In August 2015, Egypt expanded the size of the Suez Canal, a man-made Canal that links the Mediterranean Sea and the Red Sea following financing from Egyptians who bought investment certificates worth USD 3.6 billion (13 trillion Shillings) with a maturity period of five years and an interest rate of 15.5 per cent.
The Egyptian Government has encouraged African states to stop taking on expensive infrastructure loans and rely on its citizens to invest in projects through buying investment certificates.
In August 2015, Egypt expanded the size of the Suez Canal, a man-made Canal that links the Mediterranean Sea and the Red Sea following financing from Egyptians who bought investment certificates worth USD 3.6 billion (13 trillion Shillings) with a maturity period of five years and an interest rate of 15.5 per cent.
The canal is the shortest trade link between Europe and countries on the Indian and Pacific Oceans.
In an interview with URN at the canal, Khalid Taha, Egypt's Head of Foreign Public Relations said that although the first idea to finance the expansion of the canal was to borrow from foreign funders, the President, Abdel Fattah el-Sisi called upon Egyptians to involve themselves in the project by buying investment certificates.
He said over one million individuals and some Egyptian companies bought certificates.
According to Khalid, they were overwhelmed to raise over USD three billion in just eight days from Egyptians who hoped for a profit in the next five years.
He says this kind of financing which comes out of the citizens' trust is something that several African countries can adopt so as to stay out of the loan burden. He says involving locals means owning the project, but also means there is no international pressure.
Khalid says it's now joy, as Egyptians get their interest and the Canal makes more money.
//Cue in; “And this month…
Cue out…new Suez Canal.”//
He says Egypt has learnt from the experience of the Suez Canal expansion that they do not need to go out to borrow money, but have the citizens stand with them.
The expansion of the canal by digging a parallel way enhanced the capacity from 49 to 81 transiting vessels in one day at 6.1 million tons and also saw a significant decrease of the transit time from 22 to 11 hours, thus reducing the overall trip.
The Suez Canal Authority generated the highest annual revenue to a tune of USD 5.9 billion in the financial 2018/2019. The Egyptian Government in September started disbursing interest from the Suez Canal certificates that was based on a five-year investment plan.
The International Monetary Fund (IMF) and the World Bank has warned that Africa is heading towards a debt crisis.
The World Bank classifies 18 countries as at high risk of debt distress where debt-to-GDP ratios surpass 50 per cent and the total amount of external debt for the continent is estimated at USD 417 billion. Uganda’s debt has hit 42 trillion Shillings.
Like most African countries, China is the largest creditor to Uganda disbursing 39 per cent of the total credit in the financial year 2017/2018, surpassing the traditional creditors such as the World Bank (21 per cent) and the African Development Bank (8 per cent).
Alex Otto
Freelancer