Africa will see a rebound by 2023 or 2024, but it all depends on each sector and how it deals with the crisis and its related results. On a macroeconomic level, the great majority of African countries will see growth over the coming few years, I think.
AO: Which kind of procedures do Egypt’s government need to take in order to ease investors operating in the market, and what kind of incentives should it extend to foreign investors?
SS: The most important thing is to show the real opportunities clearly and that they are ready to be tapped by foreign investors. A good example of that is the Benban power station in Aswan. The government announced it as a specific clear opportunity that is ready to receive investments. If it is only a matter of PR announcements without specific announced opportunities, investors will come and go, and nothing will happen.
AO: To what extent do the actions Egypt has been taking in investment and business are expected to ease investors' work in the market?
SS: They are very good steps, but there is more to be taken. Egypt is growing by three to five percent, and its population is growing by two percent. What the government has done so far in all sectors in this regard is incredible despite the very difficult circumstances.
For instance, only eight years ago, Egypt was suffering from a power shortage, now it has excess power because there was a focus on that. Also, only three years ago, the roads were not as good as they are now. In addition, Egypt experienced devaluation five years ago, but now the currency is more stable.
So, all these things are positive, yet they are not enough because the country has a growing population that needs job opportunities to be created. It is a very good base to do more and foreign investors can play a critical role in this area to support the government in continuing its role.
Egypt is a very promising country, and it has all the ingredients to continue being a great success story.
AO: For Egypt, which sectors are expected to lead the country’s growth and recovery?
SS: Transport, logistics, renewable energy, water, gas processing, and technology.