- With Sharm El Sheikh soon to host Cop27, entrepreneurs and private equity investors are working to drive sustainable development in Egypt.
- Local group Sekem has developed a biodynamic farming model it hopes will provide an international example as well as producing carbon credits.
- Fintech group MNT-Halan is working to provide digital microfinance, while Catalyst Partners has launched what it says is the first impact fund in the Middle East and Africa.
A huge clean-up is under way in Egypt’s Sharm El Sheikh as a six-year, $64m project begins in the run-up to the Cop27 climate summit this coming November. The aim is to turn the country’s premier seaside resort into an “ecologically sustainable tourism city of national and international importance”.
Funded in part by a $6.2m grant from the United Nations Development Programme (UNDP) and agreed upon in June, the project will seek to improve waste management, protect biodiversity, cut greenhouse emissions and increase the city’s use of renewable energy. There are plans to electrify the city’s buses, ban single-use plastics, install 28 new electric vehicle charging stations and build a solar park with a view to ‘greening’ the international airport.
It will be a very public overhaul. Sustainable tourism is undoubtedly beneficial for the locale, but whether the capital will underpin positive ecological and social change remains to be seen – though it does accompany a push to develop a sustainable finance market in Egypt.
Meanwhile, several innovative companies in Egypt are also working on projects they hope will deliver lasting – and profitable – improvements in areas such as agriculture, microfinance and working conditions.
Sekem reimagines farming
Sekem is a group focused on sustainable development and social innovation. Founded in 1977 by Ibrahim Abouleish, it has created an ecosystem of businesses from a degraded desert landscape. At the company’s initial site north-east of Cairo, there have sprouted biodynamic farms, organic cotton, trading companies for fresh produce and processed foods, and pharmaceuticals and medicines businesses.
Sekem’s ambition is to turn Egypt into an organic and biodynamic agricultural system by 2057, integrating cultural, ecological, economic and social life to create a model of sustainable development that can be replicated elsewhere. Its ‘Vision 2057’ strategy sets 16 goals – including delivering rich and resilient infrastructure, climate change mitigation, a circular economy and ethical finance – and is aligned to the UN-backed Sustainable Development Goals (SDGs).
“We think we can rebuild the whole value chain from the farmer to the final product,” says sustainability director Maximilian Abouleish-Boes, “and change the DNA of how to work together and distribute capital, so it can maximise the benefit for society.”
This is not possible through Sekem’s operations alone, he adds, but through a growing network of (so far) 1,500 farmers covering 3,500 hectares, who operate and sell products under the group’s Egyptian BioDynamic Association.
Sekem wants to see broader adoption of what it calls the ‘Economy of Love’ (EoL), a reworking of the agricultural value chain to ensure farmers are appropriately compensated and protected from exploitation. It aims to achieve this by providing an EoL certification standard for products that are sustainable, ethical and transparent. This allows the consumer to trace how the product is made, its social and environmental impact and its “true cost”.
However, this set-up does not insulate farmers from market distortions caused by cheap foreign imports or products of conventional agriculture sold at a lower cost. What will bolster incomes and support essential ecosystem services is the ability to make money from CO2 sequestration (effectively, removal) and emission avoidance from sustainable farming systems in the form of carbon credits, says Abouleish-Boes.
Sekem says it is already a carbon-negative organisation, meaning it sequesters more carbon (14,699t last year) than it emits (3,704t of carbon dioxide equivalent, or tCO2e). It has developed its own EoL-certified carbon credits, which it currently sells at €25 per credit (see chart).
The credits were originally certified by Gold Standard, a voluntary system, but Sekem decided to certify its own credits because the barrier to entry for smallholder farmers was too high, says Abouleish-Boes, given a certification visit costs around €15,000. Sekem has put in place its own control mechanisms, accountability and transparency processes to protect the integrity of its project.
Switching from conventional to organic agriculture in Egypt could open the door to producing millions of carbon credits, he adds, which have the potential to generate “billions of pounds” in revenue. Sekem is talking to the Egyptian stock exchange about creating a platform for selling these credits.
MNT-Halan’s microfinance push
Another privately owned company that aims to support sustainable development in Egypt is MNT-Halan, a group of fintech businesses and Egypt’s largest non-bank lender to the unbanked and underbanked.
MNT-Halan serves some four million customers in Egypt and has disbursed some $2bn of loans. The group incorporates brands such as Tasheel, a microfinance provider; Halan, an e-payments and lending app; and Talabeyah, a fast-moving consumer goods e-commerce and distribution platform. MNT-Halan provides consumer loans from $20 to $100,000, with an average loan size of $1,200.
Technology is the biggest driver of social change and, in turn, digital banking is one of the most important drivers of sustainable development, co-founder and chief executive Mounir Nakhla tells Capital Monitor. “One could argue that access to money could be more important than access to electricity or infrastructure.”
Born into a family that worked in environment and sustainable development, Nakhla ran a business providing financing for light vehicles before setting up a microfinance company that for the first two years focused solely on lending to women. He established Halan as a ride-hailing and delivery business in 2018 before moving into e-commerce and wallet payments. Last year, it merged with Dutch company MNT Investments to form MNT-Halan.
The company is backed by African and international private equity and venture funds. It raised $120m in September 2021 from Apis Growth Fund II, Development Partners International and Lorax Capital Partners. In June this year, MNT-Halan’s microfinance subsidiary, Tasaheel, issued a $150m securitised bond as part of a wider $600m programme with Egyptian bank CIB.
Catalyst Partners: lending to mid-market firms
Another Egyptian company raising investment for sustainable development is Catalyst Partners. This year, it launched the Catalyst Capital Egypt Fund (CCE), which lays claims to be the first impact fund in Africa and the Middle East.
Catalyst Partners was set up in 2013 to serve Egypt’s “missing middle”: larger-scale SMEs that fell into the gap between the venture-backed start-up space and the more established corporates, which tend to be banked by larger financial institutions that look for bigger deals.
The fund’s limited partners include some of Egypt’s largest institutions, such as Misr Insurance, Banque du Caire, Attijariwafa Bank, Ahli United Bank, Suez Canal Bank and Al Baraka Bank. Catalyst raised E£450m ($35m) at its first close and is targeting E£1bn. It has made six private equity investments over six years, including into Qardy, an online platform connecting micro, small and medium-sized enterprises to credit providers.
Catalyst Partners’ focus on sustainability and governance was not originally driven by an international framework like the SDGs but because it made practical sense, co-founder Abdelaziz Abdel Nabi tells Capital Monitor. This was the approach Catalyst Partners took when transforming the working conditions of Cairo-listed MB Engineering.
“There was no air conditioning, no ventilation, no place for workers to have a break or a meal,” he says. When these points were addressed, at Catalyst Partners’ request, employee retention rates rose and the owner started to see the business case for better social policies and governance, Abdel adds.
Catalyst Partners is now backed by the UNDP, which is guiding it to establish a new business strategy using the UNDP sustainable finance hub’s methodology and to develop an impact measurement and management tool.
Many are sceptical of what Cop27 will be able deliver on climate action – in light of issues such as the intensifying US political backlash on ESG at both the federal and state level and the energy supply implications of the Ukraine war. The summit may at least provide local entrepreneurs with a chance to showcase successful sustainable business strategies.
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