A step closer to a military IPO: The state is moving forward with the EGX listing of the National Company for Producing and Bottling Water (Safi) and Wataniya Petroleum after the cabinet approved the pre-listing procedures for the military companies during its weekly meeting yesterday, according to a statement.

This has been a long time coming: The Sovereign Fund of Egypt (SFE) said in 2020 that Wataniya and Safi will be the first two subsidiaries of the military’s National Service Products Organization (NSPO) the fund will move to privatize. The fund said at the time that the state would first market the firms to private investors, before selling additional shares on the bourse. Several regional energy companies were reported in mid-2021 to be conducting due diligence on Wataniya ahead of a potential stake purchase, but nothing has been heard since.

Cabinet gave no additional information on the mechanism or timing of the sales, mentioning the green light only in passing at the end of its readout on the weekly cabinet meeting. Listing on the EGX would, we expect, also involve restructuring that could clear the way for a pre-IPO sale of equity to a strategic investor.

The trigger: Last month Prime Minister Moustafa Madbouly asked the Finance Ministry to prepare plans for selling stakes in NSPO-owned companies, including how much of each company would be privatized and the timeline.

Don’t expect IPOs any time soon: The government is unlikely to sign off on any public share sales until market sentiment improves. Banque du Caire has reportedly postponed its planned IPO as global equity markets have tanked — and with them the EGX. The benchmark EGX 30 is well into bear market territory YTD, having lost nearly 24% since the start of the year.

Background: The Madbouly government had previously said it wanted to sell stakes in as many as 10 state-owned and two military-owned companies this year. It signaled that it is open to both stake sales and IPOs, depending on market conditions and individual investor interest. While market conditions have put a damper on those plans, President Abdel Fattah El SIsi subsequently said Egypt plans to net some USD 10 bn annually in each of the coming four years through the sale of state assets.

Also in the pipeline: The new state-owned hotel company and Egypt Aluminum (EgyptAlum) have both been earmarked for sales to strategic investors.

The story is getting attention internationally: Reuters.