File Photo: Egypt's Finance Minister Amr El-Garhy (Reuters)
The Finance Ministry announced last Sunday a list of 23 state-owned companies that will either sell their shares via an initial public offering (IPO) or increase the percentage of their free-floating shares on the local stock exchange.
Ten of the companies in the programme are already listed, and most of the companies slated for privatisation are profit-making and should see a stake of 15 to 30 per cent of equity going into private hands.
The plan, to be implemented over 24 to 30 months, aims to yield some LE80 billion as the overall value of the companies offered is an estimated LE430 billion.
The list ranges from banking and petroleum to real estate and industry, with names like cigarette producer Eastern Tobacco and real estate gems Heliopolis Housing and Medinet Nasr Housing also included. Banque du Caire is also on the list.
Finance Minister Amr Al-Garhi told the Al-Masry Al-Youm newspaper that the aim of the programme was to widen the ownership structure and increase the stock market capitalisation of the companies and give a boost to the value and volume of transactions on the stock exchange.
He added that the first batch would include four to five companies, which he did not specify, and that these would be put on the bloc by September or October.
The oil company ENPPI is expected to be the first to be privatised, according to Minister of Petroleum Tarek Al-Molla.
The offer of a stake in the state-owned bank Banque Du Caire has made the headlines several times over the last couple of years, but the offer has been delayed.
A senior official in Banque Misr, which owns 100 per cent of Banque du Caire, told Bloomberg that the IPO for Banque du Caire would be in the fourth quarter of 2018 and not before.
“We see the programme as positive for the market, as it will lead to larger market capitalisation as a result of the new IPOs and a larger floating market capitalisation due to secondary sales of stakes in already-listed securities,” the Cairo-based EFG-Hermes investment house said in a research report picked up by Bloomberg.
“This should help attract more capital inflow into Egypt and raise market turnover,” it said.
The last IPO for a state-owned company was in 2005 when shares of Telecom Egypt, the state’s landline monopoly, and oil companies Sidi Kerir Petrochemicals (SIDPEC) and AMOC, were floated.
The new list includes another stake in SIDPEC.
State asset sales are expected to drive market transactions, currently at LE1 to LE1.2 billion, to reach LE1.5 to LE2 billion by the time the IPO programme rolls around.
The market reacted positively to the news, with shares of companies included in the list like Misr Aluminium, Medinet Nasr Housing and Abu Kir Fertilisers ending in the green on Sunday and Monday.
“Selling stakes in public companies is a good way to tighten the budget deficit, lower public debt, and activate the capital market,” said economic expert Hani Tawfik. However, selling major and profit-making companies is unacceptable, he said. “We are selling profitable companies to fix a budget deficit. What are we going to sell in coming years,” he asked.
“There are better ways of privatisation, like putting the management in the private sector on a profit-sharing basis or leasing the companies to a manager, like for state-owned hotels, or even through capital increases,” Tawfik added.
Egypt adopted a wide-ranging privatisation programme in 1991 when it picked 314 public companies to privatise. Over 10 years, it divested parts or all of this number, including soft-drink bottlers, cement factories and steel complexes.
After the 25 January Revolution, court verdicts re-nationalised some of the privatised companies in cases accusing the government of selling them at prices lower than their fair value.
*This story was first published in Al-Ahram Weekly