After the UN COP27 Climate Change Conference held in Sharm El-Sheikh last November and following the plans set out in Egypt’s 2030 Vision to introduce more green energy projects as a clean alternative to fossil fuels, a new project to build solar thermal collectors was granted 2.7 million euros in December under the German facility for Investing for Employment (IFE).
The IFE signed an agreement with Creative Power Solutions AG (CPS), the first under its Green Economy proposals. Under the agreement, the IFE provides CPS with a grant of €2.7 million, representing 50 per cent of the total investment, a press release issued by the IFE said.
Solar thermal collectors are an important way of generating renewable energy. They are mostly manufactured in countries like China at the moment and then exported to Egypt. However, as a result of the new agreement they will be produced in Egypt, allowing Egyptian firms to use more green energy after being dependent on non-renewable energy like fossil fuels which are a major source of pollution.
According to a 2021 survey by IQAir, a Swiss pollution technology company that monitors air quality, Egypt was the 27th most-polluted country in the world out of the 117 countries surveyed, with its annual reading of small and hazardous airborne particles known as PM2.5 standing at 29.1. The World Health Organisation (WTO) recommends that average annual PM2.5 readings should not exceed five micrograms per cubic metre (µg/m³).
The CPS was selected after an evaluation of its project proposal, which targets achieving decarbonisation goals and energy independence in both the industrial and power-generation sectors in line with Egypt’s 2030 Vision goals.
The project is the first manufacturing facility for solar thermal collectors in Egypt and the Middle East. It aims to introduce and localise this cutting-edge green technology through mass production. It also plans to facilitate the spread of solar thermal technology across Egypt and boost the economy via the creation of sustainable jobs across various sectors.
In November 2021, the IFE launched a call for proposals focusing on the Green Economy and providing co-financing grants ranging from one to 10 million Euros per project. The selection of the projects is based on a competitive application process and gives priority to high-quality proposals that are mature and ready for execution. The IFE aims to support the creation of employment opportunities in Africa by offering co-financing grants for new investment projects with high job-creation impacts.
During the signing ceremony, IFE Managing Director Raouf Khalaf highlighted the goals behind the facility. “Through the Green Economy call, the IFE is keen not only to create job opportunities, but also to support the immense efforts towards achieving the country’s energy supply objectives. As more than 50 per cent of the world’s demand comes from thermal energy, which results in 40 per cent of CO2 emissions, we are committed to join forces to advance climate technologies innovation in order to facilitate a path towards clean and green energy,” he said.
“After a thorough evaluation of the submitted proposal, CPS demonstrated its ability to deliver a promising climate-friendly technology that relies on renewable energy sources, bringing one of the most promising solutions to achieve decarbonisation.”
According to Khalaf, this is also just the beginning, and the IFE intends to continue giving grants to other projects in different sectors. The more projects they receive, the more contributions this means for the Egyptian economy, he said.
“This is the first grantee signing ceremony that we have contracted for the Green Economy call that closed its door for applications on 24 November,” said Karim Gad, country focal point for the IFE in Egypt.
“This is not the only applicant that has now been transformed into a grantee. It is the first of many yet to come, whether regarding the Green Economy call or the ongoing call for Women in Business.”
Gad said that CPS will be able to provide Egypt and the Middle East and North Africa (MENA) region with a creative solution that will help in the transition to green and clean energy.
APPLICATIONS: The IFE seeks applications for four types of investment projects.
The first is not-for-profit projects with job-creation impact (not generating revenues). In this case, the IFE covers up to 90 per cent of the investment costs. The second category is not-for-profit projects with job-creation impact (generating revenues), in which the IFE covers up to 75 per cent of costs.
The third category is for-profit projects with broader job-creation impact in which the IFE covers up to 35 per cent of costs. The fourth category is for-profit projects with job-creation impact, in which the IFE covers up to 25 per cent of costs.
The CPS is a category three grantee, meaning that the project will not only create jobs, but will also do so beyond its immediate operations and accordingly was eligible for up to 50 per cent of the investment cost.
“The grant amount for this grantee was 2.7 million euros, and this constitutes 50 per cent of the total investment cost of 5.4 million euros,” Gad said.
“For the Green Economy call, we had around 100 applications, and the total investment cost of all the projects submitted was about LE25 billion. We went through a short-listing process in which we identified all the eligible applicants and those that were not eligible. They were about 20 per cent, with an overall investment cost which supports the economy towards the green transition.”
As for why this project was chosen out of the many others, Gad said it was due to its readiness for implementation and its being the most responsive to queries. “The applicant submitted clearly readable documents and was very responsive to our demands. We scrutinise the projects submitted to make sure that they really create sustainable jobs,” he said.
“The call only started in February, and during this time we saw economic turbulence in the country. The only thing that we could do was to study the feasibility of projects in terms of financial feasibility.”
Gad said that the shortlisted companies worked in sectors like vocational training, food and beverages, and agriculture. “The majority of the applicants had a strong green component in their projects, but really there are also other sectors. There is no rule of thumb here,” he said.
CEO of CPS Maged Toqan expressed his excitement about signing the grant agreement. “We are thrilled to be the first grantee of the Green Economy call, allocated to set up the first manufacturing facility for solar thermal collectors in the MENA region. With the total investment cost of 5.4 million Euros, local production at the manufacturing facility will enable knowledge transfer while boosting renewable energy deployment and creating jobs across various industry sectors,” Toqan said.
“Through this innovative technology, we are committed to global endeavours in mitigating climate change and supporting Egypt’s Sustainable Energy Strategy 2035.”
He said that parts of the solar collectors will be manufactured in Egypt under the supervision of Swedish partners and would be exported in the near future after catering for local needs. So, they not only intend to cover needs locally, but also work on covering them regionally and internationally.
“We studied market needs and decided to build a solar power plant with our Swedish partners to manufacture solar thermal collectors to meet these needs. If we are to transform Egypt from a developing country to a developed country, we have to invest in such technology, and this is our objective,” he said.
Future customers will be in sectors that need such energy generating technology. “We have a wide range of customers. First, there is the Egyptian Electricity Holding Company as it will need power to heat its power plants. We are also looking at the industrial sector like food and beverage companies and pharmaceutical and petrochemical manufacturing companies. There are so many clients that need heating applications, and they are the ones that we will be targeting.”
THE IFE: The Investing for Employment initiative is an investment mechanism created by KfW Development Bank on behalf of the German Federal Ministry for Economic Co-operation and Development (BMZ) as an integral part of the Special Initiative on Training and Job Creation.
Operating under the brand “Invest for Jobs”, it aims to remove investment barriers and to create good jobs and training opportunities in partner countries in Africa, among them Egypt, Côte d’Ivoire, Ethiopia, Ghana, Morocco, Rwanda, Senegal, and Tunisia. The IFE was launched in 2020 to promote and fund projects in African countries and create more jobs in the private sector.
In November last year, the IFE also launched a call for proposals for projects in Egypt with a focus on women.
Despite the fact that businesses owned or managed by women play an increasingly important role in Egypt, they still have a long way to go. According to the Global Gender Gap Report 2022, only one in 50 firms in Egypt has female-majority ownership and only six per cent of firms have top female managers. Women account for less than a quarter of the labour force in Egypt, said a press release issued by the IFE.
The IFE is also intended to support women entrepreneurs and women-led businesses and to make financing available to projects that promote the employment of women. Applications are open to private companies as well as public entities, universities, chambers of commerce, associations, and NGOs.
In a previous interview with Al-Ahram Weekly, Gad said that in 2018 the G20 group of countries had launched its own Invest for Jobs initiative to support job creation within partner African countries, including Egypt.
The IFE is looking for mature projects, he said. “The projects have to be in a very developed state in terms of feasibility studies or market research, but they do not need to have started owing to obstacles that are beyond the entrepreneur or the applicant concerned,” he added.
Among the selection criteria are projects that do not currently have access to funds. “This means that IFE money will make a difference in seeing the project come to life,” he said, adding that it is also prepared to support projects that the banks may consider to be high risk or require collateral funding that the entrepreneur cannot provide.
Most importantly, the project has to create jobs that are sustainable with the prospect to grow. Funds are usually on a co-financing basis, varying from 25 per cent of the total investment cost to up to 90 per cent of the total.
The IFE aims at lifting the barrier of investment as well as encouraging foreign investment in the Egyptian market, Gad said. Some of these barriers include the absence or deficiency of infrastructure, like the need to enhance energy supplies or roadway systems.
Other financial institutions may only grant loans in the local currency or ask applicants for large interest payments or guarantees that could be more than the cost of the whole project.
“Last year, we had two calls running in parallel, the Women in Business Call and the Regional Call, in which Egypt is one of the seven countries contributing. We are looking very positively towards the Egyptian market, and we will have a very positive outlook on continuing strongly in the Egyptian market in terms of launching future calls and having more and more projects that we can have signing ceremonies for and potentially successful grantees who can help enrich the labour force,” Gad said.
* A version of this article appears in print in the 12 January, 2023 edition of Al-Ahram Weekly