In light of the opaque practices in which the Egyptian economy is managed under President Abdel Fattah El-Sisi, Minister of Planning and Economic Development, Hala Al-Saeed, recently announced the intention of the sovereign fund to sell a share of two companies owned by the army for the benefit of the private sector.
The matter remained vague, and puts many question marks, especially since the two companies offered for the benefit of the private sector are the “National Petroleum” and the “Safi” company operating in the field of mineral water.
The two companies operate in the field of consumer goods, and their products represent essential commodities that cannot be dispensed with, and therefore they are profitable companies, especially in light of the military’s monopoly over many of the components of the Egyptian economy.
It was interesting to consider the announcement of the Minister of Planning, that she said that offering companies on the stock exchange would come at a later stage, which means that choosing certain companies from the private sector is what is required.
Make room for the Emirates
It is no secret to anyone the case of the expansion of the Emirati presence in the Egyptian economy, especially after the military coup in 2013, as the UAE sought to monopolize the medical services market by purchasing a large number of major private hospitals, as well as the two largest medical analysis laboratories in Egypt, which are privately owned. It has also turned to the education sector, and has purchased a number of private schools operating in the field of international education, in addition to its remarkable expansion in the banking and financial services sector, not least in its presence in the field of services and management of Egyptian ports, and the Gulf of Suez projects.
On December 18, 2020, Bloomberg announced that the UAE company, ADNOC, is considering buying a stake in Wataniya Petroleum, which recently announced offering a share of it to the private sector. The opportunity for the UAE, as a state or a private sector, to enter ready and profitable projects in Egypt, and it can make profits for its investments from the first moment of the ownership transfer process.
The wrong agenda
It is recognized that investment is based on profit, and the investor should not be faulted for aiming to achieve the largest possible amount of profits, and here an important question must be asked, which is where is Egypt’s national agenda in attracting foreign investments and in managing the privatization process?
Neither the Sisi government nor his sovereign fund learned from the experience of privatization, which took place in Egypt during the era of ousted President Hosni Mubarak since 1991, when the capital assets of public business sector companies were wasted, and they were traded from buyers for the benefit of foreign companies, and the result was the disbursement of the privatization proceeds. Non-productive, and the national economy was not compensated for by alternative capital assets.
In the Mubarak era, privatization revenues for about 365 companies amounted to 50 billion pounds, part of which was consumed in filling the budget deficit, a second part was in the restructuring of public business sector companies, and the last part was the cost of early retirement for workers affected by the privatization program.
Wasn’t the first in this easy investment, whether in the “National Petroleum Company” or “Safi Mineral Water”, to enable one of the Egyptian insurance companies, or an investment fund affiliated to the Ministry of Insurance and Social Affairs, or to put their shares on the stock exchange for the benefit of small savers in Egypt? .
The small savers in Egypt were blinded by the monetary policies that wasted their savings more than once, through the floatation of the pound exchange rate in November 2016, as well as the successive decisions to lower the interest rate in banks, and it was appropriate for such savings to benefit from owning shares in these profitable companies And this is something that achieves more than one goal, the first of which is not to let the profits of these companies go abroad, as well as to revive the financial situation of small savers, to preserve their savings within the organized economy, and to pull them out of the mysterious money-placement operations, which often end with the loss of these savings.
Among the big mistakes committed against future generations is the waste of capital assets through privatization programs without replacing the economy with new capital assets, and this is the real challenge facing the sovereign fund, instead of Sisi giving the UAE or other foreign investors a working and profitable company. It should have offered real partnerships with the foreign private sector to establish productive projects in the field of agriculture and industry or the production of technology.
It is possible for the Sisi government, in its privatization of a portion of two companies owned by the army, to try to improve its gloomy image that it has drawn over the past seven years, which has crystallized in empowering the army with the joints of the Egyptian civilian economy.
The second matter is to meet the conditions of the International Monetary Fund, which previously stipulated that the Egyptian government must privatize 23 public institutions and companies. As for the most dangerous matter, which may be the privatization process of part of two companies owned by the army part of it, it is to pass the dismantling of the iron and steel complex in Egypt, and sell it within the framework of Privatization, and thus Egypt has lost one of its most important industrial fortresses.
What drives doubts is the government’s behavior towards the Iron and Steel Complex in Helwan, the organized media campaign during the last period to talk about the complex’s losses, employment problems, etc., while the government’s mission is to present a plan to reform the existing order and preserve this large industrial edifice, which Egypt needs during the coming period, if There was a real intention to establish a development project in Egypt.
It is known that the financing situation of the Sisi government has been in dire straits since 2013, and therefore it resorted to expanding borrowing, and within the framework of meeting the requirements of the International Monetary Fund to offer state-owned companies within the framework of a new privatization program, it was considered to offer a share of the military companies within the framework of the sovereign fund.
But the way out of this crisis is not by granting profitable companies to foreigners, as the bill for foreigners’ profits in Egypt has become remarkably large, as the balance of payments data for 2019/2020 indicates that the profits of foreign investments in Egypt this year amounted to $ 12.2 billion, compared to $ 12 billion in 2018. / 2019.
It is feared that the pressure of the Sisi’s government of financing insufficiency is the incentive to sell companies in favor of the foreign private sector, to obtain foreign currency financing; To meet the requirements of debt burdens, or provide part of the financing of the budget deficit.
The absence of control
In light of the law governing the operation of the sovereign fund in Egypt, privatization will take place without real oversight, given the protection of the fund’s practices and its non-compliance with all supervisory agencies, including Parliament, and Sisi remains the reference for all the fund’s operations strings.
Civil society institutions in Egypt will not be able to follow up on the privatization of army companies to know their true financial position, nor the sale contracts for the established shares, and since the sale will not be through the stock exchange, the matter will be between the parties to the contract, the sovereign fund and the private sector in whose favor the deal will be concluded.
Will Sisi, through the Madbouly government or the sovereign fund administration, present the financial position of the proposed companies? This cannot happen in light of other practices related to contracts and financial conditions, as is the case with oil and natural gas contracts, or obtaining foreign loans.