Joining me right now is Nadeem Samna, who is managing partner of Serex and who has advised on strategy and state transformation across uh across this region for almost two decades.
Nadeem, welcome back to FinTech TV.
Exactly Thank you, thank you for having me.
So Naddi, you advised investors and governments on exactly this kind of uh institutional design.
When you read Law 147, uh, a new authority, a new sovereign fund, presidential decree, asset transfers, what did you conclude about where Egypt's state capital strategy is actually heading?
Uh, well, a low 147 shouldn't be used in isolation.
It's part of a broader synchronized structure, uh, alongside the phased out of the old Ministry of Public Business Sector and the creation of the cabinet's state-owned enterprise unit.
What we are seeing is the government assembling several pieces of a strategic puzzle.
The goal isn't just to prep a handful of companies for immediate exit.
It's to build a unified robust governance umbrella across the entire portfolio of state-owned enterprises.
We are talking about 600 to 1000 entities, so it requires a really strong governance.
The overall strategy moved from short-term asset liquidation to long-term institutional value placement, which is exactly what international capital wants to seek.
So Egypt right now already has a sovereign fund of Egypt that reports to cabinet and was built to prepare state companies. for listing uh Nile Pyramids reports through an authority answering directly to the president with the same tax privileges.
So from an investor's chair, who do I negotiate with right now?
And does dual architecture create competition for assets or confusion perhaps over that?
Well, for man investor shares, the entry point is actually very straightforward.
Uh, the two entities handle distinct asset classes.
Uh, it's, if you are targeting, let's say, mature revenue generating assets, uh, you will deal with the sovereign fund of Egypt.
Its mandatory is to become the commercial co-investor, to de-risk the deal and resolve and regulatory hurdles.
If you are looking, looking at large scale long-term strategic investments, especially in fuel security, agricultural transformation, uh, heavy infrastructure that falls under the Nile Pyramids fund and the future of Egypt Authority.
So no 147 simply codifies it into a transparent legal structure.
It was already in the process, in the making for some time now.
And, and let's be pragmatic for the largest mega yield that comprises the bulk of holdings offered to investors, uh, the final negotiations and strategic alignment have always involved the head of states.
So at the macro level, nothing fundamental changes for major interactive investment except that the underlying assets now have a clearer, more formal governance.
Mhm.
Right, so, let's talk about how the IMF views this.
We know the IMF completed its 7th review.
It has released the money, and at the same time, it's that, it's, it's still assessing whether this expansion is consistent with the state ownership policy.
So, how much weight should investors put on that phrase, still assessing?
Investors shouldn't overeat.
Still assessing.
It's a standard multilateral language for the multi-year policy rollout.
The state ownership policy is a flexible roadmap.
It's not like a visual rule book.
Uh, asset deals are driven pragmaically by evaluation, market conditions, and commercial readiness.
So institutional investors, they evaluate operation efficiency and competitive neutrality, not multiple treason.
Uh, been assessing, certainly reflects, uh, waiting for the results of a multi-year uh document, not a halted agenda.
And and what do we say that the law allows state assets and and government shareholdings to move into Nile pyramids by presidential decree without prior parliamentary approval.
Uh, supporters call that speed, critics call it a governance gap.
What do you think it is, and does that mechanism make Egyptian assets more investable or less?
Well, when you think of it, I mean from an execution standpoint, requiring parliamentary approval for every single aspect passport would create immense and inspected friction.
Uh, what you just mentioned between 600 and 1000 below and So it will stall deals for months if not years.
Using direct presidential decrees provides speed and agility.
If a foreign investor showed interest in a specific state asset not investable yet, well, this mechanism allows the government to carve it out quickly, trap it, and place it into a commercial sovereign fund umbrella without being delayed by administrative administrative office.
Does it make assets more investable?
Absolutely.
Private capital value, speed, and deed certainty.
The governor's focus shouldn't be on the administrative transfer step itself, but on ensuring rigorous, transparent oversight after the assets enters the fund.
That's what ultimately protects investment companies.
Right.
And since there are supporters and critics uh for this, so here's the optimistic case.
The optimistic case is a centralized, professionally managed vehicle that restructures uh companies, builds value, and only then brings them to market.
Uh, is that what this architecture is designed to do in your opinion?
And what would you need to see in the 1st 12 months to believe it?
Well, the framework is certainly designed for structure valuation, but for investors seeing is believing.
So the government is operating on a pragmatic case by case basis, and the next 12 months will provide the real scorecard.
We have major landmark assets queued up, most notably M Life Insurance, the largest life insurer in Egypt, alongside key industrial structuring like Raj Mahalla.
We have both you care.
We have many assets lining up.
How these transactions are handled will tell us everything about the strengths of this new government, governance.
To believe in the long term thesis, well, that you need to see three things over the next year.
First, clear operational condition of these assets.
Second, fair market valuations that attract long-term institutional capital without fire sale discounts.
And third, a clear execution timeline.
If these flagship deals succeed, it proves that the centralized act to catch actually works.
Hm.
Now let's move on to the counterargument.
The program has a $10 billion plus target, and every asset that moves into a tax-exempt sovereign structure is an asset that may never reach a private buyer or the EGX.
Is there a real risk that this becomes a parking lot, as some people say rather than a pipeline?
Well, we, we have to distinguish between two types of assets.
Uh, let's say, uh, a state-owned enterprises, this profitable, generating steady income, uh, keeping it under state ownership, is it a failure in itself?
I mean, this is my husband opinion.
It's a good fiscal management.
Uh, the returns coming from these enterprises will directly fund public infrastructure and through programs.
The real challenge lies with legacy and the loss making enterprises burdened by heavy debt, rigid employment policies in the current state, private foreign capital simply will not buy them.
That's what creates the parking lot, not the sovereign fund itself, but the lack of operational readiness, moving these assets into sovereign structures.
Allows the state to absorb that, restructure operation, and clean up balance sheets away from market pressures.
If done right, well, this isn't where assets go to hide.
It's actually the emergency room where distressed assets are rehabilitated into investable pipeline deeds, right?
And I think that everybody's crossing fingers and hoping it goes right, as you say, Nadeem Samna, it's always a great pleasure to have you with us.
Thank you very much for joining in.
Thank you for.
