Ongoing reforms by Egypt to help boost growth and reduce inflation are bearing fruit with foreign companies increasing their investment in Africa's third largest economy and helping it attract newcomers.
"I can see the success of our reforms when I look at the global business rankings," Sahar Nasr, Egypt's minister for investment and international cooperation, said in an interview with The National at the Africa 2018 conference in Sharm-El-Sheikh, backed by Egypt's president Abdel Fattah Al Sisi. "The number of new companies being established, the fact that our existing investors from Asia, Europe, the US – including Samsung, Uber, Coca Cola – are increasing their investments here, while new ones are coming in."
Egypt, North Africa’s largest economy, sustained major setbacks as a result of political turmoil, with its economy slowing, capital outflows increasing and inflation skyrocketing. However the country has turned a page with President Sisi ushering in political stability and the economy has improved with the country adhering to an economic reform programme backed by a $12 billion loan from the IMF since late 2016. Under the programme, the country made deep cuts to energy subsidies, introduced new taxes and devalued its currency. Economic growth in the 2017-18 fiscal year that ended on June reached 5.4 per cent, up from 4.2 per cent in the year earlier period. The government is targeting growth of up to 8 per cent for the 2021-22 fiscal year.
In the last two years, Egypt introduced at least 10 pieces of legislation intended to expand the private sector and boost economic growth. The new laws relate to investment, companies, bankruptcy and legislation that regulates the ride hailing app Uber’s services in the country, ratified in May.
Other reforms to strengthen the business environment include tax incentives, reduced bureaucracy and an investor centre – a one-stop shop to simplify the process of establishing a company. The measures have helped prop up Egypt's standing as a business friendly environment. The country rose eight places to 120th in the World Bank’s 2019 Ease of Doing Business index, published in November.
In September, IMF managing director Christine Lagarde said Egypt’s economy is “showing strong signs of recovery”, and that its economic growth was the highest in the Middle East, at a projected 5.3 per cent for 2018, rising to 5.5 per cent next year.
Having completed the “first phase of Egypt’s transformation” with new laws and regulations, the country is now focusing on implementing those changes, increasing foreign investment and building human capital at home, Ms Nasr said.
Forming public-private-partnerships which can help attract investment for infrastructure projects driven by a large economy and growing population is a key element of this, she added.
“In the beginning, when there was no investment law, the government had to step in and build these projects itself, but now we have a lot of [international finance institutions] who are very much interested in financing them, meaning our partnerships are not limited to the borrowing associated with external debts,” Ms Nasr said.
The World Bank’s private sector arm, the International Finance Corporation (IFC) is helping to build the $2.8bn Benban solar energy plant, touted to be the biggest solar farm in the world and expected to open next year.
Egypt is seeking more foreign investors to develop its roads, highways, energy infrastructure and railways – in which there has been “limited investment in recent years”, according to the minister. On Saturday, Egypt secured loans $135m from the Kuwait Fund for Arab Development to help finance the construction of four water desalination plants.
Egypt’s share of global foreign direct investment has risen 15 per cent in the past year since the reforms came in, and the number of new private sector businesses established in Egypt has risen 29 per cent in the year to date, Ms Nasr said.
Fostering the creation of start-ups is crucial for Egypt, which has relatively high, albeit falling, levels of youth unemployment at around 10 per cent.
“Our priority is creating jobs for young people and we know that the main job creators are small, young firms – the ‘gazelles’, the innovators, the disruptors,” she said.
During Africa 2018, the IFC launched a white paper on how to create an enabling environment for “transformational entrepreneurship” – the type of entreprenerual activity that has the capacity to transcend borders, build supply chains and create new private sector jobs. This is opposed to “subsistence entrepreneurship”, where businesses are primarily concerned with addressing a smaller, local need.
More sophisticated early-stage funding, robust digital infrastructure, bankruptcy and other laws to encourage risk-taking, and practical support to build managerial skills are all needed to boost the sector, the IFC said.