Egypt has taken great steps to improve its investor environment with a number of reforms and laws passed with more in the pipeline, we speak with Mahmoud Attalla, vice Chairman and Group CEO of CI Capital, one of the leading investment banks in the MENA region who provides us his views about the investor climate on the ground, the growth potential of a variety of sectors and the reasons why
In October last year Egypt was upgraded to a stable outlook because of its political stability, fiscal consolidation, and economic growth. How do you see the current state of Egypt’s economy in terms of stability and also its potential for growth over the next few years?
There are improvements in stability and security, as you can see very clearly if you are living in the country. Instability is not a concern for potential investors any longer in Egypt. Moody’s and other rating agencies have been looking very carefully at the country and its developments. I believe that the Egypt Economic Development Conference in Sharm El-Sheikh in March was a very important step for the government to earmark their progress. It was also a great opportunity for businessmen and politicians to come to Egypt and see firsthand how things are very different in Egypt than what most people see and hear on the news.
At the EEDC there was over $130 billion in MoUs that were signed. In your opinion, how prepared is Egypt to receive this type of investment?
Much more important than the size of the potential investment are the sectors this investment is going into. Mainly, it’s going to the energy sector, which means you are addressing the most important elements that were an obstacle in the past for the industrial, agriculture, and other sectors. I’m not talking about the electricity cutting at home one hour a day, I’m talking about an investment that couldn’t have come to the country without having a clear picture and a clear map of where the energy sector is going. So, when you are securing almost double the energy that you have now, it means you are open for new business. Fixing the energy shortage is the fastest way to bring in investment. The energy supply the country was planning to build was covered between two and two and a half times by investors. The demand is there and once we sign these deals and bring the power online, I’m sure that all the investment that were in the pipeline with the backlog of the decision making will come to the country, including the heavy energy industries like the cement or the steel.
The other thing, which is very important after the Suez Canal, is The New Capital Cairo. If we recall Margaret Thatcher’s theory that to build trust you have to inject money, to inject money you need to have projects. She believed in this theory so much that she was building roads and closing them for a couple of years just to inject money into the system. It’s not only to inject money, but also to eliminate the fear of unemployment out of the memory of the people. You need to have a consistent supply of money, and a consistent supply of projects for at least two years so that people will not be afraid of unemployment. Sectors such as agriculture, infrastructure, housing, in addition to industries related to housing such as steel, cement, furniture, and textiles will create jobs which will have a spinoff on all other areas of the economy.
You have just mentioned some sectors that you feel have great potential. What sectors will you be focusing on moving forward as one of the largest investment banks in the country?
Investment banking means, to a great extent, acting as an advisory. We advise our clients. We do not choose sectors. We will work with any sector that needs advice, be it in the real estate, renewable energy, or agriculture sectors. On the private equity side we are most interested in anything that is related to consuming and consumers, such as pharmaceuticals, agriculture and the food processing industry. The non-bank financial services like leasing and mortgages are also very interesting.
What do you think is the most important follow-up after the conference?
Actually, the country was much more prepared than expected. Perhaps we had some problems in some of the logistics and the invitations being delivered late, but the core of the conference was extremely good. The ministers and their teams were working for months to come to Sharm el Sheikh with real bankable projects. Now we have to deliver on the promises that were made and be sure to follow all of the commitments and agreements that were signed during the conference very closely. I believe that Egypt will never have a better second chance for a first impression. Now we need to deliver. The government and the ministers started doing the follow-up of the conference during the actual conference. On the last day of the conference they had a small cabinet meeting to delegate responsibilities and make sure all the signed deals had a clear path. We as the private sector are pushing on our side and they as the government are pushing on their end; if this energy and enthusiasm continues I believe we will achieve great results. We do not want to lose time because as I’m telling you, when we are talking about electricity; it’s not the end but the start of something big. You have to prove that you are following the plan, and you will attract investment.
From our side, in the first two weeks after the conference we had three meetings with three ministers, including one with the Minister of Energy and Electricity. They purpose of the meetings was to follow up on what has been signed and to make sure things are moving forward. This shows how serious the country is about moving forward. We have nothing to complain about. There was a very good reaction and action from the government.
The stock market last year performed exceptionally well. There were more than 30% returns. Do you expect such high rates of returns to continue?
Why did we have such a tremendous performance in the stock market last year?
Because you have to buy rumors and sell facts. The market was extremely healthy, giving way for fresh blood to come into the system, inviting new investment to come in with the real value that will support them to make the right return. Besides, you have to bear in mind that a lot of tough decisions and tough actions were taken, including the subsidy, the black market. The cut in the budget, the deficit will not stop spending on needed sectors. This market correction will be followed by a wave up.