Return to leadership: Private sector is main beneficiary of government’s IPO programme

Fatma Salah
22 Min Read

Daily News Egypt has held its first annual summit for the most influential figures and firms in Egypt, entitled “Leadership in Times of Crisis”. The first session in the conference was entitled “The Government IPOs, and the Private Sector’s Return to Leadership”. It witnessed the participation of Ayman Soliman, the Executive Director of the Sovereign Fund of Egypt (TSFE); Khaled Rashed, the Managing Director of the Misr for Central Clearing, Depository, and Registry (MCDR); and Ibrahim Mostafa, the Vice President of the Suez Canal Economic Zone (SCZone). The session was moderated by CEO of Concord International Karim Helal.

Helal said that the current time is witnessing great and profound challenges that affect all parties, not to mention the structural defects that the region as a whole suffers from.

He added that the economy was affected by high inflation, the consequences of the Russian-Ukrainian war, and the negative effects of the aftermath of the “Corona” pandemic led to an impact on all emerging major economies, and not only that, but the effects affected all businesses, down to every family, all of this in addition to the economic effects which Egypt has been trying to solve for a long time.

He pointed out that Egypt has a problem with hard currency, which is what it needs in the current period, foreign currency and is working to provide it through various sources, perhaps the most prominent and important of which is the Sovereign Fund of Egypt, using the assets it owns. To raise questions about what urgent structural solutions can be offered through the Sovereign Fund of Egypt at the level of the economy, in addition to transferring the ownership of Misr Insurance, the largest insurance entity in Egypt and the region.

Last week, Egyptian President Abdel Fattah Al-Sisi issued a republican decree, published in the Official Gazette, transferring the ownership of all shares of Misr Insurance Holding Company to the Sovereign Fund of Egypt. The decision, which was signed on 10 March, allows the start of offering shares from companies affiliated to the Misr Insurance Holding Company within the government offering programme that includes 32 shares. It includes Misr Insurance and Misr Life Insurance.

Ayman Soliman said that the problems of providing foreign currencies in the Egyptian economy are deep and rooted, given the turbulent economic conditions around the world, but the Egyptian economy has a very large competitive advantage represented in sectoral pluralism, and that it is different and diversified in sectors.

He continued, when things are going normally in all sectors, there will be no sense of these problems completely, given the pluralism in short-term and long-term investments as well, and that the solution reached by the Egyptian state is the existence of an entity that provides and creates the appropriate climate to attract foreign investment flows. , with the aim of quickly reviving the Egyptian economy, which is the role played by the Sovereign fund at that sensitive stage in the history of the economy in Egypt.

He pointed out that the Misr Insurance Holding Company has a group of very successful companies, and therefore it can be developed faster, and it includes within it life and property insurance companies the process of transferring it is very natural, as the ownership of the largest companies in the world is transferred to its sovereign funds to maximize its value and exploit its assets. He stressed that the plans to offer the subsidiaries of Misr Insurance Holding on the stock exchange will proceed normally.

For his part, Helal pointed out once again that the government recently announced its plan to offer 32 Egyptian companies on the stock exchange.

Last February, Prime Minister Mostafa Madbouly announced that 32 state-owned companies will be offered on the stock exchange or to a strategic investor over the course of a year, as it targets 25% of those companies, and it will be completed with investment banks and specialized companies.

The prime minister stated that the companies that will be offered for the first time will be in the field of electricity and insurance, provided that the companies are offered starting from the first quarter of 2023 until the first quarter of 2024.

Soliman confirmed, during his participation in the first session of the annual summit of the Daily News Egypt conference, that the sovereign fund is proceeding with plans to offer companies currently to strategic investors or the Egyptian Stock Exchange, with the aim of increasing the value of investments, in a way that serves to attract investments of all kinds to all sectors of the Egyptian economy.

Soliman said that most of the companies included in the government program are ready to carry out their subscription operations, expecting that the offering of tourism and hotel sector companies will begin soon, explaining that what is related to cooperation with international investment banks in the promotion of subscriptions is an issue that is under consideration and is underway. Work on it within the framework of joint cooperation between sovereign funds, such as the cooperation with the Saudi Public Investment Fund (PIF) signed last year regarding the establishment of joint entities that can reach the regional and global levels.

He pointed out that the agreement with the Saudi Public Investment Fund includes searching for specific sectors in which the vision of the two sides met to establish successful regional and Arab entities that reach the world, including infrastructure, the field of food and pharmaceutical industries, the green economy, education and health care, and the field of inclusion, financial and financial technology. It aims to create successful entities in the financial sectors.

Karim Helal moved on to talk about the MCDR and explained the great role it plays in developing the Egyptian money market, but despite the development, the challenges of the Egyptian money market sector are at the top of the concerns of the MCDR.

Khaled Rashed believes that the role of his company is greater than just a fund-raising company, but its main goal is how to employ these funds for development work, and then the reflection of all this on the movement of the money market, and that the capital market He’s already facing challenges right now.

He added that the company’s work during the last period was centered around a number of files, the most important of which is dealing with customers and improving the level of service provided, explaining that the total number of Egyptian customers who dealt with them represented 83% of the total customers, and that any future investments of the MCDR will take place within the framework of development of basic and technological infrastructure.

Rashed added that the company focused on the main issues related to the infrastructure file and work to improve it, to review and study the proposed investment opportunities and offer them to clients, and that one of the main objectives of the department is to work to raise operating efficiency in the clearing Egypt, along with risks, information security and infrastructure. In addition to working on developing the company’s wealth represented in the employees and training them professionally.

He pointed out that EGP 150m has been transferred to investors, and funds are placed in the accounts of guardians. The company has foreign investors who deal in some private matters, and that the total taxes that have been paid are EGP 4bn, and work is underway on a complete program for foreign guardians. Pointing out that these steps were part of the company’s plan to resettle the funds.

Rashed continued that the company’s plan during the last period focused on 3 important pillars, the most important of which is information security and risk management, explaining that a number of comparative studies have been conducted with a number of international companies to study and review the services that can be provided and added, and that a number of foreign companies offered support in a number of services. Which the company did not provide within its services, such as electronic voting, to provide the opportunity to vote for customers remotely, stressing that the company worked to develop the file significantly.

He pointed out that 360 million investors were distributed to all branches of the company to support them, and work is underway to implement an electronic application that will be launched within a maximum of 5 months, and that the first three months of this year focused on developing the services provided by the company and targeting a larger number of foreign players and customers. As well as focusing on attracting more customers in the markets.

Rashed explained that risk management has been worked on during the past period through a number of steps, pointing out that these steps contributed to increasing investments in the capital market and investment in the Egyptian Exchange.

He continued that the practical efficiency of the services that are provided is an important step in attracting investors, and the company focused on developing the infrastructure and raising its efficiency, so that the performance indicators become clear and meaningful to all customers and investors, stressing the presence of support from foreign supporters.

Rashed stressed the existence of a number of fast, effective and reliable local investments, explaining that there were a number of discussions regarding the Euro Clear platform, and he continued that a number of talks were held with a large number of companies to participate and expand the market, and a number of initiatives were launched, some of which responded to and others are still under study.

He stressed that the company seeks to develop the capital market through its various services, especially that it has central records for most of the joint-stock companies in Egypt.

Rashed added: “The role that we play in the company does not depend on completing the tasks related to the capital market, but rather we play a very important role in the pre-IPO stage. Last year, MCDR disbursed EGP 649 billion in profits to the shareholders of these companies. It also succeeded in reducing the period for disbursing profits to custodians from three days to one day only.

He explained that MCDR House has implemented a special programme to treat double taxation for international banks to help foreign investors in the Egyptian Stock Exchange expedite the implementation of the tax response.

He confirmed an important role recently in reaching a final solution regarding the capital gains tax on stock exchange transactions when the company joined the committee formed by the stock exchange chairman to resolve the matter, in coordination and consultation with the concerned authorities.

Rashed revealed that the first phase of the electronic application, EGY Clear, is about to be launched during the next few months, through which most of the services provided by Egypt for Clearing House will be implemented, provided that, at a later stage, the possibility of distributing profits through electronic wallets to customers.

He explained that MCDR succeeded in developing the company through an ambitious strategy that focused on 3 main axes aimed at improving operational efficiency, risk management, and information protection and security.

He explained that the upcoming amendments to short selling include a central credit pool in cooperation with Citibank, provided that this pool is managed through the Company, which will allow the customer to deal with the pool individually, or through the old method that short selling represents a tripartite contract between the broker and the trustee. 

The “Short Selling” mechanism is selling a security before you own it with the aim of buying it later at a lower value, and then making a profit equal to the difference between the open sale price and the purchase price minus the interest that the investor pays for borrowing the security during the period between buying and selling.

Then, Karim Helal reviewed the major partnerships of the SCZone, referring to the numerous partnerships that the Authority witnessed recently with the private sector on various projects, especially green hydrogen projects.

SCZone signed 16 agreements related to the settlement of green hydrogen, the conversion of a set of memorandums of understanding into final agreements with global alliances, within the framework of the activities of the Conference of the Parties to the United Nations Convention on Climate Change COP27, and the state is adopting an ambitious plan in order to lead efforts to localize the green hydrogen industry and finance Ships in the Suez Canal Economic Zone, within the framework of preparing to localize the green hydrogen industry in the region for export and ship supply purposes, in cooperation with major specialized global alliances, and the total area allocated for green hydrogen production, according to memorandums of understanding, exceeded more than 20 million and 637 thousand square meters, with a total production capacity raised to 8 million and 980 thousand tons, and expected investments exceeding 30 billion dollars.

The authority’s strategy towards localizing the green hydrogen industry is based on 3 main axes, which are the manufacture of green fuel from (green hydrogen – green ammonia – ethanol) and the provision of complementary industries for green hydrogen industries such as (electrolysers – solar panels – turbines), in addition to fueling services for ships.

Helal asked: Where did the Suez Canal economic zone reach in the area allocated for projects, and where do we stand from the development of these projects?

Ibrahim Mostafa said that the zone has succeeded in attracting many investments to the zone in recent years, despite some concerns about import and export through Egyptian ports, but despite that it succeeded in being the most important port. to attract investments.

He stated that the development work will be completed in the affiliated ports and their integration with the industrial zones through the tasks of the deputies for the southern and northern regions, as the northern region of the authority includes 3 ports overlooking the Mediterranean, namely East and West Port Said and Arish, and their integration with the industrial zones east of Port Said Integrated, Qantara West and East Ismailia, as for The southern region includes 3 ports overlooking the Red Sea: Al-Sokhna, Al-Adabia and Al-Tur, which are integrated with the Sokhna Integrated Industrial Zone.

He stressed that the important element that the SCZone followed in attracting investments is the incentives provided by good land pricing in addition to the distinguished geographical location, and openness to partnerships with the private sector, stressing that the geographical location serves many regions of the world, stressing that the Authority entered into a partnership with 14 developers working with us, diversified between foreigners and local investors.

Helal explained that many of the attendees want to know the absorptive capacity that the region aims to reach in the coming period.

Mostafa said that the economic zone has not yet reached 50% or 60% of the capacity in all ports, and we have a large area for investment, especially in the port of Ain Sokhna, which we have many developers seeking to expand in Port Said, for example, and he emphasized on The current year will witness many partnerships in various fields to support the state’s drive towards greater empowerment of the private sector in the Egyptian economy.

He added that the authority is working to pump new investments during the current year to raise the capacity during the coming period and to attract more investments in parallel, in order to create added value through these investments.

Helal directed another question to the vice president of the Commission for Investment and Promotion. The location of the economic zone is very important and promising, and it could be a regional center for Europe and Africa. What’s the plan?

Abdel Khalek stressed that the main goal of the SCZone to become a regional center hub for European and African investments, stressing that this is the main goal in the strategy set between 2022-2025, stressing that the authority has pumped investments of more than EGP 2.8bn to develop infrastructure and attract more investments over the past year.

He added that SCZone spares no effort to attract investments, and works hard to help Egypt to attract investments, and we have a unified investment platform that was launched with the aim of creating an attractive investment climate in the region, and we focus on attracting partnerships with the private sector, whether globally or regionally.

Abdel Khalek pointed out that attracting new investments needs to focus on several points, the most important of which is employment, how to attract investments through incentives, and how to expand opportunities for the private sector in order to attract investment, especially since choosing the sector that we must focus on by investing is a necessity, and the added value that this must create. Investment, and serious leadership in times of crises, as included in the title of the two conferences, as at some time crises are the womb from which opportunities emerge, such as the pandemic and the Russian-Ukrainian war, and we have many investors who are looking forward to these opportunities, stressing that there are sectors that grow and increase at the most important time. 

He stated that the ministry provides the lands required to establish renewable energy stations and deliver this energy to projects within the economic zone.

Abdel Khalek indicated that the Sovereign Fund of Egypt helped the economic zone in communicating with international partners to establish projects, and it will also invest in some of these projects.

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