CAIRO – 1 November 2018: Egypt’s economic growth rate is expected to hit 5.5 percent in fiscal year 2018/2019, compared to 5.3 percent in the previous year, according to the European Bank for Reconstruction and Development (EBRD).
“Growth is expected to be supported by a continued boost in confidence, a recovery in tourism, an increase in foreign direct investment and improved competitiveness,” EBRD added.
EBRD said that other positive factors are expected to include a strengthening of exports, the start of natural gas production from the Zohr field, the implementation of business environment reforms and prudent macroeconomic policies.
Generally, EBRD said that economic growth in the southern and eastern Mediterranean will continue to pick up speed this year, with most countries in the region enjoying their best tourism season since 2010.
The bank’s report stated, “the general upturn also reflected improved competitiveness in the wake of currency depreciations in Egypt and Tunisia, combined with the implementation of reforms.”
In both Jordan and Lebanon, the projected growth in 2018 remains below the growth rate of the population, implying a decline in real per capita incomes, the report said.
The report expected growth in Tunisia to pick up in 2019 to 3.0 percent from 2.8 percent in 2018 and 1.9 percent in 2017, supported by a continued recovery in tourism and investment, stronger growth in major export markets in Europe, and the implementation of structural reforms in the run up to the November 2019 election.
“In Morocco, growth is expected to slow down in 2018 to 3.0 percent, influenced by the negative base effect following favorable weather conditions for agriculture in 2017,” it read.
In 2019, growth in Morocco is forecast to rise to 3.5 percent, supported by the continued recovery in tourist arrivals, an increase in foreign direct investment, greater competitiveness from the move to a more flexible exchange rate regime, a rebound in services and manufacturing, stronger export growth and expanded mining capacity.
According to the EBRD, growth in Jordon is expected to rise to 2.2 percent in 2018 and 2.4 percent in 2019, after 2.0 percent in 2017, supported by stronger private consumption from the rising refugee population, foreign investment, and greater certainty and confidence stemming from fiscal consolidation.
As per Lebanon, economic growth is expected to record 1.1 percent in 2018, from 1.5 percent in 2017, and a range between 1.5 and 1.9 percent in 2019.
Egypt’s Minister of Planning Hala el-Saeed said that the Egyptian government targets to achieve a high real gross domestic product (GDP) during the period of 2018-2022, setting 5.8 percent for 2018/2019, to gradually rise to 8 percent and 10 percent in 2029/2030.
Saeed added that high growth rates will be reflected on increased employment opportunities and improved standard of living as well as better services for citizens.
The minister previously referred that the overall economic and administrative reform program initiated by the Egyptian government in 2016 helped the country restore macroeconomic stability, with a growth rate of 5.3 percent at the end of 2017/2018, compared to a growth rate of 2.9 percent in 2014.
Saeed said that Egypt is expected to achieve a growth rate of 7.5 to 8 percent by the end of a four-year plan.
Egypt embarked on a bold economic reform program that included the introduction of taxes, such as the value-added tax (VAT), and cutting energy subsidies, with the aim of trimming the budget deficit.
Angola becomes ATI’s 21st Member State, pays USD25m in capital subscription fees
The Republic of Angola has become the 21st African Member State and the 1st Lusophone Member State of pan-African insurer, Africa Trade Insurance Agency – ATI, after paying a capital subscription of USD25 million. The membership was funded the Angolan National Treasury resources and proceeds from the landmark BITA water project – a strategic public investment for the construction of infrastructure for the treatment, supply and storage of drinking water that will benefit 2.5 million people in Angola.
Welcoming Angola’s membership, ATI’s Chief Executive Officer, Manuel Moses, noted the country’s demonstration of its commitment to diversify its economy through ATI’s trade and investment risk mitigation solutions.
“We are happy to support Angola in its quest to economic diversification and becoming an agricultural powerhouse on the African continent. Angola’s membership is timely as ATI’s risk mitigation and credit enhancement services will act as a catalyst for strengthening and diversifying Angola’s economy, supporting both increased investment, exports and trade under Africa’s continental framework of the AfCFTA,” Mr. Manuel said.
Under this one of a kind blended finance and guarantee innovative structure, the Republic of Angola – along with the lenders covered by ATI under the transaction – agreed for the use of proceeds under the syndicated loan to also include the financing for the purpose of Angola becoming a member of ATI. ATI provided guarantee and insurance support for this World Bank’s partially guaranteed facility to the Government of Angola for the expansion and improvement of water supply service in the urban and peri-urban belts of Luanda.
ATI’s gross exposure in Angola, the largest country in Southern Africa Region, currently stands at USD467M mainly in construction, energy & gas, trade & transport, water supply and wholesale & retail sectors, with transactions valued at USD1.4B.
“This development was made possible because of ATI’s pan African mandate that allows the organization to cover transactions in Angola and beyond, despite ATI non-membership. Now that Angola is a fully-fledged shareholder of ATI, the country can fully access more of ATI’s guarantee solutions to attract more Foreign Direct Investments and boost its internal and external trade across the region,” Mr. Manual explained.
Angola’s economy is mainly driven by its oil sector but the country seeks to pursue new growth models for economic diversification through the agricultural sector and private sector development.
With ATI’s support, Angola is on the path to fiscal consolidation, manage their debt ceiling, increase in public and private investment, in order to resume the ascending curve of sustainable and inclusive economic growth as well as human development.
ATI has grown from a small African start-up in 2001 into a pan-African institution with presence across Africa and with a significant global reach. Besides Angola, other member countries include Benin, Burundi, Cameroon, Côte d’Ivoire, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Rwanda, Senegal, South Sudan, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.
Institutional members include African Development Bank, African Reinsurance Corporation, Atradius Group, Chubb, CESCE (Spanish ECA), Ministry of Finance India (represented by ECGC), SACE SIMEST, The Common Market of Eastern and Southern Africa (COMESA), Trade and Development Bank (TDB), Kenya-Re, The PTA Reinsurance Company (Zep-Re), and the UK Export Finance.
The Impact on G7’s multi-billion dollar plan on Africa’s infrastructure gap
G7 Members (Photo: European Union)
In late June 2022, it was announced at the G7 Summit in Germany that a USD 600 billion lending initiative, the Partnership for Global Infrastructure Initiative (PGII), would be launched to fund infrastructure projects in the developing world, with a particular focus on Africa. The G7 countries – Canada, France, Germany, Italy, Japan, the United Kingdom (UK) and the United States (US) – explained the PGII would help address the infrastructure gap in developing countries.
The US has recently renewed its focus on impact-building and financing strategic, long-term infrastructure projects in Africa, with the Export-Import Bank of the United States (EXIM) supporting infrastructure development on the continent. According to a 2020 report by McKinsey and Company – Solving Africa’s infrastructure paradox – the US accounts for 38% of global investors who have an appetite for African investment, by far the most of any country. In 2021, the US launched a refreshed “Prosper Africa initiative”, focusing on improving reciprocal trade and investments that create jobs and build infrastructure between the two regions. In 2022, the US announced it would mobilise USD 200 billion over the next five years as part of the PGII, in the form of grants, financing and private sector investments. Some deals have already been announced, including, for example, a USD 2 billion solar energy project in Angola, and the building of multiple hospitals in Côte d’Ivoire.
In February 2022, the European Commission announced investment funding for Africa worth EUR 150 billion. The funding package is part of the EU Global Gateway Investment Scheme and is said to be in the form of EU combined member funds, member state investments and capital from investment banks.
In early 2020, the European Commission published its Comprehensive Strategy with Africa, outlining the region’s plans for its new, stronger relationship with the continent. The strategy document laid out five top priorities for the EU in Africa: the green transition and improving access to energy; digital transformation; sustainable growth and jobs; peace and governance; and migration and mobility.
The UK is also making a strong play for influence, investment and trade with Africa, post-Brexit. Further to key summits in 2020 and 2021, finance is being redirected into Africa from the UK. In 2022, UK development finance institution (DFI), British International Investment (formerly CDC Group), announced it had exceeded its pledge to invest GBP 2 billion in Africa over the last two years. The UK’s Global Infrastructure Programme helps partner countries (including in the African continent) to build capacity to develop major infrastructure projects, setting up infrastructure projects for success and paving the way for UK companies to support these projects.
Further, in November 2021, it was announced that the governments of South Africa, France, Germany, the United Kingdom and the United States of America, along with the European Union, were in negotiations to form a long-term Just Energy Transition Partnership. The partnership focuses on boosting the decarbonisation of the South African economy, with a commitment of USD 8.5 billion for first round financing. It is expected that 1-1.5 gigatonnes of emissions will be prevented over the next 20 years, assisting South Africa to accelerate its just transition. Discussions are also currently taking place to establish a similar partnership in Senegal.
The African Development Bank noted in early 2022 that Africa’s infrastructure investment gap is estimated at more than USD 100 billion per year.
DFIs are increasingly anchoring the infrastructure ecosystem in Africa – serving a critical function for project finance as investment facilitator and a check on capital. DFIs can shoulder political risk and access government protections in a way that others cannot, enter markets others cannot and are uniquely capable of facilitating long-term lending. The large amount of capital needed to fill the infrastructure gap, however, means that DFIs cannot bridge it alone. Private equity, local and regional banks, debt finance and specialist infrastructure funds are primed to enter the market, and multi-finance and blended solutions are expected to grow in popularity as a way to de-risk deals.
The African Union’s 55 member states have stated that their primary funding needs include support in terms of safety and security on the continent, as well help in implementing the African Continental Free Trade Agreement (AfCFTA) and the massive infrastructure investment it needs to be successful. The development of supporting infrastructure is key to boosting AfCFTA’s free trade potential, especially in terms of transportation, energy provision, internet access and data services, education and healthcare infrastructure projects.
Infrastructure projects in Africa now also have a heightened focus on improving Africa’s capacity for green, low-carbon and sustainable development, via, for example, clean energy, community healthcare and support, green transport, sustainable water, wildlife protection and low-carbon development projects. Funding such projects comes with responsibility – projects must not only be bankable and yield attractive returns, but must also be sustainable and provide tangible benefits to local economies and communities. All of Africa’s major partners have noted they will prioritise projects that commit to Environmental, Social and Governance principles, and access to capital for large infrastructure projects is likely to contain sustainability requirements.
That the focus of the PGII is on the sustainability and the social impact of these projects in Africa is further evidenced in the White House briefing room statement issued at the launch in June 2022, where it was stated that the PGII will “mobilize hundreds of billions of dollars and deliver quality, sustainable infrastructure that makes a difference in people’s lives around the world…”
By: Michael Foundethakis, Baker McKenzie’s Global Head of Projects and Trade & Export Finance, and Africa Steering Committee Chair
Shelter Afrique: Rising cost of land, materials, could adversely affect provision of affordable housing
Shelter Afrique Ag. CEO & Chief Finance Officer Mr. Kingsley Muwowo (right) explaining engaging with delegates at the 11th World Urban Forum held in the Polish city of Katowice. (Image: Shelter Afrique)
The high cost of land and the rising cost of building materials could derail efforts to speed up the development of affordable housing across the globe, pan African housing development financier, shelter Afrique has warned.
Speaking on Delivering Affordable Housing Across Continents at a special session of the 11th World Urban Forum held between June 26-30 in the Polish city of Katowice, Shelter Afrique’s Ag. Managing Director and Chief Finance Officer Mr. Kingsley Muwowo said there was an urgent need by governments to address the issues of rising costs of land and construction materials, which were hindering efforts to fast-track the provision of affordable housing globally.
“From market studies the cost of land should constitute between 10% and 15% of the total cost of a housing unit for it to be affordable, but this isn’t the case in many countries,” Mr. Muwowo said.
“In Kenya, for instance, the cost of land makes up between 40% and 60% of the total cost of a housing unit, like the case with Nairobi which is the most expensive in the entire continent of Africa. How do you deliver affordable housing when you’ve got the most expensive land? So if we don’t address the issues around land we will not be able to effectively tackle the issue of affordable housing.”
Mr. Muwowo also decried the rising construction cost – which he blamed on old building codes, punitive tax regimes, and high cost of financing such projects in various countries. He added that the Russian – Ukraine war had also resulted in the sharp increase in prices of critical construction materials. Russia is considered the fourth-largest steel exporter globally, serving over 150 countries and territories.
“In the built environment, the conflict has exacerbated and exposed the dangers of overreliance on importing building materials. Prices of building materials have increased and continue to do so, a burden that the homeowners will ultimately share,” Mr. Muwowo said.
The price of steel in Kenya, for instance, has significantly shot up over the past few months. The prices of steel bars and nails have risen by between 80 per cent to 90 per cent and 13 per cent to 43 per cent, respectively, in the past few months in the country. Additionally, the conflict has resulted in shortage of coal, which is a crucial source of energy in cement production through clinker manufacturing resulting in price hikes.
Speaking at the same event, European Investment Bank Vice President Prof. Teresa Czerwińska said the rising cost of housing in many cities across the world was a major concern for the Bank.
“We have managed to make education and healthcare relatively cheap and accessible by putting in place proper policy interventions. Housing is a fundamental human right and we can apply a similar framework in ensuring housing remains affordable and available,” Prof. Czerwińska said.
The World Urban Forum (WUF) is a global event on sustainable urbanization convened every two years by the United Nations Human Settlement Programme (UN-Habitat). It was established in 2001 by the United Nations to examine rapid urbanization and its impact on communities, cities, economies, climate change and policies. The first WUF was held in Nairobi, Kenya in 2002 and has been held around the world ever since.
This year’s event was convened under the theme: “Transforming our cities for a better urban future”.