Q&A: Egypt 'on the right track,' but needs to better market its potential: Prime Group's Tamer Wagih
Doaa A.Moneim, Wednesday 18 Sep 2019

In an exclusive interview, the head of Prime Group Tamer Wagih told Ahram Online that the economic reforms Egypt has embarked on in 2016 are “painful” but essential for the economy to thrive.

Prime Group is preparing to be listed for the first time on the Egyptian Exchange (EGX) through a real-estate company, Wagih said.

In addition, he said that the Banque du Caire is to be offered on the stock exchange by the beginning of 2020, and that its profits have increased by a factor of six in just two and a half years.

Ahram Online: How do you view Egypt’s economic situation on the back of its economic reforms?

Tamer Wagih: It seems that the economic reforms that Egypt has adopted since 2016 are hurting a wide range of people, and putting more pressure on them. But, in general, these reforms are essential for Egypt’s economy and have led to the best economic performance and growth. The situation today for Egypt is completely different from that of four years ago, as the Egyptian pound is doing well, and all signs are pointing to a healthy economic situation.

The current situation is due to reforms that were adopted in five key sectors of Egypt’s economy, which enhanced the Egyptian pound and provided hard currency, especially in exports, construction, and the oil and natural gas sectors.

This has created a stable state for Egypt’s economy and has had a positive impact on one of the key sources of hard currency, which is tourism.

AO: How is that?

TW: The tourism sector, in particular, yields an annual national income of $12 billion and it is a direct source of hard currency for the Egyptian economy. There is no doubt that Egypt is witnessing gradual progress at all levels and will be better in the forthcoming period, especially with the boom in the oil and natural gas sector now due to the continuing natural gas discoveries.

AO: What are Egypt’s potentials that can be tapped now?

TW: As I said, there are five main sectors that are playing a vital role in Egypt’s market and are full of investment opportunities that could be tapped. The oil and natural gas sector is first, and Egypt has made significant strides in this sector within a few years.

Border partitioning with Greece and Saudi Arabia has helped the sector see this surge. Border partitioning with Saudi Arabia, in particular, offers 12 new oil discoveries, as this region includes significant oil reserves according to the maps. Moreover, Egypt now has 12 oil concessions in the Red Sea, and each concession involves oil reserves worth $10 billion.

AO: And what about the construction sector?

TW: This sector is also a very attractive sector for investment and Egypt currently is one of the three top countries in terms of the surge in construction volume.

This sector will be at the top for two more years and then specialised contracting activity will appear as a promising investment sector in the Egyptian market.

AO: What do you mean by specialised contracting activity?

TW: This includes the glass, ceramic, concrete, steel, and marble industries, which are the industries that complement construction activity. This sector is witnessing a surge in the Egyptian market due to the surge in constructions projects.

The new cities that Egypt has embarked on establishing will be fully built within two years, but it will take about four years for them to be completely finished, and that will push the specialised contracting activity.

Moreover, President Abdel-Fattah El-Sisi stated during the last youth conference that there are 15 new cities yet to be built.

AO: What are the other potentials in such an important sector?

TW: Egypt has a heavy construction market which records EGP 1 trillion annually, especially after President El-Sisi stated that the Armed Forces Engineering Authority has overseen construction work costing EGP 2 trillion, while road projects alone cost about EGP 175 billion.

Thus, Egypt has significant construction projects that qualify it to be listed among the biggest countries in terms of construction volume worldwide. In addition, it paves the way for new players to enter the Egyptian market in this sector, to get involved in this significant number of projects.

AO: In your opinion, why is Egypt witnessing a surge in this sector now?

TW: Because it is a labour-intensive activity. It provides thousands of job opportunities which helps in reducing unemployment rates, which is part of the government’s policies and one of the main objectives of the economic reform programme.

AO: What are the other promising sectors?

TW: The services sector is one of sectors that is filled with investment opportunities ready to be tapped, especially in education and healthcare. This sector is very profitable so it is promising for more investment. It is the same situation for the IT sector, with Egypt’s move towards financial inclusion and digital transformation.

AO: One of Prime Group’s activities is exporting; given that, which export sectors have a competitive edge over others?

TW: The exports sector must be taken into consideration, as it is one of the most important sources of hard currency and maintaining the Egyptian pound, especially in food and pharmaceuticals.

Egypt has a competitive edge in these two areas now. Medicine prices in the Egyptian market are 10 percent lower compared to their prices in other Arab or foreign markets. The same goes for the food sector.

AO: How do you find the incentives the government offered to investors in the past few years and the efforts it is introducing in this regard?

TW: The establishment of companies has become easier than it used to be, as it does not take more than a week now to set up a new firm. Foreigners can establish a company that is 100 percent owned by them, while transferring dollars abroad has become less limited, compared to how serious this issue was four years ago.

Transferring dollars abroad or within banks is being implemented with no restrictions. And the most important incentive is that hard currency prices in the Egyptian market have become stable and are set according to the global prices which has generated stability in the financial operations in all sectors inside and outside Egypt, which is completely different than how it was at the beginning of the implementation of the economic reform programme. And we cannot ignore the security and political stability.

AO: So, what are the key challenges that Egypt’s economy is facing?

TW: The big problem is that we are lacking a good marketing plan. All sectors in Egypt are suffering from being unable to introduce their products to investors as they don't have a successful marketing plan that can show their potentials in each sector and the investment opportunities that can be tapped. That explains why Egypt, for instance, has not done well in sectors like tourism, exports, and investment till now although it has all the attractive potentials that are boosted by the incentives the government has offered over the past few years.

AO: Does it mean that Egypt is on the right track?

TW: Of course. Egypt now is experiencing the best phase in its ties with other countries and in the efforts it is making to boost the economy.

The executive bodies must play a tangible role to make use of this, and they must put in place all the right plans to market all of Egypt’s potential and investment opportunities. Investors need to be introduced to win-win approaches, and this is the right time to attract investments, due to all the incentives and reforms that Egypt is working on, which pave the way for economic flourishing.

AO: Regarding the economy’s performance, which type of economy is suitable for Egypt now to adopt and apply?

TW: The sharing economy system. It is well-known globally and is adopted in all economic types. This kind of business has became the richest around the world even without having assets; such as Uber, Amazon, etc.

This system allows for two or more investors to share their money and assets to establish new projects. And that is the system that Prime Group has begun to adopt. Prime has taken concrete action to acquire a company that is already listed on the Egyptian Exchange in the real-estate sector.

AO: So, it is Prime’s first experience on the exchange?

TW: It will be the first time for Prime to be listed on the Egyptian Exchange, and we will finalise the procedures of acquisition and listing before the end of 2019.

AO: What spurred you to take this action?

TW: The stock market is doing well and it needs new products to be listed, which helps in attracting subscribers and investors.

AO: Do you agree the planned IPOs will positively affect the state-owned companies and their assets?

TW: The IPO programme has led to a boom in all the companies even before they have been offered on Egypt’s bourse, as the IPO requires good marketing for the product and the companies to be stable and strong enough to be traded on the exchange.

AO: As a Banque du Caire board member, how did the plan for the bank to be offered under the IPO programme affect it?

TW: In preparing for the IPO, the bank’s profits leapt from EGP 1 billion to EGP 6 billion within just two years and a half due to accelerating our performance and the good marketing of our products which made it up-trend.

AO: Will it be offered on the exchange in 2019?

TW: No, by the beginning of 2020. It is totally ready for the IPO.

AO: The IPO programme is based on introducing new products to attract cash flows. What kind of products does the stock exchange need in the current phase?

TW: The IT companies will be beneficial for Egypt’s economy in general, and for the stock exchange in particular, if offered on the EGX.

It is a new product that will work up investors’ appetites, and it is an activity that is profitable for the state, businessmen, and the people, so, the market will thrive.

On the other hand, the sharing economy system has become the most attractive investment for all businesspeople around the world and is growing rapidly. This type must be adopted widely in the Egyptian market and needs to be attractive to be traded on the stock exchange.

AO: How do you evaluate the IPO impact on the listed companies?

TW: It will accelerate and improve its performance and management, and this will have a positive impact on its profits and revenues.

AO: In the past two months Egypt has witnessed a notable drop in its inflation and interest rates. How can this affect the economy?

TW: Foreign direct investment (FDI) is the largest beneficiary from the gradual decline in the interest and inflation rates, as they are signs of a healthy economy and are potentials that can be tapped today due to the lack of marketing policy, as I explained previously.

AO: As an investor in the pharmaceutical sector, how do you assess its performance in the Egyptian market?

TW: Its volume in the Egyptian market ranges between EGP 15 billion and EGP 20 billion. But the [global] hepatitis C market volume is $100 billion, diabetes is $100 billion, and cancer cures is $100 billion. The volume of these three types of treatments together records $300 billion, while they record in Egypt about $2 billion. Cures here are available at less than 50 percent of the international price.

AO: Is it true this sector is the only export sector that does not receive export subsidies?

TW: That’s true, but I am against appropriating subsidies for this sector. Egypt is experiencing a free-market phase which depends on productivity and adopts the concept of free competitiveness.

AO: What kind of challenges does this sector face?

TW: Registration of treatments is still the key challenge in this regard, as their fees are set according to the dollar price, despite manufacturing treatments in the domestic market, and these costs are set according to the domestic currency, which causes a great loss for companies.

On the other hand, there is stiff competition within the global medicine market that is hard for Egyptian drugs to stand up to.

AO: How do you find the relationship between the government and the business community at present?

TW: Businessmen and investors are witnessing easier cooperation with the government through a number of business forms like public-private partnerships (PPP) and the POT system. There is more transparency in offering projects to be invested according to the co-development system which allows the investor to make use of state-owned projects. But the government need to make use of all channels to market all the projects.