The Central Bank of Egypt (CBE) has signed off on a new US$600mn export credit risk company in a bid to bolster Egypt’s intra-Africa trade links.
The new company, which will be based out of Cairo, will seek to help Egyptian companies win contracts for major projects with African governments, which the African Export-Import Bank (Afreximbank) claims are worth US$60bn annually.
CBE expects the company to get started before the end of the year, although says it is still in the process of hiring a CEO and hasn’t yet appointed a board of directors.
Explaining the reasons behind the company to GTR, Ramy El-Shaarawy, CBE’s general department head for banking reform, says: “The reason why we started it is to boost exports, of course, especially to Africa, because when you look at the percentage of trade between Egypt and other African countries, we found it to be around 2% of the total exports.”
According to CBE’s latest annual report, Egypt’s largest trading partner is the EU, where its volume of trade for 2017-18 came in at US$25bn. The volume of trade with non-Arab African countries by contrast was US$1.4bn.
Afreximbank’s president Benedict Oramah says in a statement that the new company will make it easier for Egypt to trade with the rest of Africa, with Afreximbank promising to help it by sharing risks and funding projects where necessary.
El-Sharaawy confirms that Afreximbank will back the company, saying: “They’re helping us out in the setup process. And since it will not be that easy to operate from day one alone, we will probably keep them as consultants, walking us hand in hand until we acquire some experience.”
Oramah hopes the CBE’s new company will make Egypt a “key driver” in the implementation of the African Continental Free Trade Area agreement (AfCFTA). Launched in 2018, and now in its operational phase, the deal is aiming to bring together 54 African countries by establishing a single African market for goods and services, accompanied by the free movement of people and capital. The hope is that it will stimulate intra-regional trade flows, redress the continent’s industrial deficit, and reduce its over-reliance on primary goods exports.
This is not the first time Afreximbank has tried to stimulate Egypt’s trade with Africa in recent years, with the export-import bank committing to a US$500mn scheme in 2017 with the Export Development Bank of Egypt (EBE).
The bank also lent support to the country during two years of economic difficulty in 2015 and 2016, disbursing more than US$7bn to Egyptian entities.