Experts: Privatization success depends on acquisition prevention
Insurance and electricity companies are the first to offer shares
Egyptian government is exerting great efforts to offer the public sector companies shares, submitting to the IMF loan conditions.
Furthermore, the IMF loan is worth $12bn which will be obtained by the Egyptian government $3bn annually. Egypt will obtain the first installment of the loan by September 2016, provided by IMF that the privatization of public sector companies should be undergone within an integrated reformation plan.
In order to decide which companies are to be offered, the Ministry of Investment has made an agreement with NI Capital, a state-owned company for asset management. Moreover, a number of public sector companies’ assets will be offered in the Egyptian Exchange and international stock markets, supervised by a committee of Dalia Khurshid, Minister of Investment, Amr Al-Garhy, Minister of Finance and Lobna Hilal, CBE’s Deputy Governor.
MEO has uncovered the identity of the first company to be offered in the Egyptian Exchange; Misr Insurance Holding Company will be the first to offer its shares, followed by electricity companies and a number of banks such as The United Bank of Egypt and Arab-African International Bank.
Similarly, a study conducted by the Ministry of Petroleum and Mineral Resources is researching the offering of petroleum companies’ assets. Furthermore, the ministry asserted that no specific company has been selected to the offering yet.
Khurshid pointed out that the offering of public sector companies is expected to increase the performance efficiency of offered companies and strengthen their transparency and governance systems.
Amr Al-Garhy, Minister of Finance, said that 20 per cent of the public sector companies will be offered in the Egyptian Exchange, aiming to increase capitals efficiency. Revenues expected from this offering are estimated at EGP 8bn annually, stressing on the high potentials of the Egyptian economy as it has registered 7 per cent growth once before and 4.4 per cent last year.
Yasser Omara, Chairman of Eagle, highlighted that privatization will not influence the economy negatively as it used to do before; privatization of public sector companies will be undergo an integrated reformation plan. Consequently, companies’ capitals will increase through new investors’ participation, Omara pointed. He also demanded that strategic investors who intend to acquire companies should be limited. There are around 120 public sector companies in which few make profits whereas the majority suffers losses, especially iron and steel companies, said Omara.
In this regard, Waael Inbah, a financial expert, believes that offering the public sectors shares is the only solution to reform the public sector. The offering has to serve two main reasons, the first is to increase the capitals of profitable companies and the second is to restructure the failed companies to increase their capitals, he stressed.
Khalid Al-Shaafy, an economist, said that the offering of public sector companies will revive the Egyptian Exchange. In addition, this step will enhance transparency because it helps monitoring public companies and banks as long as they are offered in the Egyptian Exchange.
