The British International Investment (BII), the development finance institution of the UK government, aims to enhance its investments in Egypt during the coming period within the framework of the strategy to expand in African countries. Daily News Egypt interviewed Sherine Shohdy – Head of Egypt and Coverage Director of North Africa at BII, to learn more about the institution’s expansion plan.

What are the most prominent achievements of BII in Egypt in the past year?

To date, we have invested more than $4.5bn in 700 businesses across Africa as part of our ambition to be a long-term partner to the economies in which we invest. BII has over $760m in commitments in Egypt, and our direct and indirect investments span several critical sectors, such as clean infrastructure and energy, healthcare, manufacturing, and financial services, supporting over 50 businesses and over 32,000 jobs across the country. Significant investments in Egypt include:

● $100m commitment to Egyptian start-ups across the country, including most recently Algebra Ventures and Endure Capital, two pioneering VC firms that support and partner with visionary early-stage Egyptian businesses to build scalable companies in sectors such as fintech, agritech, edtech, logistics and healthcare, as well as companies supporting green growth.

● MaxAB, a prominent B2B e-commerce platform in North Africa, supports the creation of 4,000 jobs and facilitate the platform’s expansion across Egypt and Morocco, enabling the company to reach an additional 73,000 micro-retailers across the region.

● Partnering with DP World to modernise and support the expansion of three ports throughout the African continent starting with three anchor ports, including the Sokhna port. The investment in the port will help increase Egypt’s trade with the Middle East and Asia, support more than 1.4 million jobs indirectly and increase access to critical goods and staples for 16 million people and Egyptian businesses.

● $100m investment in Alfa Medical Group, one of the largest healthcare providers in Egypt, to facilitate its expansion and support improved medical health services outcomes.

● A total commitment of $150m to Kelix bio, a first-of-its-kind pan-African pharmaceutical platform focusing on the manufacturing, marketing and broadening of life-saving drugs across the continent including Egypt. BII’s commitment to Kelix bio supported the acquisition of several companies including Egypt’s ADWIA Pharmaceuticals.

● $100m Tier 2 10-year financing facility to the Commercial International Bank (CIB), to enable the bank in lending to exporting sectors and strengthen Egypt’s economy during the critical COVID-19 period.

● At COP27, the Egyptian government demonstrated its ambition to become a green energy hub by signing framework agreements to construct nine green hydrogen and ammonia facilities in the Suez Canal Economic Zone. Globeleq, a BII-owned company, announced its participation in a large-scale green hydrogen facility within the Suez Canal Economic Zone. The Facility developed by Globeleq will see 3.6 GW of electrolysers power by up to 9 GW of solar PV and wind energy and will cumulatively be worth $83 and produce 2.7 million tonnes of green hydrogen.

● Most recently, an investment was made alongside the European Bank for Reconstruction and Development (EBRD) to provide a $100m subordinated loan to Banque du Caire (BDC), one of Egypt’s largest banks, strengthening BDC’s Tier II capital. In addition to the investment, BII will play an integral role in shaping BDC’s strategy and organisational culture by providing guidance on the management of environmental and social (E&S) risk in its business operations.

What are the institution’s strategy and objectives for the current year? How much do you plan to invest in Egypt?

Egypt is one of BII’s priority markets, given the growth potential this country has to offer as we focus on expanding our portfolio. As the UK’s main instrument for climate finance investments and the largest bilateral DFI in Africa, BII is developing a blueprint addressing Climate Adaptation and Renewable Energy (CARE) for powering energy-intensive water infrastructure. With a 30% climate finance target over the next five years, UK DFI will also continue to work towards unlocking other climate innovation strategies, including clean energy solutions such as solar and wind power, green hydrogen, and water, sanitation and hygiene (WASH) systems, to support Egypt’s green transformation whilst making an economic, social and environmental impact.

We will continue to bolster the Egyptian venture capital ecosystem, supporting local investors who are the ideal partners to identify the next generation of high-potential entrepreneurs whose unique solutions help solve development challenges including climate solutions.

Building on our partnership with financial institutions, our recent investment alongside EBRD to Banque du Caire (BDC) will support the growth plans of the bank and optimise its capital structure.

Providing long-term, Tier II funding will strengthen BDC’s growth strategy, increasing its capital base and guaranteeing the availability of much-needed funds to enhance BDC’s growth within strategic sectors of the market. With one of Egypt’s largest branch networks (248 branches nationwide), a market-leading position in microfinance, and a strategic push towards digital distribution channels, BDC is well placed to serve market segments that are critical for advancing financial inclusion in the country.

Did BII change its investment plan in startups in Egypt in light of the economic crisis?

Egypt is undergoing macroeconomic challenges experienced in many countries across the globe, resulting from the Russia-Ukraine war and the COVID pandemic. As a result, there is currently a foreign currency shortage in the country, soaring food prices, increasing inflation, and the third devaluation of the Egyptian pound since March 2021.

The current economic crisis has contributed to a decline in venture capital, with investment funds and venture capital firms becoming stricter with their investments, which contributes to a decrease in available capital for Egyptian start-ups requiring funding.

Unlike conventional investors, we invest countercyclically and apply flexibility to our funding. BII is a long-term partner and provides patient capital to solve the most significant global development challenges – we support private sector growth and innovation. We invest in creating productive, sustainable and inclusive economic outcomes for those that need our capital the most – irrespective of the economic environment.

Are there any investments that BII intends to exit during this year?

As an impact investor, we’ve been a long-term partner to businesses in Africa for 75 years. Over the years of investing in high-impact companies across the continent, we’ve learned not to restrict our approach to typical private equity exit horizons. Instead, we have found that patience is often the key to sustainable value creation.

How do you see the investment climate in Egypt, especially following the commitments in the letter of intent sent by the Egyptian government to the International Monetary Fund?

Egypt’s reform programme, supported by the new IMF arrangement, includes an extensive package of structural reforms to support a more significant private sector, increasing economic activity and boosting trade. The reforms set out ambitious plans to improve Egypt’s capacity to generate jobs, increase growth and catalyse private sector investment into Egypt – levelling the playing field between the public and private sectors and providing more support to ambitious businesses.

We are immensely confident in Egypt; the country remains a key part of expanding our climate change strategy – which will drive at least 30% of BII’s total new commitments by value in climate finance.

Is BII interested in investing in the government’s IPOs programme in Egypt?

We provide flexible capital in all its forms, such as direct and intermediated equity, debt, mezzanine, and guarantees and seek to partner with Egyptian businesses and entrepreneurs who have long-term visions that align with our patient capital approach to help create sustainable and equitable economic outcomes.

In Egypt, we are particularly interested in investing in healthcare, pharmaceuticals, manufacturing, consumables, and infrastructure, including renewable energy, industrial parks, ports, and water infrastructure.

Do you plan to invest in funds or private equity funds any time soon?

We invest via General Partners (GPs) into funds, operating across regions and covering a range of sectors and themes including climate change and gender diversity. Today, approximately 33% of our portfolio is allocated to intermediated equity such as PE and VC funds that invest on our behalf.

Our strategy is to continue our engagement and innovation with GPs, including first time teams that are addressing specific market inefficiencies and backing strong performing existing GPs, to help create a stronger industry that can focus on both financial and developmental outcomes.

Last year, we hosted the Innovation for Impact Summit in Cairo, a first of its kind event dedicated to developing venture capital in emerging markets. As part of our objective to forge new relationships, mobilise capital and deepen collaboration across markets, we brought together leading players in Africa and South Asia’s entrepreneurial ecosystems. The summit facilitated knowledge exchange, explored pertinent themes and shared best practices.

Are there any green projects BII considers investing in?

BII has supported the expansion of Egypt’s renewable energy capacity having financed 9 projects within the Benban Solar Park developed under Egypt’s Feed-In-Tariff Programme, the largest Solar Park in Africa, which is helping to contribute clean, cost-effective power to meet Egypt’s growing energy demand, reducing carbon emissions and helping the country meet its climate objectives.

Climate change is the continent’s greatest challenge, and climate action remains an important area for BII as we transition our portfolio to net zero by 2050, in line with the Paris Agreement. We see an opportunity to support Egypt to adapt and become more resilient to the impacts of the climate emergency that are being felt today. Our impact investment model makes us an ideal partner for Egyptian businesses that will be the driving force for lifting populations out of poverty and providing the bedrock for sustainable, long-term economic success.

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