For all the hot money flooding into Egypt, bricks-and-mortar investment is scarce
gathered at a posh Cairo restaurant were eager to pour money into an economy that, just three years ago, lacked the hard currency to import cooking oil. A revolution in 2011 tipped Egypt into economic crisis. Investors and tourists fled. Growth was anaemic. Unemployment peaked at 13.2%. President Abdel-Fattah al-Sisi had to seek a $12bn loan from theSince then, though, his government has followed what one executive admiringly calls “almost a caricature” of anprogramme.
But sluggish investment also reflects the weakness of Egypt’s domestic market. Its size—almost 100m people, with 2.5m added annually—means it will always have robust demand for basic consumer goods. Last year both Coca-Cola and Pepsi announced $500m in investments. Mars, a confectionery giant, is opening two new production lines. Few Egyptians can afford products that would create better-paying jobs, however.
Instead of selling cars at home, Egypt wants to export them to other parts of Africa and the Middle East. The government plans to offer incentives for using domestic suppliers: firms that buy lots of locally made components could have 80% shaved off their customs bills. Nissan has agreed to produce 100,000 cars in Egypt each year with El Nasr Automotive, a state-run firm. But Egypt will have to compete with Morocco, which has invested heavily in infrastructure.
After years of weak investment, there is little idle capacity at Egyptian factories. High interest rates mean local businesses cannot afford to borrow for expansion. In February the central bank cut the overnight lending rate by 100 basis points, to 16.75%. In March, however, the bank defied expectations and kept rates steady. The Ramadan holiday and a looming subsidy cut will bring higher inflation this summer, so further cuts are unlikely until autumn.
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