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Tuesday, 7 June 2022

Surprising exactly no one, a handful of MPs quail at the notion of privatization

A handful of MPs are less than thrilled with the government’s plan to offer a stake in the company it will create through a merger of seven or eight state-owned hotels, which have yet to be determined. A group of representatives in yesterday’s plenary session at the House of Representatives flagged the plan, which Public Enterprises Minister Hisham Tawfik had announced last month, and complained that its details are unclear.

REFRESHER- The plan would see the government merge up to eight hotels owned by the Holding Company for Tourism and Hotels (HOTAC), whose portfolio includes high-profile properties such as the Cairo Marriott Hotel, Marriott Mena House, Luxor’s Sofitel Winter Palace, and Aswan’s Sofitel Legend Old Cataract. The state would then offer a stake, potentially as large as 25%, in the merged company to one or more strategic investors. Tawfik had previously suggested the company could also be listed on the EGX at some juncture. Sovereign Fund of Egypt head Ayman Soliman said earlier this week that stake sales — as opposed to IPOs — should be the focus of the government’s privatization strategy, given the current volatility in global markets.

“Parliament is kept in the dark about the minister’s privatization and liquidation policies, and we need to know more about the state-owned hotels he intends to privatize,” Rep. Mahmoud Qassem said in the session. The ministry should share with parliament whether the hotels are in the black or incurring losses, what their budgets look like, and how privatization will affect their employees, he said, ticking the usual litany of issues MPs hit: Why would we sell something that is ostensibly “profitable” and God forbid that a new owner have flexibility when it comes to a bloated staff base.

Also (still) rubbing MPs the wrong way: Plans to liquidate financially-stricken El Nasr for Coke and Chemicals, which Tawfik had announced back in January — and which the House has tried to push back on before. “Three months ago, I asked to summon the company’s manager to parliament for questioning on the company’s financial and administrative state, but the government has so far declined to respond,” said Rep. Mostafa Bakry. The company’s net income in the past year reportedly came in at EGP 114 mn, Bakry claimed, suggesting that its financials do not warrant liquidation. El Nasr has not published its financials on its website since 2011, giving us exactly zero insight into the health of its balance sheet, let alone how much it did / did not make last year.

WHAT’S NEXT- Parliamentary Affairs Minister Alaa Fouad promised to send a detailed report on the Helwan-based company’s financial and administrative situation to the House “very soon” for their review.

REMEMBER- MPs like to make noise, particularly when it comes to the sale of state assets or the word “privatization,” which many in the Madbouly government go to lengths to avoid using lest it trigger our elected representatives. A great many of them will not see a stake sale (via IPO or to a strategic) as a positive thing at all.

Our take: The political impetus here is coming from Ittihadiya. Senior government officials we’ve spoken with in recent weeks have been uniformly clear that “this time is different” — there won’t be any backing down on stake sales. MPs will be allowed to make noise, but ultimately the administration is looking for USD 10 bn per year in each of the coming four years…


Environment Minister Yasmine Fouad briefed MPs yesterday about the government’s efforts to reduce air pollution and improve solid waste management. The ministry has reportedly improved air quality by 25% “in Cairo alone in a few months,” partially thanks to new regulations requiring factories to install industrial air filters to reduce emissions, Fouad said. The government also plans to roll out 200 electric buses in the capital city as part of its 2050 climate change strategy, which will also help reduce pollution, she added. Separately, Fouad said that the government has set up 35 waste management stations across several governorates.

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