NIB approves EGP 1.5bn loan for public enterprise sector ministry

Public enterprise sector ministry provides EGP 1bn from the government's IPO programme to the state treasury, with EGP 700m liquidity available in companies

The National Investment Bank (NIB) agreed to grant the ministry of public enterprise sector a loan of EGP 1.5bn to be directed to the Holding Company for Spinning and Weaving to develop the sector, the Minister of Public Enterprise Sector, Hisham Tawfik, told Daily News Egypt during a seminar held by the Egyptian Center for Economic Studies (ECES).

The ministry needs EGP 21bn to develop the textile companies and has concluded an agreement with the NIB to pay off their accumulated debts for decades.

Tawfik noted that four companies will be floated on the Egyptian Exchange (EGX) as part of the second phase of the government's initial public offering (IPO) programme. Most of the targeted companies are operating in fields that were not available before in the EGX, which could attract new blood to the capital market. Tawfik noted that the plan aims to enhance the turnover of the EGX through introducing new goods that attract foreign and local inflows.

He expected the second batch of offerings to start in October. The four companies will then gradually be floated based on their conditions and that of the market.

Regarding the proceeds of the first phase of the IPO programme, which amounted to EGP 1.7bn, Tawfik said that EGP 1bn was supplied to the state treasury, while EGP 700m was left to companies as liquidity.

As for the plan to develop the Egyptian Iron & Steel Company, Tawfik said that the results of the scenarios will be announced in 10 days after discussing these development scenarios with a government committee formed by the prime minister two months ago, adding that there is a tendency to improve mining and provide new raw materials to the local market.

The Heliopolis Company for Housing and Development will be assigned to a management company which, in turn, will put a plan to maximise benefit from assets, where the company owns some 20m sqm of land, which may be an alternative to floating the company on the EGX.

As for El Nasr Automotive, Tawfik said there is another offer besides Nissan's to enter into a partnership with the company. The offer is now under study, while Nissan's offer was due for negotiations in June, but the company delayed in responding.

“The Egyptian Exchange (EGX) is not a mirror of the economy, but it is only a vision and expectation of the state's policies,” said Minister of Public Enterprise Sector, at a seminar held by the Egyptian Center for Economic Studies.
The seminar focused on what is currently happening in the Egyptian capital market and its decline in recent years.
He explained that the vision and expectation was positive during only two periods in the EGX's life. The first was between 1997 and 1999 under Kamal Ganzouri's government.
Although that success story ended quickly, the second time was between 2005 and 2006, and ended in 2008 after the government's return on its policy again.
The daily turnover in 2008 reached $350m, while during previous years, there has been a re-evaluation due to the changing exchange rate.
Tawfik said, “There is a stock exchange in the presence of high interest rates and inflation rates of more than 14%, and high interest rates make investment opportunities in shares decline.”
On the other hand, the market witnessed the cancellation of companies' listings due to the absence of tax incentives. This led to the exit of large sectors of substantial companies in areas such as cement, petrochemicals, telecommunications, and banks.
He added that the third factor experienced by the EGX is related to the cost of transactions.
“If an investor recycles his portfolio twice a month, the cost will reach 25% annual loss from the client's portfolio.” The number of active investors decreased from 160,000 to less than 15,000 in the last 10 years.
Despite that, the minister of public enterprise sector believes that what has happened in recent years of doubling the infrastructure of the economy in terms of roads and bridges is great, and the volume of what has been done to encourage investors over the past years was successful.
Tawfik called for the need to address all the negative aspects as a way to increase GDP through production and not infrastructure investments. This is mainly because the solution lies in debt reduction and interest rates.
“From my point of view, as a minister, Egypt is rich in assets. We have unexploited assets. If they are well used, they will be sufficient to develop performance,” he added.
As for the EGX, according to Tawfik, the cost of trading should be reduced. Compared to the Arab exchanges, the cost of trading can be cut by 50%. There are ongoing negotiations on the stamp tax to repay 10% of the profits achieved by the investor to attract companies and investors.
The ministry is also working on a large programme of proposals to encourage investors to enter companies that can increase the supply of securities, especially with the introduction of new companies in the second phase of the programme in new sectors.