COFFEE WITH: Matteo Patrone, VP of banking at the EBRD. Last week was a busy one for European investments, with Egypt hosting the two-day Egypt-EU Investment Conference, bringing together over 1k private sector players and government officials from both sides and garnering some EUR bns in investments. The conference shed light on Egyptian-European relations and the long-standing relationship between Egypt and the European Bank for Reconstruction and Development (EBRD).

Fairly new to his position as VP of banking, Patrone (LinkedIn) touched down in Egypt last week — for his first visit to Egypt in his current post — to attend the conference. We sat down with him to learn more about his expectations for the conference and whether or not it achieved the desired outcome. We also threw in some questions about the EBRD’s role in the Egyptian economy and what we can expect from the economy moving forward.

Enterprise: What did you walk into the conference expecting to see — did you have any preconceptions?

Matteo Patrone: The conference, for me, was really the perfect occasion to conduct my introduction to Egypt. This is a country that I visited on a personal basis, but never worked in my time at the EBRD. So having this kind of gathering is a very efficient way of getting to know the people, getting a sense of the strategic direction of the authorities, and getting some input from our partners — their take on where the country is going and particularly where the economy is going.

E: Egypt inked some EUR 67.7 bn worth of agreements and MoUs during the conference — EUR 49 bn with EU-affiliated entities and EUR 18.7 bn with non EU-affiliated entities. What can the government do to ensure the implementation of these projects?

MP: The government was very clear at the conference about the direction of travel — higher private sector participation in the economy and in overall investments in the country. So, we are following closely the implementation of the State Ownership Policy and the program on monetising assets, and we are working with different institutions in Egypt — such as the Sovereign Fund of Egypt — to assess how the EBRD can support the work being done in this program in a way that delivers higher levels of competitiveness and governance standards.

As I have seen in other markets, predictability and consistency of signals and positive momentum in the reform agenda spur strong interest from major, serious investors — whether institutional or industrial. We are also following the government’s policies on leveling the playing field for the private sector, which is key for incentivising long-term private investment, and we stand ready to support the government’s various agencies in these efforts.

E: What are the most attractive sectors to EU investors?

MP: Egypt’s demographics and human capital make some sectors highly attractive, for example: agri and food & beverage value chain, healthcare, education, and others. Also, Egypt has a lot of experience and a strong base in manufacturing in some important domestic and export sectors and in the context of nearshoring trends, we see several openings for international — especially European — players to have their industrial hubs in Egypt. And of course, as the economy grows — and the private sector’s share in total investments in the economy grows — there would be many chances in financial services. There are promising developments here. Fintech has been growing impressively in the past few years. Egypt's energy potential is immense, and I see a major room for growth in green investment.

E: What was the EBRD’s role during the conference?

MP: We signed two concrete transactions with our long-term partner CIB for a total of EUR 60 mn — one for on-lending to local women-led businesses and the other to fund the green transition.

We will continue investing to that tune of EUR 1-1.5 bn a year in Egypt supporting the real economy with a focus on the green transition, financial inclusion, and supporting competitiveness and resilience. The majority of our investments, 90% last year, are in the private sector. But we also realize that there are some infrastructure investments that enable private sector development that can be conducted only by the state and we stand ready to support them.

E: The bank is Egypt’s lead partner on the energy pillar of the Nexus for Water, Food and Energy (NWFE) program — what does the bank have in the pipeline for our energy sector?

MP: It’s a twofold approach to the energy sector. On one hand, we finance private sector investments in green energy, be it solar or wind, with additional investments in green hydrogen. On the other hand, if we want to increase the presence of renewable energy in the energy mix of the country, we need to make sure that the grid is resilient and is able to dispatch the energy produced by wind farms and solar power plants. That is an investment that only the public sector can do. We are willing to support the government in that area.

E: Egypt’s new cabinet was sworn in last Wednesday — what does that mean for the country in terms of its strategic direction?

MP: In the last few months, the macroeconomic situation has stabilized and investor confidence started coming back. So there is positive momentum and I think the new team is clearly tasked to seize that momentum in partnership with the private sector, both local and foreign.

E: What should the new cabinet prioritize, particularly in terms of private sector partnerships and economic reforms?

MP: I think three areas are critically important: the consolidation of the stabilization of the macroeconomic and macro financial situation in the country, the continuation of the reform agenda, and the privatization of a number of state-owned enterprises. There are a number of openings to be seized together with international partners and foreign direct investors.

E: The EBRD in May cut our growth forecast for 2024 by 0.6 percentage points to 3.9%. With the laundry list of decisions taken over the past months — the float of the EGP, major rate hike, a cap on public spending — should we expect the EBRD to revise upwards our forecast?

MP: I'm sure our economists are looking at this latest trend and if they see signals that would warrant a revision upwards, they will obviously take that into account. But from my perspective, as a long-time investor in the country, I do not focus on short term revisions of GDP expectations. I am more interested in the long-term sustainable growth of the economy that is underpinned by solid macro financial policies and a credible structural reform agenda which are at the base of an attractive business environment.

Macro financial stability is a condition and without it, the growth of GDP cannot be resumed and maintained in a sustainable way. I am sure this is very much at the top of the agenda of the new government in cooperation with international partners such as the EU and the IMF.

Maintenance of the reform agenda is absolutely crucial because it sends a signal of continuity and predictability to foreign direct investors, and this is particularly important at this moment when we have turned the page.

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