The importance of formulating the general policies of countries in times of crisis emerges, especially with economic crises that make them reconsider formulating their economic policy.
With economic developments at the global and local levels, and Egypt going through an economic crisis that is well known, the role of experts in formulating economic policies that can chart the best ways to overcome the crisis.
Daily News Egypt interviewed Moustafa Moharram, Founder & CEO at Moharram & Partners – Public Affairs & Strategic Communications, in order to identify the most important policies that Egypt must follow to get out of the crisis, in addition to seizing the opportunities generated by crises.
Could you tell us about the company?
We are the first specialised advisory group in the field of public affairs in the Middle East and Africa, to support institutions in communicating with governments regarding the legislative and regulatory frameworks regulating investment, and studying risks and partnership opportunities available in various sectors.
We started working about a decade ago, as the first specialised group in the region, starting in Cairo, and we are currently present in more than 20 countries, starting from Egypt to South Africa, and from Morocco to Pakistan, passing through Turkey.
The group plays a role in representing companies before governments, and seeking to create a better political environment for our clients and partners, so that they can focus on what they do better, including developing and operating their operations, implementing public offerings, and achieving profits.
How much is the size of the group’s customer base currently?
The group has provided advice to more than 80 current clients of companies in various sectors to serve about 19 different sectors for clients of the largest international companies, on top of which are the sectors of industry, e-commerce, financial technology, communications, banking services, construction, transport, finance, education, health, payments, in addition to other sectors, and the most prominent advice came in the study of risks associated with economic and legislative policies.
How do you see the economic crisis that Egypt is currently going through?
Egypt is able to overcome the crisis, with the need to put the economy on a real basis, which includes a reformulation of economic policies, and work to increase dollar sources for the country by creating new sources based on benefiting from the enormous potential of the Egyptian state.
Egypt, like many countries, is suffering from a severe economic crisis with high inflation rates as a result of the consequences of the Russian-Ukrainian war, in conjunction with the repercussions of the Coronavirus crisis on the Egyptian economy, which has not yet recovered.
The Egyptian government estimated the cost of the direct impact of the Russian-Ukrainian war on the country’s budget at about EGP 130bn ($7.1bn) annually.
The government IPO and asset monetisation programme to solve the dollar liquidity crisis that Egypt is going through is a temporary solution in the short term. To maximise the benefit from the programme, it is necessary to overcome the obstacles facing investors wishing to invest in the government offerings programme.
Last February, the Egyptian government announced a government asset monetisation programme that includes about 32 Egyptian state-owned companies with the aim of selling shares to strategic investors or public offerings. The companies are distributed in about 18 different economic sectors.
When developing a programme like it in light of an economic crisis, there is no luxury available to choose investors, but with the presence of an international advisor such as the International Finance Corporation (IFC) as a reliable international institution, a “neutral party” that will give investors a strong message of reassurance, especially foreign ones, and reflects the change in government policy towards seeking international expertise.
It is necessary to change the mental image of the government’s offering programme among the masses of citizens, and clarify the full dimensions and added value of offering state assets for investment, and the positive results that will return to society, such as highlighting its role in attracting foreign direct investment, resolving the crisis, and creating new job opportunities.
The strong role played by the Sovereign Fund of Egypt in maximising the value of state assets, supporting the investment climate and improving the investment environment in Egypt. Moharram group is working on discussing a number of proposals to maximise the investment situation in Egypt in cooperation with the fund, and consultations are still ongoing. In this regard, we seek to strengthen the link between investors and the Sovereign Fund of Egypt in the current period.
It is necessary for the fund, during the coming period, to have a role in shaping the mental image of the government offering programme in the Egyptian society, and communicating with the local community to identify its most important demands and needs, and then presenting them to the foreign investor who wants to enter the Egyptian market through certain assets that the fund offers in certain regions, because of the fund’s role in facilitating and accelerating government procedures, and providing strategic information and data to investment partners, which helps them to make informed decisions, which would improve the business environment and promote investment.
Provided that you are a group that is constantly in contact with foreign investors, what is the nature of the problems they face in the Egyptian market?
During the last period, the state was able to create various entities and structures to support investment. However, through talks with foreign investors, it became clear that there are no clear mechanisms through which the investor can communicate their problems to the concerned authorities. The most prominent problems facing investors are two main problems, the first: the price of exchange rate, where the existence of two exchange rates for the Egyptian pound against the dollar is not attractive to foreign investment, especially with the scarcity of dollar liquidity in Egyptian banks.
Egypt is facing a crisis in foreign exchange shortage, in the wake of its negative impact on the repercussions of the global inflation wave and the Russian-Ukrainian war, which caused the exit of billions of dollars in indirect foreign investments, and an increase in the import bill of basic commodities, most of which are imported from abroad.
Second: Some Egyptian governmental bodies do not keep pace with the developments of global investment vocabulary, and then the government must seek the help of specialised teams from the private sector, capable of dealing with the investor, as this is an important factor for the sustainability of investment transactions so that they do not collapse during the coming years.
Would the geopolitical changes in the region attract foreign investments to Egypt?
Political alliances in the region are different, and new economic alliances entail new ones. The Ministry of Foreign Affairs is required to pay more attention to providing greater support for Egyptian companies that want to expand abroad, and to be present in economic forums at the regional level. It must include delegations that accompany the official visits of the president to several countries, or visits at ministerial levels, a group of businessmen who own the language of consultation with their counterparts in these countries, and can deal with the investment vocabulary and economic sectors in these countries, and employ the visit to achieve economic gains optimally, which has a great impact on attracting investments to Egypt.
From the womb of crises, opportunities are born. What are the opportunities available in the Egyptian market now?
There are many opportunities, the depreciation of the currency is like a new starting point for many countries of the world, led by India, it represents a challenge in the short term, provided it is dealt with well, it could be a new starting point for Egyptian exports. The tourism sector and information technology can benefit from its price competitiveness relative to similar services offered by other countries in the region, and in order to take advantage of the opportunities, it must be accompanied by real structural and institutional reform to support productive institutions.
What is required to overcome the currency crisis?
The currency crisis is more a symptom of economic crises than the disease in itself. The most important thing in the short term is to bridge the financing gap, such as the government’s intention to start a programme of government offerings, focus on the tourism sector, and target a specific segment of investments that would help the state to overcome the crisis, and one of the solutions proposed in the medium term is to encourage Egyptian companies to be present in several markets in the region while preserving their financial centre in Cairo, which helps in solving the foreign exchange problem.
As for the most important solutions proposed in the long term, it is represented in the necessity of restructuring the economy to be based on exporting abroad, and reorganising the investment system in Egypt.
The Egyptian government revealed a gap in external financing amounting to $16bn over the course of about 4 years, but it expected to reduce it and secure sufficient funds to fully cover its needs after the conclusion of the agreement with the International Monetary Fund, which may encourage investors abroad to pump new investments in the country.
Is the current credit rating of Egypt a problem for foreign investors?
The foreign investor looks at international indicators to assess the risks of investments and take decisions. Of course, the credit rating is important, but it is not the only indicator that is taken into consideration. The government does not adequately consider these indicators, and they are important for understanding how the world views Egypt. Economic, investment and other indicators, and developing action plans to improve Egypt’s position in these economic indicators.
As for the government IPO programme, do you think that state-run companies were evaluated accurately?
The ceiling of ambitions regarding the programme should not be raised in its initial stages, as the first stage has a specific nature for certain goals in light of the economic crisis.
The performance of the Administrative Control Authority and its new role in supporting investment and solving investors’ problems is good. It is important to create a sustainable mechanism adopted by the Authority to measure investors’ view of the investment environment in Egypt.
Do we still need a ministerial portfolio for investment?
Undoubtedly, we still need the ministry of investment, but the question lies in its terms of reference, as it must have the necessary powers, and that it has a central authority to ensure the coordination and harmony of the various sectoral policies, especially since in light of the multiple organisational structures in Egypt, there is no specific channel of communication to solve the administrative and legislative problems related to the private sector, so the existence of a Ministry of Investment is a necessity, not a luxury.
Many companies seek to exit Egypt, how can we turn things around?
Existing investors need messages of reassurance to stay in Egypt. The state should take care of the interests of the investors in Egypt and treat their problems instead of increasing the burden on them.
The formation of a new economic vision is vital, to translate the many ideas into real policies, as the laws regulating industry in Egypt since the fifties, and the entire legislative framework are outdated, and a unified industry law must be put in place, and the bodies entrusted with industry licences should be restructured, and a new window should be created for the private sector to obtain licences and transactions with companies, such as what happened in Morocco, where transactions were changed for the private sector, which is able to deal with foreign investors.
How do you see the Saudi market?
The most important thing is the volume of development witnessed by the Saudi market, which is characterised by a large volume of financing for projects, and a comprehensive vision to attract investments and develop the Saudi economy, indicating that the development that the Saudi administration is making during the current period is capable of facing the challenges of the legislative and regulatory environment needed to attract foreign investors.
There is a large space for economic integration between Egypt and Saudi Arabia in various sectors. The presence of Egyptian companies in the Saudi market represents a good investment opportunity for them. Therefore, it is necessary to seek an integrated vision between the Egyptian and Saudi economies, in various sectors such as industry and tourism.
How do we legislatively protect financial centres of companies in Egypt?
We need to provide competitive tax policies and facilitate its procedures, facilitate the transfer of profits, provide dollar liquidity for production requirements, and maintain the stability of legislation and economic procedures in a manner that keeps pace with the global investment environment.
