3 fundamental factors for attracting investments
Hisham El-Khazendar to Amwal Al Ghad:
The economic situation better than pre-June 30
Cautiously optimistic about the future of present reforms
El-Beblawi’s government the best since the January Revolution
Citadel completes its transition plan in Q1 2014
Hisham El Khazendar, Co-Founder and CEO of Citadel Capital, said Egypt’s economic situation is better than pre- June 30, given that a number of positive indications have emerged despite persistent tough challenges.
El Khazendar told Amwal Al Ghad in an exclusive interview that a clear-cut political roadmap would help a lot in restoring growth rates and foreign direct investment (FDI), citing that the present government is the best of all following the January 25 Revolution as merit superseded political loyalties.
He said the focus was to turn the firm from a direct investment entity into a holding company, forecasting the transition would be finalized in Q1 2014. He added that the company’s capital would be raised by 87 percent by January.
Q. What are the latest news about Citadel and its future priorities?
A. We focus at present to turn the company from a direct investment entity that buys, restructures and then sells firms, into a holding company designed for acquisitions and development. So investments would be held for a longer time.
We seek to raise the capital by 87 percent from LE4.3 billion to LE8 billion, marking the biggest capital increase for a listed company since March 2010. The capital raise would be earmarked for increasing equities of the company’s main sectors: energy, transport, food, mining and cement between 51 percent and 100 percent.
Q. When will Citadel complete its transition plan?
A. I expect it to be completed by Q1 2014. The capital increase will be in January, and the company’s name will be changed to reveal its new entity as a holding company.
Q. How the dissociation process from secondary sectors will be managed?
A. The disengagement from sectors like financial services, property investment, glass and foundry will be completed in three years in a bid to concentrate liquidity in the abovementioned five basic sectors.
Q. How do you expect to the underwriting would go given the low market of Citadel’s stocks compared to its nominal value?
A. Optimism is high to cover the underwriting despite the current economic conditions. The nominal value is LE5 per share, while stock trading price stands at LE3.5. It is agreed that partners will buy their stakes in subsidiaries in return for investing in Citadel’s capital raise. That would give them flexibility and an opportunity in dealing with their investment through dropping stakes in shut down firms and holding shares in a listed company.
Q. How much is Citadel’s stake in the five main sectors now?
A. Citadel’s subsidiaries include TAQA Arabia (34%) and Tawazun (48%), Mashreq Petroleum Co. (25%), Egyptian Refining Company (12%), Gezour (20%) and Wafra (99.9%), Nile Logistics (32%), Africa Railways (28%), ASCOM (39.2%) and ASEC (54.8%).
Q. How are projects going in Egypt and Africa?
A. We have three vital projects in process: Egyptian Refining Company costing $3.7 billion, Mashreq Petroleum (in which Citadel’s stake stands at 25%) and ASEC’s Galfa Algeria cement plant costing $580 million.
Q. How do you see the investment climate now?
A. Undoubtedly, the current situation is better than four months ago. Egypt is a better economic situation than pre-June 30, given a number of positive signs despite the tough challenges. But a clear-cut political roadmap would help a lot to restore growth rates and increase FDI.
Q. How do you evaluate the performance of the Beblawi-led government? How do you see its raft of measures and impacts of its decrees?
A. The present interim government is the most efficient after the January Revolution, where competence overweighs political colors. To the contrary of previous cabinets, there have been very fruitful decrees from the economic perspective in general and Citadel in particular. Egyptian Financial Supervisory Authority approved Citadel’s capital increase.
Q. What are the challenges facing the economy in your opinion?
A. The chronic deficit in the country’s state budget. It’s possible to see an economy suffering 2-3 percent budget deficit, but not 12-15 percent. Foreign exchange pressures as well as insufficient energy. I think statements by Finance Minister Ahmed Galal to implement a cash subsidy scheme and modify prices of petroleum products will have a positive impact.
Q. How do you think decision-makers can attract foreign investments?
A. There are three fundamental factors to attract foreign investment back to Egypt: boosting the political roadmap, restoring security and good investment environment.
Q. What do you think of reconciliation with Egyptian businesspeople?
A. Let’s admit that mistakes of former regimes during Mubarak and Morsi’s rules have caused economic deterioration. But judgments of some businesspeople are politicized and have repercussions on the investment climate in general.
We need to look at businesspeople from another perspective away from court rooms.
Q. What about energy subsidy and its impact on investment in Egypt?
A. The energy sector is an attractive opportunity for investment due to unprecedented high demand for petroleum products and electricity locally. That requires speeding up development of generation plants and distribution networks, launching new power facilities and oil refineries. But due the economic turmoil, these projects may be implemented through public private partnerships (PPPs).
Q. Are you optimistic about the Egyptian economy despite all these odds?
A. There is cautious optimism about the future of the economy provided that a clear-cut political and economic roadmap is carried out.
