Sharm El-Sheikh – Hassan Abdalla, Governor of the Central Bank of Egypt (CBE) and Chairperson of the Board of Governors of the African Development Bank Group, has said that Egypt witnesses unprecedented levels of transparency, clarity and disclosure as the government aims to encourage the private sector to invest in the Egyptian economy.
He explained that talking about the government’s commitment to increasing the participation of the private sector in the Egyptian economy is not within the prerogative of the CBE. However, as an “Egyptian citizen”, he says that the private sector had, over the past decades, a dominant share in the gross domestic product, ranging from 70 to 80%. That is until 2011.
He also stressed that after 2011, the country witnessed a state of reluctance by the private sector to place any additional investments in Egypt, which prompted the state to pump investments to maintain the balance and stability of the country’s economy.
He explained that there is a dedicated programme to attract the private sector investment. The programme is characterized by transparency, disclosure, and speed. It will ensure not only the offering of 32 companies for private investments with a total of $40bn, but that private sector investments will significantly exceed this target.
Abdalla mentioned this during his participation in the annual meetings of the African Development Bank Group for 2023, which was recently hosted at the city of Sharm El-Sheikh, which touched on a set of important issues, including putting forward a complete vision to attract the private sector and expand work in the brown continent, according to real investment criteria based on studies. Feasibility and profits, and not out of a sense of social responsibility, in light of the unprecedented competitive opportunities enjoyed by African countries and high returns on invested capital.
The Governor of CBE demanded providing mechanisms to encourage the expansion of private investments in Africa, and reducing the risks facing investors, while making more efforts to open more profitable investment horizons, taking into account that the private sector places the margin of return on its investments among its top priorities.
Abdalla stressed the need to stimulate the private sector to implement direct investments instead of relying on high-burdened loans, by providing a supportive environment that guarantees investors that the return on capital covers all potential risks, especially in light of the African continent enjoying enormous competitive opportunities and advantages in all sectors. sectors.
He also highlighted the vital role multilateral financing institutions play in raising awareness. He also expressed his aspiration for these institutions to play an effective role in mobilizing private sector capital, by providing technical assistance and soft and long-term financing, as well as new financing mechanisms such as providing guarantees, in order to ensure high returns.
The CBE governor explained that, as an Egyptian citizen, he believes that the Egyptian private sector has always enjoyed strength, as the state supports it and encourages it to expand continuously. Additionally, there are vigorous efforts to expand the ownership base of this sector through a programme of government offerings, within the framework of a clear national plan characterized by a high degree of transparency.
Abdalla said that Africa enjoys the highest return on investment in the world for the private sector. It also possesses huge and unprecedented investment opportunities for investors. These capabilities qualify the continent to attract private capital and international investments to work within their countries based on the generally accepted investment principles such as profitability and return on capital, and not in terms of social responsibility.
He stressed the importance of providing mechanisms to reduce risks that impede the expansion of private sector investments in Africa, while finding financing opportunities suitable for the conditions of African countries, in terms of long lending terms and low interest costs, with the aim of encouraging attracting private investments and enhancing capital flows.
According to Abdalla, the convening of the annual meetings of the African Development Bank this year coincided with the emergence of many developments and challenges at all levels, most notably the disruption of the performance of the financial sectors, the continued rise in inflationary pressures, the increasing severity of geopolitical unrest, as well as the repercussions of the COVID-19 pandemic.
He pointed out that the African continent was not immune from these challenges, which led to increasing pressure on the economies of the countries of the continent, to widen financing gaps with the decline in the volume of international aid, the increase in debt burdens, and the increase in the costs of social protection programmes and measures.
Abdalla pointed out that the realization of development aspirations reflects the importance of the role assigned to regional and international financing organizations concerned with development issues within the continent, led by the African Development Bank Group, which plays a pivotal role in enhancing the confidence of private sector investors, in order to achieve stability and inclusive and sustainable economic growth.
He pointed out that in the year 2020, the volume of domestic and international financial flows allocated to dealing with climate change in Africa amounted to only about $30bn, which does not exceed 12% of the volume of funding required, which reflects the size of the funding gap faced by the countries of the continent in this regard.
The CBE Governor stressed that in light of the pressures experienced by most of the budgets of the countries of the continent, it is necessary to encourage the private sector to direct more of its investments to environmentally friendly projects, to shift from investments based on debt instruments to actual investments in capital, and to strengthen partnership between the two sectors. public and private.
He explained that with regard to regional and international financing institutions, it may be best for those institutions to consider adopting a new approach to support the countries of the African continent, so that their role is not limited to providing loans and the increasing burdens they impose on the economies of the countries of the continent, but rather to increase the flow of their financing channels towards encouraging investments in environmental and development projects that promote sustainable development.
“Based on the needs of the countries of the continent, and based on the belief in the important role regional financing institutions play, I see these institutions adopting a clear message that requires avoiding the expansion of high-cost lending and directing the bulk of their financing programmes towards encouraging direct investments in the countries of the continent.
The CBE governor pointed out that Egypt is an integral part of those regional and global interactions, and therefore these contemporary developments and changes had a great impact on many local financial and economic data.
He stressed that all officials in Egypt join forces to take all measures to limit the negative effects of these changes, which is consistent with the directives of President Abdel Fattah El-Sisi, who indicated at the closing session of the Egypt Economic Conference 2022.