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Tuesday, 22 June 2021

INTERVIEW: Economic reforms, commitment to private sector-led growth will attract more investors to Egypt: UK-based CDC’s coverage director

Shohdy said that the new UK-Egypt trade deal will not influence the scale of CDC's current or future investments in Egypt, which has been a significant investment partner for over 18 years

Doaa A.Moneim , Sunday 28 Feb 2021
Sherine Shohdy
Sherine Shohdy, UK-based CDC’S Country Coverage Director of Egypt
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Economic and trade ties between Egypt and the UK have been witnessing a new chapter since the trade deal between the two countries came into effect as of January 2021.

Ahram Online sat with Sherine Shohdy, UK-based CDC’S Country Coverage Director of Egypt, to discuss how the deal will boost British companies' investments in Egypt and how it will positively affect the companies' businesses - that back to 2003 - in the Egyptian market.

Shohdy also stressed that Egypt shows positive signs, unveiling that CDC’s investment portfolio in the country exceeds $266 million, with 35 Egyptian companies collectively employing close to 29,000 people.

CDC Group is the UK’s first impact investor funded by the UK government with 1200 businesses in emerging economies.

Ahram Online: How do you see the investment and doing business atmosphere in Egypt?

Sherine Shohdy: The investment and business climate in Egypt is showing positive trends. In the World Bank's Doing Business 2020 report, Egypt rose six places compared to the previous index and ranked 114 among 190 economies in terms of the level of ease in doing business. Behind this trend lies ongoing economic reform, a commitment to private sector-led growth, and the ambition to create an environment that attracts more domestic and foreign investment.

COVID-19 had a substantial impact on some key sectors of the economy, tourism being one prominent example. On the whole, however, Egypt has dealt well with the economic consequences of the pandemic, thanks partially to strong consumption.

The outlook remains uncertain due to a possible resurgence of the virus and the pace of global recovery, but the IMF's latest review expects Egypt to register positive economic growth in FY2020/2021. On this basis and to aid its recovery, we expect Egypt will continue to push on with reforms that will improve its attractiveness as a market for investments and doing business.

Macro-economic stability, the diversified and dynamic nature of the economy, green recovery plans and the entrepreneurship ecosystem, should in turn all serve to ensure Egypt remains an attractive market for investors.

AO: To what extent is the UK-Egypt trade deal, that came into force in January, expected to boost the investments in both countries?

SS: The trade deal is a great testament to the strength of the partnership between the UK and Egypt and will ensure that we continue to share strong commercial ties.

It both secures the existing £3.5 billion ($ 4.7 billion) of trade between our two countries and provides a framework to develop our trading relations further. British and Egyptian businesses will be able to draw on new opportunities and make significant savings thanks to the liberalisation of trade in agriculture, agri-foods and fisheries provided by the agreement.

Tariff-free trade on industrial products will also create future investment and development opportunities for both countries.

AO: How is CDC expected to benefit from the deal regarding its investments in Egypt?

SS: The new UK-Egypt trade deal will not influence the scale of our current or future investments in Egypt. For CDC, Egypt has been a significant investment partner for over 18 years. As the UK's development finance institution, CDC is mandated to invest in creating jobs and driving sustainable economic transformation across Africa and South Asia by investing in private sector companies and backing their growth with our expertise.

We have over 70 years of experience successfully supporting businesses' long-term development in Africa and South Asia and over half of our portfolio of investments are committed to companies across the continent.

I look forward to continuing the growth of our permanent presence in Egypt and expanding our coverage across the country in partnership with many more of Egypt's prominent companies and entrepreneurs.

AO: Could you shed some light on CDC’s recent investment that had been injected in Egypt's private sector?

SS: The COVID-19 pandemic has tested medical staff and healthcare facilities worldwide, highlighting the global imperative need to invest in pandemic preparedness and resilient healthcare systems.

In February 2021, CDC announced a $100 million investment in Alfa Medical Group, which includes leading diagnostics companies Alfa Scan and Alfa Laboratories, as well as El-Saha Hospital.

Alfa Medical Group is one of the largest healthcare providers in Egypt and consists of over 140 labs and six radiology centers, with a 170-bed hospital, in addition to two further hospitals and the Alfa Medical City currently under construction. Our investment in Alfa Medical Group was encouraged by the leading role it has played in improving healthcare outcomes for millions of Egyptians over the last 25 years.

The investment marks CDC's largest equity investment in Egypt and is a testament to our firm commitment to doubling down on investments across the country as well as, partnering with prominent businesses and entrepreneurs in Egypt.

This investment will increase public access to high-quality medical care - ensuring healthcare is accessible to all income levels and underserved communities across the country. It also came in line with the Egyptian government's objectives to improve the quality of life and the standard of living of Egyptians, as outlined in Egypt's Vision 2030.

AO: What is the total of CDC's investments in the Egyptian market?

SS: CDC investments in Egypt date back to 2003 and it is an important partner for our investment activities.

Our portfolio of investments in Egypt now exceeds $266 million, with 35 Egyptian companies collectively employing close to 29,000 people across the country.

CDC provides the flexible long-term capital that will support the growth of Egyptian businesses, driving a similar mission of creating positive environmental, economic and social change.

We provide capital in many forms, including direct and intermediated equity, debt, mezzanine and guarantees to promising companies and projects that stimulate inclusive growth. Our portfolio covers various sectors, including infrastructure, manufacturing, trade, microfinance, healthcare, business services and financial services.

We also have investments in Private Equity (PE) and Venture Capital (VC) funds with exposure to Egypt and North Africa, such as Ezdehar and Sawari Ventures. So far, we have invested in 12 PE and VC funds with exposure to Egypt and are identifying more opportunities to provide debt/equity to private Egyptian companies and projects which meet our ticket size (this typically worth $20 million up to $150 million).

Meanwhile, CDC is a key partner in the 800 MW Benban Solar Park project located in Benban, Aswan with investments recorded at $97 million, covering nine projects with a total capacity of close to 400 MW.

This project provided clean, cost-effective power to over 350,000 people and generated up to 6,000 jobs during construction.

Moreover, our Africa portfolio of investments supports over 80 investment funds operating in 37 countries across the continent. We currently have investments in over 700 African businesses that collectively employ over 300,000 people across 35 countries and we paid $1.7 billion during 2020 in national tax contributions - supporting governments to deliver essential public services.

AO: Based on that, what are CDC’s future plans for the Egyptian market?

SS: Our establishment of a permanent CDC office in Cairo and my appointment in 2020 are a testament to our long-term mission of supporting the country's private sector, entrepreneurial culture, and the government's national agenda to drive sustainable growth. As CDC's Coverage Director based in Cairo, I will continue developing our pipeline of investment opportunities and strengthening our relationships with new and existing partners along side building our relationships with current and potential investee firms, entrepreneurs, policymakers, and financial institutions.

In Egypt, over the next few years, our strategy will focus on where our capital, technical and operational expertise can make the most substantial environmental and social impact. We will be identifying opportunities, chiefly in healthcare and pharmaceuticals, manufacturing, consumables, infrastructure, renewable energy, desalination and wastewater treatment, industrial parks, and ports sectors.

In January 2021, we announced our target to invest $1 billion in African businesses throughout the year. The commitment enables CDC to deploy more capital to many more promising African entrepreneurs, small and medium-size enterprises (SMEs).

In 2021, as ever, we are focusing on job creation as well as accelerating economic and human development. We will continue to deploy and mobilise capital to enhance women's economic participation, building on the success of the 2X Challenge, which has channelled over $4.5 billion in investments to support initiatives that empower women as entrepreneurs, business leaders, employees and consumers.

Our climate change strategy is also a fundamental objective for us; as such, 30 percent of our annual commitments in 2021 will go to climate finance. Since 2017, we have committed over $1 billion to climate change mitigation, resilience and adaptation measures as we align our investment approach with the Paris Agreement to ensure that our portfolio will be net-zero emissions by 2050.

In November 2020, we partnered with Development Partners International (DPI) and the European Bank for Reconstruction and Development (EBRD) to launch the first pan-African pharmaceutical platform of its kind.

The $750 million biopharmaceutical platform will expand access to vital speciality generic drugs across the continent and enable the $250 million acquisition and combination of two leading companies: Egyptian generic drugs manufacturer Adwia Pharmaceuticals and Celon Laboratories Pvt, Indian oncology and critical care specialist.

Our partnership with these investors will generate significant cost savings for healthcare providers across Africa and aims to raise a further $500 million to realise its strategy, fund additional acquisitions, develop new drugs and establish new distribution capabilities. We are proud of these initiatives and I am excited to develop them further with our partners in Egypt and beyond.

AO: What are the procedures, policies and measures Egypt needs to take for a much more easier and convenient investment environment in the market?

SS: Egypt should continue to progress on the various aspects of its ambitious reform agenda, which includes promoting private sector-led growth and foreign investments. Amongst the ways to achieve this are to continue improving transparency and governance, enabling fair competition and public-private collaboration as well as introducing stable tax policies. Collectively these will make doing business in Egypt easier, attract additional long-term foreign investments and further boost sustainable economic growth.

Currently, Egypt is already pursuing reforms that address some of these areas. For example, the customs law that was ratified by President Abdel-Fattah El-Sisi in November 2020 should improve and help facilitate cross-border trading. Other initiatives can come in the fiscal space, such as providing incentives for exporters or financially supporting innovation and entrepreneurship, which the Egyptian ministry of planning and economic development is already putting into effect.

Critically, developing comprehensive policies that ensure human capital development, will not only foster a strong investment environment but will also serve to entrench sustainable growth and resilience of Egypt’s economy. The combined forces of climate change and global disruptions resulting from COVID-19 have exposed the urgent need to address widening skills gaps, particularly for women and youth. Prioritising training, re-skilling and upskilling, with a focus on improving digital skills and those relevant to green economic sectors, will have a dynamic impact on the lives of millions of Egyptians and significantly strengthen the country’s socio-economic future.

 

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