Engr. Emeka Okwuosa, Chairman/GCEO, Oilserv Group, Ahmed Elsewedy, Chief Executive Officer, Elsewedy Electric, and other Engineering, Procurement, and Construction (EPC) stakeholders in Africa have called on African Export-Import Bank (Afreximbank) to create more funding access at favorable rates for African EPC companies, to improve infrastructural development, reduce capital flight and accelerate industrialization in the continent.
The African EPC stakeholders shared these views during a panel session at the ongoing Intra-African Trade Fair (IATF) 2023 trade conference, in Cairo, Egypt, with the theme: “The Challenges, opportunities and Solutions for African EPCs- Perspective of the EPCs,” on Monday.
According to them, providing customized financial products and services to meet the specific needs of EPC companies could help to save over $50 billion in annual capital flight caused by foreign firms’ involvement in the execution of EPC-related contracts in the continent.
Engr. Emeka Okwuosa, Chairman/GCEO, Oilserv Group, while speaking during the panel session revealed that having access to cheap loans, guarantees, and trade finance facilities. would enable more African companies to compete for EPC-related jobs within the continent and beyond.
He noted that except African EPC companies can access more funds the continents can’t compete with the rest of the global economy.
Referencing the critical role of funds in infrastructure development which leads to economic transformation, he said, “When we talk about finance and funding, for us, in the oil and gas sector, we have a success story of the ongoing construction of the AKK pipeline at $2.4billion.”
On how and why Afreximbank should drive the process, he said: “The issue of funding is not about access but cost of the funds. Most African countries are not in a position to access funding in a way to be able to compete in terms of the cost of the funds relatively compared to the Chinese companies.
This is because, if you are bidding for an EPC contract and the cost, apart from your ability to execute in terms of your technical capacity, the cost enables you to win and execute the project profitably.
“Competing with the European, and Chinese companies is quite difficult because, at the end of the day, the margin of an African company does not come close to competing with the financial muscles of the Chinese which often than not does not build indigenous capacity but rather giving way to capital flight which are repatriated to develop their countries rather than injecting such in Africa.
“I believe, the AfreximBank should step up and create more access to funding for African EPC companies, and at a good rate because that is the only avenue capacity can be built. Also, we are looking at Afreximbank to solve problems and there are ways to go about it.
“When we talk about financing, from placement of guarantee for a project of a billion dollars project, the Chinese would present less than the budget because it’s been backed up by their government. Afreximbank can leverage its position of strength and be able to work with other financial institutions across African countries like the NEXIM banks of these countries.
“I will take into account the African Continental Trade Agreement and I’m sure there are some protocols that can be taken into account for a better synergy to be able to provide the basis for a more competitive financial system for such projects by Africans which will make a lot of difference.
“However, when you talk about Chinese and others coming in to run a project, they come in with finance at a cheap rate. However, these funds are being met with difficult conditions, part of which would be the minimum involvement of local content to provide finance for labor, materials, and equipment. If Afreximbank can take up the challenge, the value system will be improved.
“Another challenge is the ease of moving labour across Africa as well as building up of local content. When we tackle these challenges very well, capacity will be built. The ease of moving labour in Africa is very poor.
“For instance, Nigeria has, to a greater extent grown capacity but the ease of navigating this capacity across Africa is not too welcoming and seems impossible. This should not be so as we can grow the capacity of Africa for Africa development.”
Ahmed Elsewedy, Chief Executive Officer, of Elsewedy Electric, in his contribution, frowned at the current inconsistency in the political system in Africa, as many projects are either delayed or frustrated by this system.
He said, “The political uncertainty in Africa has made it challenging for EPC projects. For instance, in a switch from one government to another after an election, oftentimes, projects are dragged backward thereby, undergoing renegotiation.
“This process can sometimes take more than two years to be approved. That alone is a major setback to the EPC projects across Africa and this does not look good, but because we are ready to work, most times we continue with the project despite being unattractive and profitable.
On capital flight, he added that “capacity is never achieved when the projects are contracted to the Chinese or European companies. Africa has the capacity and the idea of taking the money back to China or Europe to develop is a system and challenge that will never grow capacity.”
Hassan Allam, Chief Executive Officer, of Hassan Allam Holding, speaking on the challenges faced by EPC’s companies in Africa, another panelist, identified infrastructure deficit, and lack of funding as a crisis rocking the sector.
He said, “The first challenge is the infrastructure deficit. Most of the African countries are faced with infrastructure challenges which include logistics and that of supply chain which is impacted on project executions.
“The second which is limited access to finance and skill gap in the African space and its contractors.”