The cabinet has recently approved Egypt’s accession to the Lagos-headquartered Africa Finance Corporation (AFC), with the Ministry of Finance representing Egypt as the 32nd member state to join the institution. The AFC is a pan-African development institution that provides funding and makes investments in the infrastructure sector in Africa.
Egypt’s joining the AFC will likely open a new window of funding for the infrastructure sector in Egypt, a sector that has been witnessing rapid developments over the previous years that made it the focus of attention of local, regional, and international investors.
The AFC was established in 2007 by Austine Ometoruwa, former director of Citigroup Middle East North Africa, and Chukwuma Soludo, former governor and chairman of the board of directors of the Central Bank of Nigeria, with an authorized share capital of $2 billion.  It is owned by private financial institutions in Africa which hold 55.3 percent of its shares whereas the Central Bank of Nigeria holds the remaining 44.7 percent of shares. AFC allows its members (through their respective central banks, sovereign funds, and insurance funds) to become shareholders. Currently, the AFC has a total of 32 member states, namely Nigeria (the host country), Benin, Cape Verde, Chad, Cote d’Ivoire, Djibouti, Eritrea, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Liberia, Madagascar, Malawi, Mauritania, Rwanda, Sierra Leone, Togo, Uganda, Zambia, and Zimbabwe. 
When the AFC was established in 2007, Africa was already suffering an infrastructure investment gap estimated at $20 billion over only a decade. Since then, this investment gap has widened to over $170 billion, with an investment shortfall of $67 billion in water and sanitation, $50 billion in energy, $47 billion in transportation and logistics, and $12 billion in information and communications technology. This infrastructure investment gap, along with travel restrictions, customs regulations, the absence of integrated and standardized payment systems, and currency mismatch represented a serious hindrance to making operational several trade agreements in Africa.
AFC signed its first funding deal worth $50 million with Standard Bank in July 2011. The following year, the African Development Bank (AfDB) approved a $200 million credit line to AFC aimed at promoting the AFC’s ability to fund investments and help bridge Africa’s infrastructure investment gap.  In October 2013, AFC signed its first syndicated loan worth $250 million with Citibank, Rand Merchant Bank, Standard Bank, and Standard Chartered Bank to finance trade projects.  In June 2016, AFC borrowed a 15-year $150 million loan from KfW Development Bank (a German state-owned development bank), to fund power, telecommunications, transport, and heavy industry sectors. 
The AFC focuses primarily on investment in five main sectors, namely energy, transportation, logistics, natural resources, communications, and heavy industries.  In June 2009, the AFC agreed on a 240 million equity financing deal with a consortium of investors to fund Main One Cable System, a 7,000 km undersea fiber-optic cable connecting West Africa to Europe.  The same year, the AFC invested an amount of $180 in oil and gas, telecoms, transport, and airline projects in Nigeria.  In 2011, the AFC partnered with the African Export-Import Bank (Afreximbank) and Banque Internationale pour l’ Afrique Occidentale in a $320 million trade finance facility for the importation, processing, and refining of crude oil by Societe Ivoirienne de Raffinage (SIR). 
In May 2013, the AFC, Lagos-based Vigeo, and India’s Tata Power formed a consortium which successfully bid $129 million for Benin Distribution Company.  A month later, the AFC announced its support for privatization of the Nigerian power sector, providing a $215 million debt financing facility for the acquisition of the Ughelli Power plc by Transcorp.  In August 2013, the AFC provided a $170 million loan to Mainstream Energy Solutions Limited (MESL), a Nigerian firm, in a successful bid for the 1,338 MW Kainji Hydroelectric power plant in Niger State, Nigeria. Further, the AFC is already a private sector partner in the US $7 billion USAID-funded ‘Power Africa’ initiative announced by US President Obama in Cape Town.
Since its involvement in the initiative, the AFC has invested $250 million in the power sectors of Ghana, Kenya and Nigeria.  In December 2014, the AFC acquired a 23.2 percent stake in Mozambican power development company Ncondezi Energy. In the same year, the AFC became the largest investor and lead developer in the $900 million worth Kpone Independent Power Project (Kpone IPP) in Ghana. In July 2015, the AFC signed a joint development agreement with the Ivorian Ivoire Hydro Energy SA (IHE) to build a 44MW hydroelectric power plant in Singrobo, Côte d’Ivoire.  In June 2016, the AFC and Harith General Partners merged their power sector assets to form a new entity combining renewable and non-renewable power generating assets in Africa.  And the projects’ list goes on.
Overall, the AFC’s infrastructure investments in Africa so far have exceeded $10 billion, including investments in member and non-member countries. For example, the AFC had had investments in Egypt even before Egypt become a member.
How the Move will Benefit Egypt
While the AFC had previously invested in Egypt’s energy sector through a $100 million project implemented with the Egyptian General Petroleum Corporation (EGPC) and Carbon Holdings, Egypt’s membership in the institution will open the door for more infrastructure investments, particularly given the AFC careful investment approach based on measuring the size of the economy and risks, government spending priorities, ease of doing business, and rule of law, all of which are determinants in which Egypt outperforms most African countries, which increases Egypt’s chances of accessing to funds from the AFC. Currently, AFC’s potential investments in Egypt are estimated at between $600-700 million, with investments of $400-500 million in sectors of renewable energy, transport, logistics and natural gas, as well as $250 million to support transport projects and logistics.
Usually, the AFC pursues hybrid financing strategies where 20-30 percent of the investment is provided as direct investments (in exchange for an equity interest) whereas the remaining 70-80 percent are provided as loans, allowing the AFC to increase funding to projects by six-fold. However, for this to take place, an agreement on a funding and investment strategy must be reached, particularly amid the significant shift Egypt is seeing in energy and infrastructure sectors. The AFC is looking forward becoming a partner in Egypt’s successes in these sectors, as has been demonstrated in the AFC’s meetings with ministries of planning and petroleum and the Central Bank of Egypt where the corporation has shown keen interest in renewable energy, green hydrogen, storage, and construction sectors.
Additionally, Egyptian institutions could benefit from Egypt’s membership in the AFC and promote some bioproducts. During the AFC talks with the Ministry of planning in Cairo, Minster of Planning suggested considering cooperation between the AFC and the Egyptian Holding Company for Biopharmaceuticals and Vaccines (VACSERA) to distribute the locally-produced vaccines of the latter as well as cooperation with the Sovereign Fund of Egypt in several areas of renewable energy, water desalination, and rolling stock manufacturing.
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