Egypt puts state-owned companies on the stock exchange. Attempts to attract real investment

Egypt will start listing state-owned companies on the stock exchange from next September as part of various measures the state has taken to boost investment and support the economy.

Egyptian Business Minister Hisham Tawfiq said in a statement to the Reuters news agency today, Saturday, that Egypt will start offering state-owned companies on the stock exchange from next September.

The minister added that the companies’ offer had been postponed until September, after the end of the summer holiday period for investors.

The government planned to offer shares in 4-6 companies during the current financial year, which ends at the end of June.

Introduction of companies owned by the armed forces

A few days ago, Egyptian President Abdel Fattah El-Sisi instructed the government to list companies owned by the armed forces on the stock exchange before the end of this year.

Financial market experts believe that the decision to place the military companies on the Egyptian Stock Exchange, in addition to offering some companies in the public sector, has economic dimensions and several benefits, including the revival of the Egyptian Stock Exchange, which was severely affected by the exit of hot money after the Ukrainian war, and pumped real investments in the Egyptian capital market through the participation of the private sector And put some public sector companies.

President Abdel Fattah El-Sisi has instructed the Egyptian government to announce a program for private sector participation in state-owned assets with a target of $ 10 billion annually for a period of four years.

According to the World Bank, there are about 60 military-affiliated companies operating in 19 industries in Egypt, out of a total of 24 listed on the industry classification table.

The issue of listing Egyptian military companies on the stock exchange is not new. In 2019, Egyptian President Abdel Fattah al-Sisi said the armed forces should be allowed to sell shares of his companies on the stock exchange along with other state-owned companies that are planning to privatize.

The government has been talking for years about selling non-military-owned state-owned companies, and in 2018 it announced that it would list minority interests in 23 state-owned companies on the stock exchange in a plan to raise up to 80 billion Egyptian pounds ( $ 4.33 billion).

The program has been repeatedly delayed, with government officials saying the repeated delays are due to weak markets, legal barriers and the readiness of each company’s financial documents.

And Sisi had earlier announced that the Egyptian army “does not work with more than 3% of the volume of the national product, emphasizing that the participation of the army does not reach 10 or 50% – as some claim -.”

The Egyptian president believes that the army’s intervention with its companies in the civilian sector is a “necessity to meet strategic needs or reduce prices,” and reiterates its call that the private sector to these companies (which with the armed forces are affiliated) must participate. and others.

Army companies expected to be set up

According to previous statements by the Egyptian Minister of Planning, Dr. Hala Al-Saeed, is intended to offer 10 to 100% of the armed forces’ national petroleum and national companies for the production and bottling of natural water and vegetable oils “Safi”, in a step aimed at increase private sector participation in the economy.

It is planned that the proposals of the National Petroleum and Safi companies owned by the National Service Authority of the Egyptian Army will be followed by a study of the implementation of the proposals of 3 other companies affiliated with the Egyptian army is, according to the Minister of Planning.

Egypt’s CEO of Sovereign Fund, Ayman Soliman, has revealed that the initial plan is aimed at selling almost 100% of the shares of 10 companies owned by the National Service Projects Authority, as the fund will help raise assets select and promote it to investors.

Soliman explained in statements to the Bloomberg Agency the possibility that the Sovereign Fund of Egypt would participate in the offers by acquiring minority interests in those companies.

The CEO of the Sovereign Fund of Egypt, Ayman Soliman, expected that companies affiliated with the Egyptian army, including the “Watania” company for the distribution of petroleum products, and the “Safi” food company, would be ready for presentation to the upcoming Eid al-Fitr, noting that accelerated steps have been taken recently to prepare these companies to present to the public or private before next summer.

The head of Egypt’s Sovereign Fund said the fund owns minority interests ranging from 15-20% in the recently announced agreements and projects, including the project to produce green fuels from hydrogen and ammonia with the aim of supplying and exporting ships. feed.

He added, “The stock exchange is still the option available to list companies affiliated with the Egyptian military, and we are in the process of completing the legal restructuring of two companies affiliated with the military to be listed on the stock exchange soon. to be offered. ”

Egypt’s most prominent measures to improve investment climate

Within the framework of the Egyptian state’s efforts to create an investment climate, and its determination to create a strong, balanced and diversified competitive economy based on innovation and knowledge, the General Authority for Investment and Free Zones, the Financial Supervisory Authority , and the Information Technology Industry Development Agency (ITIDA) has signed a collaborative protocol aimed at making the environment Legislative and procedurally attractive for investment.

As well as finding innovative solutions that suit the nature of the work of emerging companies, facilitating their transactions and creating a suitable working environment for entrepreneurs, in order to attract local and international capital to form partnerships and grow of emerging companies in Egypt. .

Eng. Amr Mahfouz, CEO of the Information Technology Industry Development Agency (ITIDA), said that start-ups have become one of the most important sources of investment and job creation in Egypt as this sector has remarkable prosperity and steady growth in the volume of investment in recent years , and this year is also expected to see more growth.

Mahfouz added that the three bodies have worked together to formulate the necessary measures that will improve the investment field in this promising sector, including:

To leave the initial evaluation process for the two parties without state interference, except to ensure that a recognized methodology is applied using risk capital assessments.

– Approval of aids for the conversion of financing amounts into convertible notes

The adoption of a unified form for the companies ‘articles of association to enable shareholders to add to the provisions of the shareholders’ agreement

Exemption from inventory transfers for companies related to revaluation, etc., to deposit the purchase price in banks

– Execution of share transfers in accordance with shareholders’ agreement

The ability to use the Misr Clearing Company as a surety agent in inventory transfers to ensure its implementation

The cooperation protocol between the three entities provides for the encouragement of investment in Egyptian start-ups, attracting capital and financing to them, and the establishment of more local, regional and international partnerships, which contribute to increasing the added value of the Egyptian economy. , which makes Egypt a local and international center. for technology based on creativity and entrepreneurship.

According to the protocol, the General Authority for Investment and Free Zones will prepare a unified form of the shareholders’ agreement to establish start-up companies, verifying the validity of the initial evaluation of the emerging companies, by investing and estimating the investment needed . start the activity, and determine the appropriate timing and method for pumping new investments through public offering, merger or acquisition.

The Financial Supervisory Authority will also introduce facilitating controls for the transfer of ownership of companies and entities engaging in risk capital activity by investing in emerging companies through financial instruments that can be converted into share ownership, and will also define procedures for the transfer of ownership. share ownership in emerging companies. companies, in order to ensure the implementation of ownership transfers in the stock exchange.

The Information Technology Industry Development Agency will provide more protection to minority investors in emerging companies through new mechanisms such as the inclusion of appropriate clauses in shareholders’ agreements. The needs of beginners to join them.

It is noteworthy that ITIDA has developed and formulated a comprehensive five-year strategy in collaboration with the global consulting firm Deloitte, funded by the United States Agency for International Development (USAID). The strategy is based on four main axes.

These include improving the work environment for beginners and developing their growth factors, facilitating access to finance and investment, developing technical skills and increasing the number of professionals to facilitate access to it, while creating an environment be that stimulates the growth of pioneering work and innovative thinking, and finally, the facilitation of penetration into global markets through an international promotional and marketing plan.

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