“We’re getting a lot of business in this area…mainly the Nile Basin,” said Alaa Gouda, General Manager of ECGE, adding shrinking demand from the West after the global financial crisis was driving Egyptian export interest in sub-Saharan markets.
Partly state-owned ECGE has a $200m portfolio and says more of its clients are eyeing the African market to export engineering and infrastructure products in particular, including electric cables, cement and ceramic tiles.
ECGE insures short and medium-term deals against risks like buyer insolvency and civil disturbance in the buyer countries.
“We have 50 percent of our exports going to the U.S. and Europe, now demand in the U.S. and Europe due to the financial crisis has declined. It’s normal to see a shift,” he told reporters in an interview, adding that Africa was now a growing focus.
He said Egyptian firms were targeting African markets because of upbeat growth forecasts, expanding populations and high returns. ECGE’s business with Africa grew from 10 percent of its portfolio in 2008 to 25 percent now, Gouda said.
The shift in focus by exporters is mirrored by a growing interest from Egyptian investors, which ECGE does not cover, such as private equity firm Citadel Capital’s plans to invest $200-400m in East Africa by 2012 mainly in transport and logistics, and El Sewedy Cables investment in power line production in Ethiopia.
No default
Foreign currency shortages in some African markets meant payment deadlines were often a longer tenure than in Europe, but Gouda said: “We don’t have default in the area of the sub-Sahara.”
He added that this was the only region for the ECGE with no default during the financial crisis. “Those (African) markets have been booming,” he said.
Kenya’s economy is seen growing by 3.9 percent in 2010 and Uganda’s by 6.38 percent, a poll shows.
Ratings agencies typically highlight threats such as a fear of resurging political violence in Kenya or possible secession of south Sudan, but Gouda said this seemed to overstate risks and African businesses had learnt to deal with such issues.
“All the ratings agencies have been giving weak ratings for these countries and saying there’s a lot of political risk,” he said. “You could find a lot of ethnic riots. It’s always been there, but it does not paralyse economies.”
“We have always been speaking of this part of the world as high-risk, high-risk, high-risk, then we got the hit from somewhere else,” he said, referring to the global crisis that hit the U.S. and other developed countries hard.
He said the eagerness of African states to attract foreign direct investment often encouraged businesses to be extra careful about meeting payments and improving business practices.
“For the coming two decades at least, foreign investors will be in a safe haven,” he said.
