Rebooting the privatisation programme

Sherine Abdel-Razek , Thursday 16 Feb 2023

The government is selling stakes in 32 state-owned companies.

Rebooting the privatisation programme
Seven of Egypt s five-star hotels will be sold to strategic investors


Historic hotels, military-owned organisations, three banks, and two insurance companies are some of the companies included in the government’s to-be-privatised list announced by Prime Minister Mustafa Madbouli last week. The move aims at injecting much-needed investment, preferably in foreign currency, into the battered economy.

Madbouli said the government was selling stakes in 32 state-owned companies through sales to both strategic investors and share offerings to the public. The plans will be executed over the course of a year, with up to eight transactions to be executed in the first six months.

The privatisation programme comes as part of a new deal with the International Monetary Fund (IMF) under which Egypt is to receive $3 billion in direct funding in addition to $9 billion in pledged loans from international partners. It is also the fruit of almost a year of negotiations on what is known as the State Ownership Policy Document, which aims at doubling the private sector’s role in the economy to 65 per cent, with the government withdrawing from various economic activities over four years to attract $40 billion in investments.

Madbouli listed three banks: the Banque du Caire, which has seen its initial public offering (IPO) delayed several times over the last five years due to unfavourable market conditions; the Arab African International Bank (AAIB), one of the leading players in Egypt’s financial sector that is already 50 per cent owned by the Kuwaiti Sovereign Fund; and the United Bank of Egypt, which is said to be the target of negotiations by the Saudi Investment Fund. Also up for grabs are two insurance companies: Misr Life Insurance and Misr Insurance.

Two military-owned firms, bottled drinks firm Safi and petrol-stations operator Wataniya, are on the list. The two companies had been added to the pre-IPO fund managed by the Sovereign Fund of Egypt (SFE) to restructure them prior to the sale. Limiting the role of the military in the economy is another demand by the IMF that Egypt is committed to fulfil according to the loan agreement.

According to the list and statements by senior officials to local media outlets, 20 to 30 per cent of a newly formed holding company that will include seven of Egypt’s five-star hotels will also be sold to strategic investors. The names included are the gems of Egypt’s hospitality sector, like the Cairo Marriott Hotel in Zamalek, the Pyramids Hotel overlooking the Mena House, Aswan’s Old Cataract Hotel, and the Cecil Hotel in Alexandria.

The list also comprises profitable companies from different sectors, including ports, real estate, petrochemicals, and industrial companies. Notable on the list is the inclusion of two wind-farm projects in Gabal Al-Zeit and Zaafarana, as well as the Siemens-built combined cycle power plant in Beni Sweif. It was revealed last year that the Saudi Sovereign Fund is showing interest in the three facilities.

It was in 2018 that the government revisited its privatisation programme, saying it was planning to sell 23 companies including the Banque du Caire and oil company Enppi through IPOs in the local exchange, in addition to selling additional stakes in already listed companies. However, unstable market conditions due to the emerging markets crisis followed by the Covid-19 pandemic and the war in Ukraine put the plans on ice.

Observers believe that this time no delays will happen, as the government is in need of cash, especially from foreign investors to compensate for the outflows of portfolio investors abandoning their holdings in local treasury bills last year, stripping the economy of at least $20 billion. This added to the dollar crunch that resulted from an inflated food and oil imports bill resulting from the war in Ukraine.

The three devaluations of the Egyptian pound that took place last year have increased the appeal of the offered companies due to their attractively low prices.

* A version of this article appears in print in the 16 February, 2023 edition of Al-Ahram Weekly

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