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Tuesday, 01 December 2020

Egypt post-2014: State-owned assets and the trajectory for growth and development

Doaa A.Moneim , Monday 15 Jun 2020
File Photo: Egypt's President Abdel Fattah El-Sisi delivers an opening speech to commence the fifth national youth forum in Cairo, Egypt on May 16, 2018 (Photo Courtesy of President Sisi's official Facebook page)
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Egypt has adopted a vision to utilise state-owned assets, especially untapped ones, to serve as a real contributor to the country’s economic growth by attracting domestic, foreign, and regional investments in win-win deals. 

The total untapped state-owned assets record 4,800 units according to the Egyptian cabinet’s data, while the total tapped assets in the country number over 1 million units. 

In this regard, Egypt has adopted a vision focusing on three trajectories including the implementation of the initial public offering (IPO) program, launching a project for managing and exploiting state-owned assets, and establishing Egypt’s sovereign wealth fund, the first of its kind in the country’s history. 

In 2018, the government announced the launching of the IPO program with the aim of expanding the ownership base, providing additional funds for Egyptian companies, luring more investments and optimising state-owned assets through offering extra shares of the already listed companies or offering companies’ shares for the first time on Egypt’s stock exchange. 

The total amount of offered shares under the IPO program were estimated at EGP 80 billion approximately, and the market value of offered companies was around EGP 430 billion. Offered shares of companies were set to range between 15 percent and 30 percent unless public shares are lesser in value, according to the finance ministry. 

Before the COVID-19 crisis, the program was scheduled to be completed over 24 to 30 months in an attempt to expand the ownership base, market capital and daily trading volume through offering the shares of 22 companies in seven sectors, including petroleum and refining services, petrochemicals, logistic services, financial services, real-estate, customer service and industry.

Egypt launched the first phase of the program in March 2019 through floating extra stake (4.5 percent) of the already listed Eastern Company for Tobacco on the EGX, and, before the COVID-19 crisis, was preparing to resume the offering of other companies listed in the phase. 

After the COVID-19 crisis hit all stock markets around the world, including Egypt, the government decided to postpone the program until further notice, considering to set a new plan for the IPO program in accordance with the new developments in light of the COVID-19 outbreak. 

For the state-owned assets and properties management project, Prime Minister Mostafa Madbouly announced in May that the government has completed the first phase of the project which included refining and establishing a database that contains all data and information regarding state-owned assets that are ready to attract investments. 

The second phase is preparing the unified contract system, in addition to designing a mobile app that allows investors to recognise the available state-owned assets and properties that are ready to be exploited. 

For the untapped assets and properties, Egypt inaugurated its sovereign fund under the name the Sovereign Fund of Egypt (TSFE) with the aim of attracting private investments to the Egyptian market, promoting and co-investing in state-owned assets to maximise their value and efficiency for the Egyptian economy with EGP 200 billion as capital. 

According to the TSFE data, the fund is fully independent and its work is based on deep partnership and cooperation with the private sector, stemming from its key role in development and growth. 

Since its inception in 2018, the fund inked three agreements, two of which aim to maximise investment in assets owned by the Ministry of the Public Business Sector and the National Investment Bank, while the third agreement was signed in June to improve the historic area of Bab El-Azab. 

It also inked an agreement with the National Service Products Organisation which targets rehabilitating its untapped assets to be ready to receive investments. 

Recently, Egypt’s sovereign fund placed 43rd among the 93 sovereign wealth funds globally in terms of asset size, in a set of rankings created by the Sovereign Wealth Fund Institute (SWFI).

It has also ranked eighth in the Arab region.

Egypt’s fund has total assets worth $11.959 billion, accounting for 0.14 percent of the total assets managed by all sovereign wealth funds globally, which have total assets of $8.229 trillion, according to SWFI.

However, the COVID-19 crisis has pushed the fund to rearrange its plans and priorities in accordance with the developments in the crisis.

In this regard, CEO of TSFE Ayman Soliman told Ahram Online that the fund has to adapt with the ongoing crisis through focusing on three main sectors in the coming period, including health, food and industry, as they are promising areas in the Egyptian economy that are qualified to attract investments.

In addition, Egypt is among the top three countries in Africa that enjoy a solid manufacturing infrastructure, which qualifies it to focus on industrial projects over the medium and long terms.

In the long run, Soliman said that the fund will work to boost strategic regional and international partnerships and explore commercial investment opportunities abroad.

Soliman also revealed that the fund targets EGP 50 billion in revenues from utilising untapped state-owned assets.

He also noted that financial technology (FinTech) and pharmaceutical manufacturing are among the new sectors to which the fund aims to expand its activities, especially with the increased roles that these sectors are playing during the ongoing crisis.

On 7 June, Minister of Planning and Economic Development Hala El-Said unveiled new amendments to the Law 177 of 2018 that organises the fund’s work, which includes changing its name to the Sovereign Fund of Egypt for Investment and Development. 

El-Said also noted that the fund plans to establish a number of sub-funds covering tourism, FinTech, infrastructure, digital transformation, and real-estate investment over the medium and long terms.

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