A handful of economic news was revealed last week with the expectation of an influx of foreign funds. New privatisation deals are being discussed, billions of dollars in Saudi investments are promised, and a Eurobond offering is in the making.

After months of no talk about privatisation, the programme is picking up speed with news of offers of stakes in two banks and Egypt’s largest telecommunications company in the next few months.

Privatising state-owned companies is a means to attract foreign direct investment (FDI) to support the country’s foreign-currency resources. In its third review of the reforms accompanied by an $8 billion augmented loan, the International Monetary Fund (IMF) in July called on Egypt to accelerate its programme of divestment of state-owned enterprises.

The government aims to sell $3.6 billion in state assets by the end of June 2025 as part of the programme.

Last year it unveiled an initial list of 35 companies it planned to offer to investors.

In the second half of 2023, the government finalised deals to sell stakes in seven historic hotels, three chemical companies, the tobacco monopoly Eastern Company, and the steel company Ezz Al-Dekheila.

However, “the pace of privatisation is slower than it should be mainly because the instability in the exchange rate before devaluation meant that investors were not able to know at which dollar price they should finalise their deals,” according to one economic expert who asked to remain anonymous.

“In addition to the stable exchange rate, the economy is now showing signs of recovery, manifested in an inflow of Gulf investments, like for the Ras Al-Hekma deal and the $5 billion Saudi Arabia promised to inject into the economy last week,” she added.

Such news is a sign of the stability that will attract good offers for the state-owned enterprises slated for privatisation.  

According to a statement by the Central Bank of Egypt (CBE), the United Bank of Egypt is to debut on the local bourse in the first quarter of 2025 through an initial public offering (IPO). The CBE owns the majority of the bank.

People close to the deal told local financial dailies that selling an additional stake to a strategic investor is also being considered. The announcement came just a few days after news that the government is considering accepting an offer by the Italian Intesa Sao Paolo group to buy the 20 per cent stake the latter does not own in the Bank of Alexandria.

In 2006, the Italian group bought 80 per cent of the then-public bank. It is also rumoured that a stake in Telecom Egypt, the country’s largest telecoms company, will be put up for sale.

But news about the United Bank consumed most of the ink this week, as it has been eyed by the Saudi Investment Fund, the Kuwait Finance House, and the Qatar Islamic Bank for the last two years. However, disagreements about the bank’s worth due to the volatility of the exchange rate have prevented finalising a deal with any of the three parties.

According to Enterprise, a daily economic newsletter, the deal to sell the United Bank was expected to yield LE22 billion before last March’s devaluation, equivalent to $700 million.

Six months on, with the dollar changing hands at LE48 compared to LE30.9 before the devaluation, the transaction is worth less than $450 million.

The CBE statement put the value of the bank’s total assets at LE106 billion. It did not specify the size of the IPO or the exact date of the offering, but it noted that it would be subject to market conditions and the timely receipt of the relevant regulatory approvals.

The $5 billion investment that the Saudi Public Investment Fund (PIF) said last week it was injecting into Egyptian investments will not be channelled into any of the above-mentioned deals.

The promised investment is the “first phase” of a larger programme of investment, according to Prime Minister Mustafa Madbouli, that will see Saudi private-sector companies and the PIF doubling their investments in renewable projects and seawater desalination plants over the coming period.

Madbouli, who visited Riyadh last week, said that the promised investments are not related to the deposits Saudi Arabia has made at the CBE. A sum of $11 billion out of the $35 billion Ras Al-Hekma deal was in the form of transferring a deposit to investments.

Commenting on the PIF’s interest in the country, Aya Zoheir, head of research at Zilla Capital, noted that the recent electricity price hikes and fuel subsidy cuts would improve the competitiveness of Egyptian renewables projects and make them a profitable investment.

She added in a research note issued this week that the Saudis are not new to such fields, giving the example of Saudi Arabia’s ACWA Power, the world’s largest private water desalination company, which has invested $2.5 billion in Egypt in the last few years.

In the renewables sector, ACWA has investments in the Benban Photovoltaic project, the Gulf of Suez Wind Power project, and green hydrogen facilities.

In a weekly press conference, Madbouli told reporters that his visit to Riyadh last week, President Abdel-Fattah Al-Sisi’s meeting with the German president in Cairo the week before, and meetings of the Egyptian-Kuwaiti Joint Committee in Cairo had all aimed at attracting more investments.

During the same conference, he said that the government has chosen five spots on the Red Sea coastline, including Ras Banas, to offer to investors to develop deals like that of Ras Al-Hekma.

While Madbouli did not name the spots, observers believe Sharm El-Sheikh’s Ras Gamila is one of them. In April, the Saudi Ajlan and Bros Holding Company filed an offer to secure a land plot in the area to establish 10 hotels in a first phase with investments of $1.5 billion excluding the value of the land.

The government is seeking a steady supply of FDI from the sales of state-owned assets to cover the gap in its hard-currency resources, which led to Egypt being late in paying foreign liquefied natural gas (LNG) producers, leading to a slowdown in production and pushing the country to follow the load-shedding schemes that resulted in daily blackouts for most of the summer.

Finance is also being found on the international capital markets through a Eurobond offering. For the first time since late 2021, Egypt plans to collect $3 billion from the international markets via dollar-denominated international bonds, which might include Sukuk (Islamic bonds), before the end of the current fiscal year in June 2025, according to an unidentified government source speaking to the financial news agency Bloomberg.

According to the news agency, Egypt’s dollar debt is the fourth best-performing among its peers this year, with a total return of more than 30 per cent, more than three times the average across emerging markets.

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* A version of this article appears in print in the 26 September, 2024 edition of Al-Ahram Weekly