By: Ahmed Kotb
The 14th round of the African Economic Conference (AEC) organised by the African Development Bank (AfDB), the United Nations Economic Commission for Africa, and the United Nations Development Programme (UNDP), was held last week in Sharm El-Sheikh to discuss opportunities for boosting entrepreneurship, improving the business ecosystem and access to capital, providing better infrastructure and skills development for better employment opportunities, and creating jobs for young people.
Al-Ahram Weekly interviews AfDB Egypt country manager Malinne Blomberg on the sidelines of the conference.
What is the importance of the AEC?
Conferences like the African Investment Forum and the AEC are important to help companies network better by meeting government delegations, the other private companies they want to work with, and financial institutions.
We need more of this type of matchmaking, and we take this very seriously at the AfDB.
We have also launched, in partnership with Microsoft, the Coding for Employment Digital Training Platform, an online tool to provide competitive digital skills to young people in Africa. The platform allows easier matchmaking for companies by putting their projects out there where financiers can express interest in them.
We want to help Egyptian companies find partners in all of Africa, and they are starting to be very active in this area. We also need a conference like this to gather researchers at the higher level to think about best practices and innovative ideas that will allow practitioners to learn about new ideas.
Knowledge sharing across countries is very important to make better investments. How can business flourish between Egypt and the African countries?
The African Continental Free-Trade Agreement (AFCFTA), which entered into force in May 2019 aiming to create a single continental market for goods and services, presents a great opportunity that is interesting for North African countries wanting to do more in Sub-Saharan Africa.
Over the last few years, we have seen a significant increase in the interest of the Egyptian leadership to engage more with Sub-Saharan Africa, and this is great to see. There is already a lot of work going on in that regard. Egyptian companies are going to East Africa, for example, and there are many business activities there.
What we want to ensure with the African Free-Trade Agreement is that there are different mechanisms put in place first, including that the agreement secretariat needs to be up and running. We are working now with the Egyptian government to see what this means for Egyptian businesses, and how we can facilitate things such that more Egyptian companies reach out to Africa. For example, Egyptian furniture manufacturers are using wood imported from Asia, while Africa has some of the best wood in the world. So, we are working on how to connect these manufacturers to source wood from Africa.
Why are some investments hard to implement in Africa?
We see two main reasons why manufacturers find it difficult to establish themselves in Africa. Market data is the first reason, as you make significant decisions based on what data you have. So, we are trying to see how to put Egyptian companies in touch with relevant counterparts, because it is very important to have a local business partner who knows the system and the situation on the ground. It is important to help open doors to facilitate the work of Egyptian companies in Africa.
The second reason Egyptian companies find it difficult to establish themselves in Africa is the risks associated with entering new markets in Africa. Some Egyptian companies that are ready to invest in African countries may find their project not financially viable after doing feasibility studies. However, if we can provide a guarantee against political and other risks, then the project becomes less costly and becomes financially viable.
What can the AfDB do to help?
We are working with the Egyptian government after it requested a guarantee mechanism for companies that want to invest in other parts of Africa. We are supporting the government to establish such a risk-mitigation product.
We as a bank can provide financial guarantees for Egyptian companies looking into investing in the African countries, and we have several initiatives on risk-mitigation for doing business in Africa. We are now setting up to see if can have specific initiatives for Egyptian companies in Africa led by the Egyptian government, while the AfDB is providing technical assistance to set up what such an initiative would look like, how it could be financed, and what it specifically would do.
What are the main barriers halting trade and investment in Africa?
Transportation costs are very high in Africa and can reach up to double or triple as much as in many other parts of the world. When you are producing the same product for the same cost and add up the costs of transportation, the African continent becomes less competitive compared to others. This is really an important issue, but it has historical roots as the transportation network in Africa was not built for intra-African trade. We are working with the African Union to find solutions, and there is a programme for regional infrastructure projects through the Programme for Infrastructure Development in Africa (PIDA).
One of the roads being built is the Cairo-Cape Town Road, in addition to other roads connecting other African countries. Each country has its part to play. We are currently discussing with the Egyptian Ministry of Transportation plans to expand roads that would contribute to the Cairo-Cape Town route. Improving infrastructure is very important in reducing the costs of trade and investment across the African countries.
What has the AfDB done in Egypt to improve the transportation sector?
I believe Egypt is the gateway to Africa, and that is why we are discussing with different ministries and agencies ways to develop roads and railway stations as well as ports. The Egyptian government has big plans for these, as part of its efforts to take advantage of the opportunities of the African Continental Free-Trade Agreement.
What are the other sectors that you are working to develop?
We continue to finance renewable energy, sanitation, and technological higher education to meet the rapid changes in market needs.
We are working with the Ministry of Higher Education to provide financing of about $50 million to eight universities to add specific technological education programmes in different locations. Like with the theme of the AEC, skills development is critical for finding jobs and for entrepreneurs, and we are happy to support such development for job creation.
Why does the AfDB tend to focus more on electricity and renewable energy projects in Egypt?
The AfDB’s first project in Egypt in 1974 was in the electricity sector. Since then, it has constantly supported the electricity and renewable energy sector. We have provided the equivalent in financing for the development of about 4,000 megawatts in electricity and renewable energy projects in Egypt during the last few years.
It is very impressive what Egypt has done to develop the electricity sector in just a few years, and this is an area we would like other African countries to learn from. We have a special initiative called “Desert to Power”, which is a desert solar initiative to make Africa a renewable powerhouse. It is set to stretch across the Sahel region and is expected to connect 250 million people with electricity by tapping into the region’s abundant solar resources. Egypt is going to have a special role in that project in sharing its experiences.
We are willing to finance private-sector projects in renewable energy, and we are discussing with the Egyptian government ways to continue to support reforms in the sector.
How do you see the economic reform programme in Egypt?
What we have seen of the economic reform programme so far has been very impressive, and this is an area that we want other African countries to learn from Egypt’s experience in structuring such a programme and negotiating with the international financial institutions.
We have provided $1.5 billion in loans during this reform process to support the general budget. The next phase of reforms that we see is coming through, and there will be more structural reforms after the macroeconomic stabilisation, which itself has been very successful.
What we would like to see in the future is sectorial reform. More structural reforms are now also important for Egypt to increase its competitiveness.
The most important thing is to help grow the role of the private sector. Each sector should try and see what the private sector can do to help develop it. The Egyptian government is already taking the initiative to see the challenges facing the private sector in order to take action in developing various economic sectors and to try to facilitate them.
Many ask if Egypt is going to continue with its reforms, and I believe there is no reason to think the opposite. The reforms are still going strong.
What does the AfDB do to support entrepreneurs?
The AfDB has financed the execution of 32 projects through loans of a total value of $3 billion in 2019 and 16 projects through grants of $32 million.
We also have the Tanmia and Tatweer grant on which the implementation is starting, which is designed to finance entrepreneurs or to give them the startup capital for their projects to a total value of four million euros. The projects we are interested in through this grant include those targeting renewable energy, agribusiness, Upper Egypt, and women.
Additionally, the Affirmative Finance Action for Women in Africa (AFAWA) is a pan-African initiative with $380 million of resources mobilised to help bridge the financing gap facing women in Africa. This is still a new initiative, and Egyptian women will benefit from it.