Egypt’s banking sector has been surprisingly resilient since the revolution of 2011. This strength is by in large down to the extensive reform and restructuring of the industry throughout the last decade. We speak with Tarek Elrefai, general manager of Barclay's bank Egypt about their strategies moving forward and take his perspective on the appetite for investment opportunities from a growing number of private equity houses to Arab funds looking to capitalise on the variety of new developments on the ground.
What is Egypt’s potential with regards to its rating?
During the conference there was sovereign level, corporate level and then direct foreign investment level. At the sovereign level, the Arab countries promised $12.5 billion with $6 billion already paid to the Central Bank. Country reserves now stand around $20 billion which is really encouraging as far as the country rating and monetary policy is concerned. Egypt was upgraded by Moody’s, and we expect Egypt to be upgraded by the IMF by the end of the year. All in all, I am very optimistic.
What do you expect the actual rating to be by the end of the year?
To get the full picture, you have to remember that Egypt was downgraded 6 times over the last few years. We have since been upgraded 3 times so we are almost back to where we once were. If you combine it with signing with the IMF, we will get an upgrade and are likely to receive one more before the end of the year. Most of the downgrades took place because of the recent changes on the political front.
On the corporate side, major deals took place mainly on the energy side and we started to see guarantees coming. We have a signed pipeline guarantee. Long-term, we see 7-10 years of guarantees.
How did the conference impact Barclays? Were the results good for the bank?
As partners, we are involved in the guarantees which are a start, and we are looking at strategies as far as new geographic investment locations under development now. This will positively affect our branch network, our technology network, and our expansion in the country. Most of these areas are underdeveloped now, so we need to have a presence in these areas.
What areas of economy and of Egypt are you most focused on?
We’re looking at the Suez Canal area where there are so many projects under construction, and we’re looking at the Golden Triangle in the south.
What are your thoughts on the Capital City Project and the reality of it coming into fruition within the next 7 years?
One of the things about the pipeline is that we’ve started to get an appetite from private equity funds and Arab funds to look for investments, so now private investors are looking for opportunities to participate in this project and we are part of this discussion.
Leading up to the conference, we had talked a lot about the new investment law that was needed and the government reforms that were taking place. Are you happy with the new investment law, and do you think that the reforms that have been put in place so far are what the country needs? Do you feel that there is still a need for more reform?
Reform is a non-stop operation in general, but it’s a good step in the right direction not only with the investment laws but also I see the Central Bank taking good steps in reducing the interest rates and adjusting the foreign exchange rate both of which investors were waiting to see before getting into the market.
You recently moved to your new headquarters, in which we are sitting in today. Can you talk about the move and why it happened? This move shows an investment in Egypt as well as Barclays’ commitment to the country’s future.
Barclays is the oldest bank in the country. It’s 150 years old, and when you look at the business model of Barclays over those years, you see that it follows the cycle of business in the country. In 1864, it began in Alexandria where the most active commodity and cotton stock exchange in the world was located. At that time, they followed the cycle of the business in the country. The next asset cycle in the country was the Suez Canal, so they moved and opened in Suez cities. Now we are spreading all over, and we are moving closer to the new capital and closer to the new Suez Canal projects. We are following the asset side of the business in the country.
What were your personal thoughts on the results of conference, and what do you think are the most important steps in the country in terms of follow-up?
What happened at the conference is a success story. The real challenge now is how to manage people’s expectations and to deliver. If Egypt wants to continue doing this conference on a regular basis, Egypt needs to show results and keep up the momentum, which is really a big challenge. By opening the Suez Canal in August, doing a number of business projects on the energy side, and by opening the new Capital Project, these examples of the deliverables that we are looking for. It’s a big challenge to deliver.
Do you think the delivery needs to come from the government or is it more the job of the private sector?
The government did very well with the scenario of the economic landscape of the country because for any country to grow, you need your own people to buy in first. They needed to buy their own country, buy their own dreams and buy their own projects. The big deliverable in this was the Suez Canal CD’s. It was only for Egyptians with a 5 year interest rate, but the Egyptians had to buy these dreams themselves.
The second thing was at the sovereign level where other Arab and European countries gave $70 billion that really is coming into the pipelines. The last thing will come from investors, equity funds, and asset managers looking for opportunities. The government role here is to change the legal and tariff infrastructure to make it more appealing to investors to come to Egypt.