Egypt’s quest to press ahead with many of the major schemes announced earlier this year has slowed down due to a number of investor concerns. Although currency fluctuations and bureaucracy continue to deter some private-sector investors, Egypt’s PPP Central Unit has stood out as an efficient body able to implement complex schemes in partnership with the private sector.

Egypt’s PPP law, which was established in 2010, has been recognised by the World Bank and other countries in the region as a comprehensive model. As such it has been emulated by many neighbouring countries to implement their own programmes.

Appetite is dependent on the ability of Egypt to offer the correct structures in order to address the currency risk

While the falling oil price and a slower recovery than expected from the global financial market has had an impact on liquidity, there is still healthy appetite from regional and international banks to invest in Egypt’s infrastructure programme.

This appetite is dependent on the ability of Egypt to offer the correct structures in order to address the currency risk sufficiently.

Investor interest

Egypt’s PPP programme consists of more than 20 projects, ranging from wastewater plants to river boat schemes. The programmes pipeline has attracted both international and local investors, despite concerns about foreign exchange issues in the country. It is understood that most of the projects will be paid for in Egyptian pounds.

In November, MEED reported that the government is preparing to issue a foreign exchange guarantee for utility projects, including planned renewable energy schemes, and the Central PPP Unit has undertaken a degree of foreign exchange risk on the Abu Rawash wastewater scheme between the commencement of bidding and the project’s financial close.

However, according to sources close to the programme, the government is not planning to undertake forex guarantees for any of the other schemes, which may dissuade potential investors.

Further to this, a sovereign guarantee is in place to ensure obligations will be met in case the client defaults, and Egypt’s PPP unit has said it is committed to ensuring this is maintained throughout the programme. The majority of states pursuing PPP schemes in the region will be willing to offer sovereign guarantees. The more difficult issue is foreign exchange guarantees.

Egypt has a history of implementing major schemes through the PPP model and, as such, the unit finds itself in a strong position to continue to press ahead as the country anticipates a new wave of investor interest following years of economic stagnation.

Overall, the state of public funds and the difficulty Cairo has in pressing ahead with projects without the private sector mean the PPP unit will be central to upcoming plans.

In addition to this, the unit’s ability to provide a comprehensive investment model amid long-winded bureaucratic processes in Egypt also means that private, and particularly foreign, investors find investing in Egypt at the moment may best be done through the unit.

Interview: Atter Hanoura, head of the PPP Central unit

The Finance Ministry’s PPP (public-private partnership) Central Unit has been able to create an effective, favourable investment environment for the private sector.

Atter Hanoura, head of the PPP Central Unit, says the agency has been able to offer a comprehensive model for both local and international private-sector investors.

“The PPP law was issued in 2010 and we received international awards from the [Washington-based] World Bank. Most of the countries around us are using the PPP law, extracting some of the articles and using it in their laws that they are building up; some countries are even taking the law cut-and-paste,” he says.

Four projects

To date the unit has moved ahead with four projects, including the Abu Rawash wastewater treatment plant and the New Cairo water plant.

The list also includes the Cairo Contact Centres Park in Al-Maadi. “[That] project involves the financing, designing, construction, furnishing, operation and maintenance of administration buildings for usage or renting to companies working in the field of information and communication technology,” says Hanoura.

The PPP law was issued in 2010 and we received international awards from the World Bank

Atter Hanoura, PPP Central Unit

The fourth PPP scheme is the Nile River Bus development in Cairo. Work includes the rehabilitation of 16 existing berths and the construction of 12 new ones.

The PPP unit has pushed through comprehensive investment laws that have encouraged private sector participation, with investors telling MEED the unit has so far been successful in providing the transparency and ease required to do business in Egypt.

Risk protection

Hanoura tells MEED the PPP unit has been proactive in including a detailed risk matrix surrounding foreign currency risk, and cites the Abu Rawash project as an example of the support the unit can offer.

“The structure of this project is slightly different because we have something called a bridge loan, which is accompanied by the interim private agreement – the government’s sovereign guarantee for this project,” says Hanoura. “We just gave some kind of foreign exchange risk protection until the project’s financial close.

“The private sector factors in currency risks,” he adds. “As a government, when we are studying a project and doing the financial model to check the viability, we put ourselves in the private sector’s shoes and calculate these kind of risks. So when we get these bids we know they are very close to our estimations that have deemed the project viable.”

Housing support

With Egypt’s PPP model proving successful, analysts have suggested the unit takes on other work, particularly the low-end housing programmes the country desperately needs.

“The ministries of housing and transport should in any country occupy 75 per cent of infrastructure projects, so naturally the communication between these two ministries is very high,” says Hanoura.

“Housing units that the Ministry of Housing is undertaking are under the structure of the PPP law, but they do not lie under the PPP unit. We are providing support and knowledge for contract terms,” says Hanoura. Regulations surrounding land allocations mean the unit can only offer this advisory role.