Egypt is embarking on an ambitious structural reform program aimed at developing the economy and enhancing the well-being of its citizens. Spearheading these efforts is Dr. Hala Elsaid, Egypt’s minister of planning and economic development as well as chairperson of Egypt’s Sovereign Wealth Fund. The current reforms place significant emphasis on national benefit, with a direct focus on improving the economic welfare of the Egyptian people.
The tightening of screws on Egypt’s Sovereign Wealth Fund signifies the ongoing reforms, which prioritize investments from both local and foreign funds. This strategic approach aims to ensure a stable and secure economy for future generations, moving away from the currency shortage crisis that has recently affected the nation’s economic landscape.
Elsaid’s notable accomplishments include receiving recognition as the Best Arab Minister by the Arab Government Excellence Award in November 2020. Additionally, she currently serves as the chairperson of Egypt’s Sovereign Wealth Fund, building upon her prior experience as the minister of planning, monitoring, and administrative reform from February 2017 to December 2019.
Given the current state of Egypt’s economy, the following interview with Elsaid sheds light on the economic strategies and frameworks being implemented, as well as the opportunities and challenges that lie ahead.
What mechanisms are being implemented to increase private sector participation?
One of the key objectives of the National Structural Reform Program is to enhance private sector participation, serving as a fundamental pillar. The State Ownership Policy document complements this program by offering a diverse set of tools designed to facilitate collaboration with the private sector. These tools include the provision of specific assets or corporations, thereby stimulating the circulation of capital. In some cases, the private sector may assume management responsibilities, possess utilization rights, or acquire a partial stake in state-owned companies or assets.
Egypt’s Sovereign Wealth Fund operates as the investment arm of the state, with the primary goal of promoting increased involvement from both local and foreign private sectors, while maximizing returns from state-owned assets. It is important to emphasize that the Sovereign Wealth Fund is owned by the Egyptian people and is dedicated to preserving the nation’s wealth for future generations.
The growing interest among Egyptian investors in the Initial Public Offering (IPO) program sends a positive message and serves as evidence of significant Egyptian entities capable of attracting foreign capital. Moreover, the increasing influx of foreign capital serves as a clear indicator of confidence in the Egyptian economy, demonstrating the trust that local investors have in its potential. Currently, the government’s foremost focus is on optimizing returns from state assets. This objective can be achieved through extensive cooperation with the private sector, fostering a mutually beneficial partnership that paves the way for success.
In recent times, what specific efforts has the Egyptian government made regarding the IPO program? Additionally, could you provide us with information regarding the hotel group that was awarded to ICON?
Recently, Egypt achieved a significant milestone by generating $1.9 billion through the successful sale of shares in state-owned companies. As part of its ongoing efforts to promote investment opportunities, the government has appointed an international financial advisor, with a particular focus on historical heritage sites, including the old ministry buildings in Cairo.
In line with these initiatives, a company that owns multiple hotels recently presented itself to a group of investors, seeking to raise capital for a minority stake in these establishments. Following multiple offers, the ICON Group emerged as the chosen partner, securing a 37 percent increase in capital amounting to $700 million. This strategic partnership combines the expertise of local and foreign investors, with the primary objective of enhancing operational efficiency and facilitating the development of hotels, thereby attracting a larger number of tourists. These endeavors are aligned with the government’s ambitious goal of welcoming 30 million tourists annually.
Furthermore, the Abu Dhabi Developmental Holding Company (ADQ) has acquired minority stakes ranging from 25 to 30 percent in three prominent corporations: Ethydco, Egyptian Drilling, and Egyptian Linear Alkyl Benzene (Elab).
Can you tell us about the government’s divestment from Al Ezz Dekheila Steel Co. (EZDK)?
During the recent period, the government has made its third offering involving the divestment of EZDK, a prominent private sector investor in Egypt, along with their expressed interest in acquiring the remaining state shares. The National Investment Bank (NIB) has been entrusted with overseeing the public offering process for approximately eight entities. As part of this undertaking, around 31 percent of public sector shareholders were divested, resulting in a substantial sum of $241 million. This strategic move was undertaken to empower the company to carry out its investment expansion plans and facilitate the localization of additional industries associated with the steel sector.
What about the reforms that the government is currently working on? What specific procedures are being followed?
The government is currently engaged in the process of issuing an IPO related to the Gabal El Zeit wind farm. To select the most suitable investor, a competitive bidding process was conducted by the sovereign fund. Various non-binding offers were received and thoroughly evaluated, leading to negotiations with prospective investors to determine the highest offer. In June 2023, the investor who presented the most favorable offer was chosen. It is important to mention that this investor has been granted a 60-day exclusivity period to conduct due diligence. The final decision is scheduled to be announced in October, with the anticipated value of the wind farm exceeding $300 million.
In regard to the national company, the opening of its data center took place in late February, generating significant interest. Six non-binding offers were received, and progress has been made with three qualified applicants. The due diligence process has already commenced, and the announcement of the award is expected to take place between October and November of this year.
What initiatives are being carried out in regard to water desalination plants?
The government is currently working on a new proposal regarding water desalination plants. As part of a comprehensive five-year plan developed by the Egyptian government and the Ministry of Housing, a total of 21 stations with a combined capacity of 3.3 million cubic meters per day are set to be established. The initiative, which has a target date of 2025 to become fully operational, involves initial investments exceeding $3 billion.
To facilitate this initiative, the Sovereign Fund is collaborating with the Ministry of Housing, along with committees from the Ministry of Finance and the Prime Minister’s office, to conduct a thorough study. During the pre-qualification stage, over 90 investors from 30 countries expressed their interest, and after careful evaluation, the committee and the fund have qualified 17 coalitions of investors. The initial offering will include four stations and is scheduled to take place in the fourth quarter of 2023. Additionally, Siemens is working on a separate station that is expected to be completed in the first quarter of 2024.
Are any new projects excluded from the investment plan? And why are these exclusions made?
The Cabinet has taken a decision to streamline capital expenditure in the state’s investment plan for the upcoming fiscal year. Consequently, all new projects that have not yet been implemented will be excluded unless they are deemed absolutely necessary. The plan prioritizes ongoing projects, aiming for a 70 percent execution rate.
Moreover, projects involving a financial component will also be excluded. This decision highlights the significance of directing state resources toward the most vulnerable groups and social protection programs. The total value of the excluded and deferred projects amounts to approximately 247 billion Egyptian pounds. These projects encompass various sectors, including housing and utilities, transportation and roads, as well as communications and information technology.
For more news on the economy, click here.