Egypt provides a case study in how to prepare for the Africa Free Trade Area

The African Free Trade Area (AfCFTA) could add at least 32 new trade partners to Egypt and help diversify and upgrade the country’s economy. But to benefit fully from the AfCFTA, Egypt needs to update its policy approach for economic transformation, according to the new  Production Transformation Policy Review (PTPR), released by the Egyptian government on 8 June. Although Africa is a small industrial player, accounting for only 2% of world manufacturing, Egypt is the continent’s top manufacturing hub, producing 22% of Africa’s manufacturing value added. This has led to international investors choosing Egypt as their base for manufacturing goods for the African continent and the Middle East. Between 2017 and 2020, Egypt attracted the highest percentage of foreign direct investment (FDI) in electronics and electrical manufacturing in Africa (21% of the total number of projects), and the second highest level of investment in knowledge-intensive projects (14%). The country has become one of Africa’s top hubs for start-ups. It accounts for 14% of the continent’s start-ups and 10.5% of its venture capital.

Egypt also launched a successful COVID recovery package last year which accounted for 1.9% of Egypt’s GDP, and includes tax breaks, loan repayment deferrals and subsidized credit to firms. Since 2017, Egypt has been reforming its governance and regulatory framework to attract investment, foster trade and digitalisation in firms, the report says. Among the country’s key reforms, the implementation this year of a ‘national single window’, an online platform to speed up customs processes, is a good example. Egypt has also been investing in ensuring manufacturing quality and established the National Food Safety Authority in 2017. However, Egypt still trades little with other African economies, with only 15% of its exports traded on the continent and this it plans to increase rapidly under the AfCFTA.

Meanwhile, Egyptian B2B ecommerce platform MaxAB has secured US$40 million in Series A funding to help it expand across the country and the broader MENA region. Founded in 2018, MaxAB connects food and grocery retailers to suppliers in Egypt’s most under-served geographies. The company serves a network of traditional retailers across Egypt, using empowering technologies and innovative supply chains to help put the correct amount of food and groceries at the right place at the right time. So far it has supplied more than 55,000 retailers, fulfilled more than one million orders, and grown more than 5x year-on-year. Having secured US$6.2 million in seed funding in 2019, the new Series A round will be deployed to expand MaxAB’s physical footprint across the MENA region, following its expansion to every key city in Egypt by the end of 2021. The company also plans on scaling recently launched business verticals, including new supply chains and embedded finance solutions. It also plans to expand its talent pool.