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What do the recent Emirati investments mean for the Egyptian economy?

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The intensive Emirati orientation towards the Egyptian market comes amid the political and military relations that are currently boosted with unique economic and investment commitments.

The most recent action was seen in late July when ADNOC Distribution, the UAE’S largest fuel and retail distributor, inked an agreement to acquire an over 50 percent stake in TotalEnergies Egypt in a deal worth $186 million, with an additional earn-out of up to $17.3 million.

In a meeting with Prime Minister Mostafa Madbouly in May, Secretary-General of the UAE International Investors Council (UAEIIC) Jamal Saif Al-Jarwan stated that the UAE is looking forward to raising its investments in the Egyptian market to post $35 billion over the coming five years, up from the current $20 billion.

Al-Jarwan said that this tendency comes as the Egyptian economy is flexible and attractive to investors, affirming that foreign investments in Egypt are being boosted under the supervision of President Abdel-Fattah El-Sisi.

In fact, 2022 has been witnessing a notable presence of Emirati investments in Egypt’s economic activities, especially following the outbreak of the Russia-Ukraine war in February. 

A few days ago, the UAE-based Chimera Investments completed the acquisition of a controlling stake in Egypt-based Belton Financial Holding — an Orascom Financial Holding subsidiary — in a deal estimated at $20 million.

Non-banking financial and energy sectors were not the only areas of focus for the recent Emirati investments in Egypt. A few months after acquiring a majority stake (over 75 percent of shares) in Egypt-based food processing company Atyab in a deal valued at about EGP 3.2 billion, Agthia Group ­– owned by Abu Dhabi Investment Holding (ADQ) – acquired in July a majority stake (60 percent of shares) of  Egypt-based healthy snacks and coffee manufacturer Abu Auf in a deal worth EGP 2.9 billion.

“The UAE eyes the beneficial and successful investment opportunities available in the Egyptian market. These are in real estate, non-banking financial sector, food processing, and energy. Egypt has a host of opportunities for development that are qualified to be tapped; especially amid the ongoing global crisis, the elevating inflationary wave, and rising interest rates,” economic affairs expert Mostafa Badra told Ahram Online.

Badra pointed to Egypt’s recently announced State Ownership Policy Document that charts a new chapter in partnerships between the private sector and the state.

 

“According to the document, there are about 80 economic activities with lots of opportunities for Emirati investors,” Badra added.

 

Madbouly launched in June the State Ownership Policy Document, which is currently being discussed in a comprehensive community dialogue. The document explains Egypt’s plan to raise the share of the private sector in the country’s economic activity to 65 percent, up from the current 30 percent.

The policy document sets nine sorts of partnership between the state and the private sector in terms of tapping state-owned assets; including the privatisation of a number of these assets, performance contracts, and management contracts.

Badra referred to the industrial partnership between Egypt, the UAE, Jordan, which Bahrain has recently joined. The initiative was launched by the UAE in May to boost economic development in these markets amid the ongoing global challenges. The UAE’s ADQ committed $10 billion for this partnership.

“The initiative aims at localising industrial partnership between its parties and increasing production capacities,” Badra said.

These actions, he added, will impact positively on the Egyptian economy. They will contribute to raising the liquidity in the local market, providing hard currency that is currently seeing a shortage amid the European tensions, supporting the Egyptian pound, in addition to benefiting from foreign experiences and the advanced technologies that will enter the domestic market as a result of the UAE investments.

The UAE’s investments are also focusing on Egypt’s state-owned assets.

In April, ADQ – also known as the Abu Dhabi Wealth Fund – completed acquisition deals for five companies in Egypt, including private sector and state-owned firms, to the tune of $2 billion.

The deals included purchasing stakes in the International Commercial Banks (CIB), e-payment platform Fawry, state-owned Alexandria Container, and Cargo Handling Company (ALCN.CA), state-owned Misr Fertilisers Production Company (MOPCO), and state-run Abu Qir Fertilisers.

These transactions represent a part of the joint investment fund ADQ established in 2019 with the Sovereign Fund of Egypt (TSFE) for $20 billion with a key mission of helping Egypt’s economic development through joint strategic investment projects, specialised funds, and investment tools in key sectors, mainly healthcare and pharmaceuticals, utilities, food and agriculture, real estate, and financial services.

Finance and investment expert Ahmed El-Otiefy told Ahram Online that these investments are backed by the stable economic relation between the two countries that allows a good environment for these investments to grow going forward.

It will also contribute to providing the liquidity Egypt needs to repay its international liabilities, including loans and their services.

Nonetheless, all these transactions were sealed through the gate of the financial market by purchasing minority or controlling stakes, not through long-term investments, according to El-Otiefy.

“These investments will benefit the Egyptian market, particularly in terms of alleviating the pressure on the country’s financial resources and its hard currency that were harshly affected by the repercussions of the war in Ukraine. However, this kind of investment is easy and rabid to exit. It is not a long-term foreign direct investment,” according to El-Otiefy.

 

This week, the UAE’s Al-Dar Properties revealed its plans to invest an extra $1.5 billion in Egypt and the UAE in the coming months.

 

The company’s CEO Talal Al-Dhiyebi said that Al-Dar is poised to increase its land portfolio in key areas in Egypt; in the North Coast, west and east of Cairo, as well as in the Red Sea.

 

The Sixth of October Development and Investment Company (SODIC), in which Al-Dar has a controlling stake, submitted a few months ago a non-binding offer to acquire 100 percent of the capital of Madinet Nasr for Housing and Development (MNHD).

The MNHD’s board of directors rejected the offer because the submitted share price was lower than its real value.

In February, the UAE announced it will invest $10 billion in Egypt’s ports.

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