The COVID-19 pandemic has severly effected Africa, subjecting it to great uncertainty from both external and domestic risks.
In an exclusive interview, Ahram Online discussed with the Deputy Director General of the African Development Bank (AfDB) for North Africa and Country Manager for Egypt Malinne Blomberg the findings of its latest updated report on Africa’s economy and how the bank sees Egypt’s performance in navigating the crisis.
The interview also touched upon the African Continental Free Trade Area (AfCFTA) agreement and its expected role in helping the continent recover from the pandemic.
Blomberg talked about AfDB’s current investment and project portfolios in Egypt and the finances it had extended - so far - to help the continent in navigating the crisis.
Ahram Online:In light of the AfDB’s latest African economic outlook report, how is the COVID-19 pandemic expected to affect the continent’s economy during 2021 and 2022?
Malinne Blomberg:The negative impact on economies has been massive. Africa has been hit hard by the COVID-19 pandemic. Gross domestic product (GDP) in Africa contracted by 2.1 percent in 2020. In just one year, the continent lost five years' worth of gains in terms of economic development. We expect to have turned the corner and Africa’s economic growth rate is projected to recover to 3.4 percent in 2021.
AfDB’s greatest and most urgent goal is to save as many lives as possible; reverse the trends; protect livelihoods and put Africa’s economy back on more resilient recovery pathways. That’s why we put in place up to $10 billion in a crisis response facility to help African governments and the private sector deal with the impact of COVID-19.
The bank also launched a $3 billion 'Fight COVID-19 Social Bond' on global capital markets and provided $27 million to the Africa Center for Disease Control and Prevention. This so that they can take the lead in tackling the pandemic.
The economic recovery process from the pandemic will mainly depend on the financial capacity of African countries in addressing immediate shocks, stabilising their economies and investing in growing back. With the leverage of our AAA financial standing, the bank will continue to mobilise the funds Africa requires to cement the continent’s status as the world’s next business frontier.
AO:How do you see Egypt's economic performance amid the pandemic?
MB:Faced with the COVID-19 outbreak, the Egyptian economy has demonstrated great resilience and agility to a large extent. Thanks to the reforms undertaken since 2016 to stabilise the economy.
The national economy, which expanded by 3.6 percent in 2020, was one of the few in Africa that posted positive growth for the year. Indeed, Egypt has weathered the crisis well due to its macroeconomic stabilisation and recent efforts to enhance health, education and economic diversification outcomes.
Meanwhile, the pandemic has accentuated pre-existing vulnerabilities in many economies across the globe, undoing significant progress made in recent years. Egypt’s economy has also been deeply affected, with trade and supply chains disrupted, tourism and other industries were hit hard.
Egypt’s youthful and educated population, its growing competitiveness and the potential of its private sector give us reason to be confident that the country can overcome the COVID-19 crisis. To achieve this potential, we anticipate that a second wave of bold economic reforms will be implemented, to a large extent focusing on the business environment, which in turn will create more job opportunities.
AO:How does the AfDB see the role Egypt plays on the continent, especially in economic and trade areas?
MB:Egypt is playing a key role in Africa, with its economy being more and more integrated within the continent. All whilst focusing on a swift and sustainable recovery. Egypt also has an opportunity to strengthen its competitiveness and integration into the global economy, which remains essential for longer-term growth. Considering that Africa is one of the fastest-growing regions in the world, further integrating with other African countries makes a strong business sense. The Bank’s support to regional integration includes assessing the skills needed for tomorrow’s jobs in the Suez Canal Economic Zone, with the aim of contributing to securing a suitable workforce for those investing in the zone.
Furthermore, as many world economies turn inward, we see great potential for closer African integration over the medium term. Despite huge trade and investment opportunities in the region, intra-regional trade in North Africa is among the lowest of any world region (below five percent) and represents an opportunity in itself.
AO:How is the AfCFTA expected to boost the African countries’ economic and trade growth, especially with the ongoing crisis?
MB:The prospects for greater cooperation with Sub-Saharan Africa are huge. The Egyptian private sector has demonstrated a keen interest in strengthening cooperation between North Africa and the rest of the continent. This is being bolstered by the coming into force of the African Continental Free Trade Area (AfCFTA), which provides for the elimination of at least 90 percent of tariff barriers on goods from other African states over a period from five up to 15 years, and is expected to boost intra-African trade. We are keen on supporting the Egyptian government’s strategic efforts in seizing opportunities with other African countries, and we are intensifying dialogue with the private sector to support its investments within the continent.
Looking forward, as a result of AfCFTA, one of the most promising areas for growth in Egypt is in trade and industry. However, at the AfDB, we don’t want this free trade area to just be about consumption. We want Africa to be a continent-wide manufacturing and industrial zone because that is where value addition and jobs are. In particular, we have a keen interest in the pharmaceutical industry. Partly driven by COVID-19, we want to make sure the continent is ready for the next health challenge. We have just prepared a strategy for how Africa can boost its manufacturing base in pharmaceuticals and are engaging with pharma companies in the region and beyond to attract investment for it. Egypt is uniquely positioned to be a hub and launching pad for this opportunity, as it has good manufacturing capacity and a well-developed pharma industry.
Free trade has proven to be a pathway to prosperity. It’s one of the reasons why the AfDB has always been a strong supporter of the AfCFTA. It helps create a huge market of 1.3 billion people worth more than $3.4 trillion. The AfCFTA offers a unique opportunity to pave the way for more sustainable development.
In 2020, we approved an institutional support grant of $4.8 million to the African Union (AU) to accelerate the implementation of the free trade zone. To further reinforce the free trade area, we are also contributing to the Africa Exchange Linkage Project to integrate stock exchanges across Africa. This will create a capital market with capitalisation in excess of $1 trillion, representing 90 percent of Africa’s total equity market. This will also raise liquidity and enable seamless trading platforms across the continent.
AO:What is the kind of support that AfDB has extended to Egypt, since the onset of the pandemic? What is the total of AfDB investment in the Egyptian market?
MB:Whilst we are in the middle of a pandemic, we want to help position countries for a quick recovery and build resilience in case of future crises. In Egypt, this means that we will continue providing support to the national budget and also focus on investments that enhance the competitiveness of the country.
In 2020, the bank supported the Egyptian economy by providing support to the national budget of $250 million. In order to complement the government’s efforts in mitigating the impact of the pandemic, we provided a $500,000 emergency assistance grant in 2020 for food relief and to contribute to restoring the livelihoods of severely affected vulnerable populations.
We continue - for example - to support reforms in the electricity sector. In February, the bank approved financing $27 million to a 200 MW solar power plant in Kom Ombo in southern Egypt, contributing to green growth, with some of the lowest tariffs seen to date. In addition, the Bank provided a €225 million budget support loan for Egypt’s electricity sector to bolster economic resilience and sustainability amid the ongoing pandemic. The bank is a long-standing partner in the country’s transformational reforms and the development of it's energy sector.
Earlier support includes financing electricity production in Benban, under the solar Feed-in-Tariff program, as well as at the Ain Sokhna and Suez power stations.
Moreover, The bank’s board of directors has approved recently the financing of €145 million for improvements on the railway network control system, which will contribute to making it safer. In addition to enabling the Egyptian National Railway to optimise the use of the network, both for passengers and for transporting goods, which again is contributing to the economy and Egypt’s attractiveness as an investment destination.
Water and sanitation is another sector where the bank has long-standing partnerships in. For example, eastern Cairo’s Gabal El-Asfar treatment plant, the largest facility of its kind in Africa and the Middle East, received $58 million in Bank funding and the Abu Rawash treatment plant in Giza $150 million. The two plants have contributed to economic development in the surrounding region - particularly in agriculture - by providing treated wastewater to irrigate agricultural land and to produce organic fertiliser. In Upper Egypt, the bank is supporting rural sanitation in the Luxor governorate, with a total funding of $120 million to significantly increase access to sanitation services.
For almost half a century, the AfDB has forged a deep partnership with Egypt, mobilising $ six billion to implement more than 100 operations in multiple sectors, including energy, agriculture and water as well as sanitation.
AO:Recently, AfDB has been named the world’s best financial institution for 2021, what are the main reasons behind claiming such a critical award?
MB:This award is a global recognition of the Bank’s continued culture of results, strong client orientation, leadership, creativity and continued innovation.
Since 2015, more than 335 million people across the continent have benefitted from the bank’s important work.
In 2020, the bank received broad recognition for responding swiftly to the needs of the African continent, in the wake of the COVID-19 pandemic, and for its pioneering role in the global social bond market.
As the deputy director general for the North African region, I am proud to be part of the African Development Bank’s multiple achievements. The bank is an institution that is transforming itself into a solutions bank for Africa, through a combination of its operations, knowledge services and investment positioning, which continues to help accelerate Africa’s development.