Addressing challenges of infrastructure financing in Africa: The Egypt’s example

News Analysis by Ismail Abdulaziz, News Agency of Nigeria (NAN)

Most countries in Africa have the luck of having resources such as raw material, labour, large population and land, among others, which can be tapped and utilised for the sustenance of citizens.

Incontrovertibly, especially among the developing nations, one of the biggest deficits faced by the people remains access to healthcare delivery, electricity and transportation, among others.

In addressing these challenges, cost implication and sourcing of the funds become significant to governments.

Unarguably, most countries lack the fund to embark on life changing projects that will affect the lives for generations.

For instance in Nigeria, electricity deficit affects most of the development spheres that would have propelled the country’s progress.

Although sourcing of fund from foreign countries has always been the option to solving the problems, malpractice, arising from somewhat misappropriation in handling such funds is worrisome.

In Egypt, the funding of the Egypt’s New Suez Canal ought to catch the fancy of other African nations in addressing the challenge of funding needed for the provision of infrastructure in the respective countries.

Analysts note the leadership style of President Abdel Fattah el-Sisi in that regard when he needed to expand the Suez Canal not only for the benefit of Egyptians but as a hub for other Africans and the world.

While there were financial challenges threatening the undertaking of the project, the reality in the face of the government has been that the project would bring immense advantage to Egypt and the entire maritime industry in the world.

Suez Canal is considered to be the shortest link between the East and the West due to its unique geographic location and Egypt is said to be the first country to dig a canal across its land with a view to stimulate other countries’ interest in maritime trade.

Suez Canal is, therefore, an important international navigation canal linking the Mediterranean Sea at Port Said and the Red Sea at Suez.

Determined to achieve the feat, in August 2014, the Egyptian government inaugurated construction to expand and widen the Ballah Bypass for 35 kilometres to speed the canal’s transit-time.
At a cost of 8.4 billion dollars, this project was funded with interest-bearing investment certificates issued exclusively to Egyptian entities and individuals and the New Suez Canal was opened with great fanfare on Aug. 6, 2015.

The New Suez Canal is expected to expand trade along the fastest shipping route between Europe and Asia.

The new canal allows ships to sail to both directions in the same time to decrease transit time from 18 hours to 11 hours for most ships.

The expansion is expected to double the capacity of the Suez Canal from 49 ships to 97 ships a day.

The expected revenues from the Suez Canal (after the completion of the New Suez Canal) will jump from 5 billion dollars to 12.5 billion dollars annually.

The Egyptian government said that these revenues will be used to transform the cities along the Canal (Ismaïlia, Suez, and Port Said) into international trading centres.

The government has also said that many new projects in the Suez province are being considered in the areas building a new industrial zone, fish farms and the completion of the valley of technology, bringing to reality the industrial zone and a new capital city.

The lesson for other developing nations, including Nigeria is that the new canal project cost around 30 billion Egyptian pounds and no foreign investors were allowed to invest in the project.

Rather Egyptians were urged to participate in funding the project through bank certificates of deposit initially, yielding 12 per cent and later raised to 15.5 per cent.

After President Sisi announced the new megaproject, Egypt’s stocks rose to the highest level in the past six years.

The Egyptian Armed Forces also participated in the project by helping in digging and designing the canal.

The financing of the mega project became a success story and a rallying point of nationalism for Egyptians.

Many new projects are being undertaken after this project such as the various expansions in Ismailia, Port Said and Suez, which a recent visit by African journalists revealed in January.

Observers note that this nationalistic spirit of Egyptians to rally round a project that was of benefit is a signal to the way to go in infrastructure financing in Africa.

If Egyptians could go to designated banks to invest their money in a project believed to be of immense benefit to their generation, then other nations can replicate the idea, they observe.

According to them, making the people a part of a success story for national development can be embraced to create the necessary change needed in the continent.

They call on Nigerians or Africans to be a part of history in changing the fortunes of Africans and the upcoming generations just as Egyptian woman who was impressed by the initiative said: “Even if I don’t benefit from the project or the money I invested now, I am proud that my children would benefit from it’’.(NANFeatures)

**If used, please credit the writer as well as News Agency of Nigeria (NAN)