The International Finance Corporation (IFC), a World Bank Group member, plans to increase local currency financing in Egypt, IFC country manager for Egypt, Libya, and Yemen, Walid Labadi told Daily News Egypt.
“During the last fiscal year 2017/18, IFC made its first local currency loan, providing a leading maker of construction materials, Vinavil Egypt for Chemicals, with the equivalent of about $15m,” noted Labadi adding that local currency financing enables companies to make long-term capital investments and we plan to do more of this in the future.
Daily News Egypt sat down for an exclusive interview with Labadi, the transcript of which is below, lightly edited for clarity:
Egypt has been chosen by IFC as model for its investments in Middle East, Africa. Thus, does IFC intend to increase finance for Egypt in FY 2019?
The IFC has been a long-term supporter of Egypt’s private sector. In the last 12 years, the IFC has invested $4bn in the country. Our portfolio is diversified and includes investments in financial markets, infrastructure, oil and gas, agribusiness, manufacturing, and healthcare.
Last fiscal year, the IFC invested $1.2bn in Egypt to support the development of the infrastructure, renewable energy, manufacturing, and banking sectors. That figure, which includes funds mobilised from other investors, represents a record for the IFC in Egypt.
Our work focused on sectors that generate jobs, like the construction industry, infrastructure, and manufacturing. We invested $15m in Vinavil Egypt for Chemicals to help the company boost its production of construction materials. The building sector is an important source of employment and a key economic driver. It accounts for more than 4% of Egypt’s gross domestic product (GDP) and employs 12% of Egyptian workers.
We also made a landmark investment of $653mn in Egypt’s Benban solar park to support the development of 13 power plants, an effort which will create up to 6,000 jobs during the construction phase. It will also generate up to 752 MW of solar power, supplying 350,000 residents with clean, renewable energy.
We also extended an Islamic financing package of $75mn to Almarai, a regional dairy and juice producer, to enhance food safety and create jobs along the agricultural supply chain.
To complement our investment engagements, we also signed an advisory agreement with Daltex, a leading agribusiness producer in Egypt, to increase economic opportunities for its women employees and small holder farmers. The aim is to increase and retain women workers in select Daltexowned farms and packaging facilities.
Can you elaborate on future funds for Egypt over FY 2019, which sectors, shares for each sector?
This fiscal year, the IFC aims to invest up to $1bn. We see great opportunities in infrastructure, especially, in renewable energy, like wind power. We are also eyeing opportunities in agribusiness, manufacturing, services, and tourism, as they are top-priority fields for the country.
Finally, we are looking closely at opportunities in other key sectors, like education. One of our aims is to help provide post-secondary students with training in high-demand fields, like information technology. That is
key to tackling youth unemployment by better addressing the needs of the labour market.
Does IFC receive new requests from Egyptian banks to finance SMEs?
We are working with a number of banks to provide loans and financing facilities for SMEs. The IFC sees great potential in the SMEs market, and we aim to help more banks to tap into this segment.This has been one of our strategic priorities in Egypt for years, as we believe that SMEs can help drive economic growth and job creation in the country.
This fiscal year, we provided $100m to a leading private bank in Egypt, the Commercial International Bank, to help scale-up its lending to clients, including local enterprises, which will help create and preserve jobs in various sectors. In the past, we have provided SME related loans to the Arab African International Bank ($100m) and the National Bank of Kuwait – Egypt ($50m).
How IFC supports job creation for Egyptian youth?
We plan to focus our efforts on supporting SMEs and young entrepreneurs. We believe that supporting innovation and entrepreneurship can unleash the potential of youth, while contributing greatly to job creation.
The IFC, in cooperation with the World Bank and World Economic Forum, recently released a study that confirmed that view. It revealed
that countries that support start-ups, through a vibrant entrepreneurial ecosystem, tend to have stronger economies and are better at creating jobs.
At the IFC, we work with governments and start-up accelerators to help create an environment that makes it easier for entrepreneurs to thrive. We also invest directly in venture capital funds and incubators, which provide start-ups with crucial financing. We have previously invested $10m in a leading venture capital fund, Algebra Ventures, to help expand access to finance for entrepreneurs, and supported a regional business accelerator, Flat6Labs, with another $1. 2m. Over the last two years, the IFC has provided close to $65m in funding to technology companies and start-ups in the Middle East and North Africa.
Last week, we also signed an agreement with Egypt’s Ministry of Investment and International Cooperation to select up to 100 promising entrepreneurs from Africa and connect them with business leaders, international investors, financial institutions, and policymakers during the Africa Summit 2018, which will be held in Sharm El-Sheikh in December. The initiative aims to identify barriers to start-ups growth in Africa and help address the challenges that hinder their growth and development.
Will you provide funding for Egyptian corporations, enterprises in EGP in coming year?
Yes, we plan to increase local currency financing in Egypt, and during the last fiscal year, IFC made its first local currency loan, providing a leading maker of construction materials, Vinavil Egypt for Chemicals, with the equivalent of about $15m. Local currency financing enables companies to make long-term capital investments and we plan to do more of this in the future.
What do you assess funding allocated for Egyptian women to increase their economic empowerment?
While we do not have a specific fund for female economic empowerment, creating opportunities for women is at the core of what we do. For example, Our Banking on Women programme helps Egyptian banks design financial products for female entrepreneurs, train their staff on how to deal with female borrowers, and provide female clients with training in business fundamentals. This work is important because in Egypt, women own up to 30% of all enterprises, but they often struggle to find the financing the need to expand their businesses.
As well, the World Bank Group, of which the IFC is a member, is spearheading the Women Entrepreneurs Finance Initiative, or We-Fi. A joint effort between several development agencies and national governments, it aims to raise $1bn in financing for
female small business owners in the developing world.
IFC announced studying investment opportunities in IPOs. Will IFC buy shares of Egyptian banks that will be offered in EGX?
The IFC invests in several industries, including the financial sector. Egypt’s recent economic reforms, including the potential IPOs of some state-owned enterprises, are an encouraging steps and could help unleash the promise of the private sector.The IFC is open to considering opportunities associated with the IPOs of state-owned firms.
What about your expectations of Egypt’s economic growth by end of current year, for 2019?
As long as the government stays the course with its economic reforms, the future looks bright. The real GDP growth is forecast to increase gradually to 5.8% by fiscal year 2020. Egypt’s sovereign credit rating has been upgraded to B from B- by Standard and Poor’s and the country’s outlook has been upgraded to positive by Fitch. Also, just last week, Moody’s upgraded its outlook on Egypt to positive from stable.
How do you assess recent reforms taken by GoE related to tax reform, subsidy, economic legislation, exchange rate, other policies?
Egypt’s bold economic reforms have played a vital role in stabilising the economy. The liberalisation of the exchange rate has helped eliminate foreign currency shortages and made Egypt’s economy more competitive and more attractive to investors as witnessed by the increase in foreign direct investment into the country.
Economic activity is also picking up. Egypt’s economy grew by 5.2% in the first half of 2017/18, compared to 3.7% the year before.Therefore, from a macroeconomic standpoint, we are seeing signs of improvement. With continued reforms and improved macroeconomic performance, we will likely see an upward trend in foreign and domestic investments, which will help create private sector opportunities and much needed jobs.