Cape Town- Daniel Salter, head of equity research at Renaissance Capital investment bank, presented the investment opportunities in Africa through several standards, including financial culture, poverty, labour costs, energy production, investment as a percentage of GDP, stability, and demographic distribution.
Mohamed Farid, chairperson of the Egyptian Stock Exchange, opened the North Africa Investor Conference on 9-10 April in Cape Town, South Africa, organised by Renaissance Capital.
The conference was attended by Egypt’s leading corporates from a variety of sectors, including consumer, healthcare, banking and financial services, manufacturing, and real estate. They conducted around 150 one-on-one meetings with top South African and international institutional investors with total assets of $20bn.
According to Renaissance Capital, Egypt is one of the most attractive countries for investment, based on the aforementioned standards, especially in the light of the country’s ongoing economic reforms and volume of economy. Additionally, Egypt is one of the countries with the lowest wage, estimated at $116.
Salter added that financial inclusion in Egypt declined, as less than 20% of Egyptian have bank accounts, as is the case in Morocco, Tunisia, and Algeria.
Founder and CEO of Invest Africa, Robert Hersov, said that the African countries ready for investment include Egypt, Tunisia, Morocco, Nigeria, South Africa, Rwanda, Kenya, Uganda, Ethiopia, Namibia, and Cote d’Ivoire.
He pointed out that the most prominent sector that may have a great share of his investments over the upcoming period is electricity. He considers Egypt’s Benban solar park as one of the success stories to be proud of.
Farid said that Egypt has a relative low investment percentage to GDP, estimated at less than 25%. “It is natural for investment to GDP to decline whenever the volume of economy increases. Many African countries have a much lower GDP compared to the Egyptian economy’s, he added.
Farid noted that Egyptians have a different nature in terms of the financial culture because they usually rely on irregular community methods for saving, such as “money pooling”. It is difficult to monitor this kind of saving, however, if it was measured and included in the calculations of financial culture, the rates will certainly rise.
The average daily trading of EGX – except South Africa – represents a six-fold of the average daily trading in the closest African markets to the Egyptian market, up to $60m daily, he related.
There are some of the Egyptian sectors that have shown major changes over the past four years, mainly the SMEs and entrepreneurship, which greatly increase saving and local investment rates, however they do not replace industries that address basic needs, he continued.
Moreover, the exploration sector still represents more than 60% of direct foreign investments, and liberalising energy prices and determining electricity tariff has allowed the private sector to invest in Benban and prompted major flows from intentional funding institutions, Farid said, adding that there are other promising sectors in the Egyptian market, such as health.
Farid also referred to the state’s plan to develop the education sector and encourage the private sector to inject investments in this vital field.
For his part, the CEO of Invest Africa revealed that Sub-Saharan Africa received about $60bn in direct foreign investments over the past four years, while the volume of internal investments in Africa through merger and acquisition ranged between $40-$50bn during the same period.
He added that throughout the past eight years, South Africa has lost direct foreign investments in the sector of mining, estimated at $20-$30bn, to countries like Canada and Australia, noting that inefficient administrations cost their countries losing major investment opportunities.
Companies overcame difficulties of economic reforms, and turn to profits
The second session of the investment conference tackled the challenges faced by the Egyptian economy following the flotation of the Egyptian pound in 2016 and how companies overcame the difficulties they experienced in conjunction with the implementation of the economic reform programme.
Seif El Dein Thabet, the managing director of Juhayna Food Industries, said that before the flotation, the existence of two exchange rates (formal and informal) was a major challenge before companies working in the food sector as it relies on imported raw materials.
In the year following the flotation, consumers’ purchasing power declined greatly and it was clear in the decline in sales which gradually began to recover part of 2018 losses, and then companies started to turn to profits.