Historically, Egypt is one of the largest sources of outward foreign direct investment (FDI) from Africa, a status it has held on to despite the economic slowdown following the 2011 revolution, thanks in large part to a sizeable set of strong industrials that have the capital to expand into the surrounding region. Among the companies currently driving Egyptian investment abroad is Orascom Construction Industries (OCI), whose fertiliser branch has been on a foreign acquisition and construction spree in recent years.
During the last year, Egypt has also announced plans to establish industrial zones in at least four African countries, which will further facilitate investment abroad. “The ability of an Egyptian firm to survive today lies in its ability to expand regionally,” Karim Sami Saad, chairman of building services provider Samcrete, told OBG.
OUTWARD FDI: FDI flows from Egypt to Africa stood at some $626m in 2011 according to figures from the United Nations Conference on Trade and Development. This was down significantly on the 2010 total of $1.18bn, a decline which has been blamed on the economic downturn following the revolution; however, levels of outward FDI had been erratic in the years preceding the revolution and the figure was nonetheless higher than that of 2009, which stood at $571m.
The 2011 figure also ranked Egypt the largest source of outward foreign investment in North Africa, accounting for over a third of the regional total of $1.75bn, and second-largest in Africa as a whole after Nigeria, with $824m. Total Egyptian outward FDI stock as of 2011 stood at $6.07bn, almost all of it generated in the 2000s (the figure stood at $655m in 2000), ranking Egypt second in Africa behind Libya, whose oil revenues fuelled a buying spree of some $16.85bn.
FERTILISER INVESTMENTS: In recent years one of the most important generators of outward FDI from Egypt has been the fertiliser segment, largely in the form of a wide variety of projects and acquisitions undertaken by the country’s largest private company, OCI. The firm is 55%-owned by the Sawaris family, with the rest of the company’s shares floated on the Egyptian and London stock exchanges.
INVESTING IN THE US: Most recently, in September 2012 OCI announced plans to build a $1.8bn nitrogen-based fertiliser plant with a production capacity of up to 2m tonnes per annum (tpa) of urea ammonium nitrate in Lee County in the Midwestern US state of Iowa, to be known as Iowa Fertiliser Company. The company describes the project as the largest-ever investment to be made in Iowa, which is the biggest consumer of nitrogen-based fertiliser by state in the US, thanks to its status as a major grower of corn. Construction on the plant began in November 2012 and the facility is due to commence production in the final quarter of 2015. In May 2013 the World Bank’s International Finance Corporation announced it had issued $1.2bn worth of bonds to finance the project.
The plant will be OCI’s second in the US, with the firm having acquired an ammonia and methanol production facility in Beaumont, Texas in 2011. The facility, which was built in the 1960s, had been idle since 2004 until it re-entered into operation under OCI’s ownership in 2012. The firm intends to invest around $100m to debottleneck the plant’s methanol and ammonia lines by the second half of 2014, raising methanol capacity by around 25% to 875,000 tpa, and ammonia capacity by 15% to 292,000 tpa.
In addition to its US operations, the company also has foreign production facilities in the Netherlands and Algeria. In the Netherlands it owns a 100% stake in OCI Nitrogen, based in Geleen, which it describes as the world’s largest producer of melamine, with capacity of about 250,000 tpa. OCI’s ownership of OCI Nitrogen stems from its acquisitions of Dutch-based Royal DSM’s nitrogen fertiliser and melamine operations in 2010. The plant is also described as Europe’s second-largest producer of nitrates. In 2011 the company expanded OCI Nitrogen’s calcium ammonium nitrate production capacity by 26% to 1.45m tpa. The firm also has an anhydrous ammonia production capacity of 1.1m tpa.
In Algeria OCI owns a 51% stake in Sorfert Algerie, a producer of urea and ammonia located in the port city of Arzew in the west of the country; Algerian state oil and gas firm Sonatrach holds the remaining 49% stake in Sorfert, which was founded in 2006. The project was due to enter into operations in 2010, but has faced repeated delays. However, in late April 2013 OCI said that construction on both production lines at the plant was complete and that it expected to receive approval from the Algerian authorities to test the lines and then to begin commercial production and exports “within the coming weeks”, with the plant to start contributing to OCI’s revenues in the second half of the year.
In addition to Europe, the Maghreb and the US, OCI also has intentions to enter the South American market; in October 2011 the firm announced plans to build a nitrogen-based fertiliser plant in Brazil in partnership with local conglomerate EBX. The $3bn, 3m-tpa-capacity facility is to be built at the port of Acu, 350 km northeast of Rio de Janeiro, and is due to be completed by 2016. OCI already has a strategic partnership with Brazilian firm FITCO for the supply and distribution in Brazil of granular urea produced by the Egyptian firm.
FOCUS ON MEA: Another example of an Egyptian industrial firm with significant investments abroad is the El Sewedy Industries Group, which is active in the electric products segment. One of the firms, El Sewedy Cables, has 30 factories across 15 countries; the company’s foreign investments are concentrated in the Middle East and Africa (MEA) in particular, though it also has production facilities in Slovenia, Russia, India and Malaysia. Its sister firm El Sewedy Electrometer has six factories outside of Egypt (in addition to three factories in its home country), most of them majority-owned joint ventures with local investors, also including locations in Africa (namely Ethiopia, Ghana and Zambia) and Europe (the Czech Republic, where its most recent foreign investment was the purchase of a local firm in 2010) and two in Latin America (in Mexico and Brazil). The company produces around 1.5m electricity metres a year and also describes itself as one of the top 10 firms in the international metre industry.
Egyptian financial companies are also active investors abroad, including in the industrial sector, again with a particular (but not exclusive) focus on the MEA region. For example, Cairo-based private equity firm Citadel Capital has a 48.5% stake in cement and construction firm ASEC Holding, which owns 35% of Algeria’s Zahana Cement Company (ZCC). It currently building a 3. 5mtpa cement factory in Djelfa that is scheduled to come on-stream in 2015. ASEC owns Takamol, a 1.6m-tpa capacity cement facility in Sudan that entered into operations in 2010. The firm says it is currently looking at opportunities in other MEA states, including Ethiopia, and has a licence to build a cement factory in Syria. Egyptian plastics producers are also looking to invest abroad, in the Middle East in particular.
AFRICAN INDUSTRIAL PARKS: Egypt is also looking to fellow African nations to expand its industrial activities abroad, through the creation of joint industrial zones and parks. In the first of a recent wave of announcements of such plans, in October 2012, the State Information Service reported that Egypt intended to establish industrial zones in Algeria and Ethiopia. Specifically, the Ethiopian government is intending to provide Egypt with 1m sq metres of land for the establishment of the zone there. Egyptian firms reportedly interested in investing in the zones include companies from the beverage, agro-processing, plastics, chemicals, metal and packaging sectors. With respect to the government’s plans for Algeria, Egypt’s then-Prime Minister Hisham Qandil said the zone would be focused on construction materials, as part of plans for Egyptian construction firms to take part in a housing construction push by the Algerian government.
OVERSEAS PORTFOLIO: Such proposals are not new; plans for an Egyptian industrial zone in Algeria, in which Egypt has traditionally been one of the largest foreign investors outside of the hydrocarbons sector, date back to at least 2007. Previous major Egyptian industrial investments in the country include Algeria Cement Company (ACC), a wholly-owned subsidiary of OCI Cement Group that was the largest foreign investment in Algeria outside hydrocarbons and telecoms when it was established in 2001. The firm is no longer in Egyptian hands, as OCI Cement was sold to French construction materials giant Lafarge in 2008. Total Egyptian investment in Algeria stood at around $6bn as of 2012.
In March 2013 then-President Mohammed Morsi announced plans for the creation of a 2m-sq-metre industrial zone in Juba, the capital of newly independent South Sudan, focused mainly on agro-industry.
This was followed in April 2013 by an announcement by (north) Sudanese President Omar Bashir that the country would provide Egypt with 2m feddan (1 feddan: 1 acre) of land near the capital Khartoum for the establishment of an industrial zone, focused on pharmaceuticals and biofuels, supervised by the Egyptian Industrial Development Authority. Four Egyptian industrial firms are active in Sudan, and relations between the two have improved since the 2011 revolution.
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