The Egyptian government is preparing to offer 20 state-run companies, whether through a public offering or selling a share to a strategic investor, with the aim of increasing the participation of the private sector in the Egyptian economy to 65% over the coming three years.
At the end of last year, the state adopted the “State Ownership Policy Document” to allow more room for private sector participation in generating economic growth and increasing levels of investments and exports.
Prime Minister Mostafa Madbouly said that the government will announce, after its meeting next week, the timetable for offering stakes in more than 20 companies owned by it for the first time on the Egyptian Exchange.
Madbouly added that the timetable for offerings will be for about a full year, provided that the main objective of offering operations is to expand the ownership base, increase capital, restructure and expand through individual and institutional investors, stressing that the offerings will be a mixture between offering on the stock exchange and strategic investors.
He mentioned in a press conference on Thursday that a number of companies that will be offered will be ready within a period of three months, some of them will need five months, and others by the end of the year, according to the circumstances of each company, but the companies that will be announced within a general time period will have been offered.
He added that the twenty companies will be offered for the first time, and will be a mixture of offerings on the stock exchange or for a strategic investor through the state ownership policy document.
Yasser Al-Masry, Managing Director of the Arab African International Securities, said that the market is ready to receive a number of government offerings, not all of the number expected to be offered, pointing out that the success of the first offering will give impetus to the next offering, and so on, explaining that the completion of the program will depend on the success of each offering.
He explained that there should be a period of time between each offering in order to give investors the opportunity to make a profit from the offering and enter the next offering, stressing the importance of choosing the appropriate times to ensure success.
Al-Masry identified several factors that must be present in the upcoming government proposals to ensure their success. The first of these is the companies to be offered that must be different, tell a success story and achieve profitability, and a logical sequence for the proposals as well, in terms of the strength of the companies that will be offered, especially those that do not have representation on the stock exchange.
He nominated some sectors, especially the petrochemicals and fertilizers sector, the industrial sector, and various companies operating in the petroleum and gold sectors, for example, stressing that the important element in the success of the offering is choosing the offering manager who has a large customer base, whether inside or outside the Egyptian market.
Tarek El-Molla, the Egyptian Minister of Petroleum and Mineral Resources, said last Thursday, on the sidelines of the launch of the “EGYPS” exhibition, that up to half of the 20 companies scheduled to be offered on the stock exchange or to strategic investors belong to the oil and energy sector, stressing that “Enppi” is still among the companies of the oil sector. The list is also supposed to include Egyptian Linear Alkyl Benzene (ELAP) and Wataniya Petroleum.
Monsif Morsi, head of the research sector at CI Capital, said that overcoming the challenges facing the Egyptian economy in general is represented in increasing the participation of the private sector, and the import problem has greatly affected Egypt’s economic performance, and its solution gives the economy a strong outlet.
He nominated that the sectors of banking, energy, transportation and shipping be among the most prominent companies that must offer shares of them within the offering program to increase the depth of the stock market, suggesting that companies in the consumer sector or those with export activity have greater opportunities for growth during the current period. The first half of the year will witness Interest rates being raised by 2%, indicating that the central bank will follow a strict policy during the coming period.
He expected the inflation rate to reach between 22-24% during the first six months of this year, and 15% during the second half of this year.
At the end of last year, the government announced the establishment of the Pre-IPO Fund as a sub-fund of the Sovereign Fund of Egypt, which aims to prepare companies to be offered on the Egyptian Exchange, by offering a share of them to a strategic investor to maximize their value.
Informed sources revealed to Daily News Egypt last month that the mechanism of the Pre-IPO Fund, which was established by the Sovereign Fund of Egypt, works, and that it will be a fund for each company emerging from the main fund.
The sources pointed out that the aim is for each company to have a separate fund to facilitate the investment option for investors interested in a specific company, or to invest in a specific activity, in addition to the different nature of each activity from the other.
Amr El Alfy, head of the research sector at Prime Holding, expected that the volume of foreign direct investment in Egypt would increase during the current year, as a result of the state’s progress in implementing the government offering program in parallel with the provisions of the state ownership document that includes an exit from some economic activities, as it is scheduled to be offered.
He added that the stability of the local currency exchange rate against foreign currencies, specifically the US dollar, will determine the sustainability and volume of new investments in the Egyptian market on the stock exchange is still unclear, and the announcement of the timetable and details by the government is scheduled to carry greater clarity within the framework of targeting the involvement of the private sector in the economy in the coming period.
In its annual report on the 2022 harvest, the Egyptian Exchange revealed the readiness of 12 companies to be listed on the Egyptian Exchange, which will contribute to revitalizing the market and attracting new investors.
Mostafa Shafie, head of the research sector at Arabeya Online, suggested that the shares offered by the Egyptian government in the 20 companies to be offered would be mostly to a strategic investor with the aim of attracting dollar liquidity.
He added that the main factor that the state must provide to attract more Gulf and foreign capitals is to create a safe investment climate, explaining that all economic conditions must be created by controlling the huge and others so that the investment picture becomes clearer for the targeted investors.
He pointed out that a flexible exchange rate policy must be followed in order to provide dollars in banks, because exchange rate fluctuations represent a challenge for mergers and acquisitions deals.
