At the start of 2022, Egypt began navigating the initial steps of a severe economic crisis. The worsening internal and external conflicts, the decline in the Egyptian pound’s value, and dwindling foreign investment revealed a harsh reality dominated by an urgent need for hard currency and a glaring inability to meet mounting debt obligations. As the government scrambled to secure basic needs, hopes of economic stability faded amid an impending collapse gripping vital sectors like tourism, trade, and finance.
Seizing this opportunity, the Abu Dhabi sovereign wealth fund (ADQ) expanded its investment footprint in the Egyptian market by acquiring substantial stakes in five leading companies. This step was not just an investment but a masterful exploitation of crises, framed as part of a strategy to bolster Egypt’s struggling economy. The country, meanwhile, faced increasing pressures from soaring food and energy prices triggered by internal economic failures and regional conflicts.
A Deal of a Lifetime for ADQ Holding
Through a deal exceeding $1.8 billion, ADQ Holding cemented its presence in key economic sectors, such as financial services, fertilizers, and technology. The agreement, announced in March 2022, aimed to provide liquidity to Egypt. The stakes acquired included shares in the Commercial International Bank (CIB), Fawry, Abu Qir Fertilizers, Mopco, and Alexandria Container and Cargo Handling Company. Although the Egyptian stock exchange did not officially disclose the buyer, reports confirmed that the government approved the sale as part of a broader $2 billion investment deal.
The acquisition details were as follows: 17.15% of CIB for $911.5 million, 21.5% of Abu Qir Fertilizers (formerly held by the National Investment Bank) for $391.9 million, 20% of Mopco for $266.6 million, 32% of Alexandria Container and Cargo Handling for $186.1 million, and 11.8% of Fawry for $54.9 million.
Economic expert Abdelnabi Abdel Muttalib highlights the trajectory of privatization in Egypt. He explains that, since the aftermath of the COVID-19 pandemic, the government has been preparing a comprehensive privatization program, rebranded as the “offerings program” to avoid the historically sensitive term “privatization.” Initially, the program proposed listing 40 government and public-sector companies, along with two or three state-owned enterprises, on the Egyptian stock exchange. However, unfavorable market conditions impeded the anticipated subscriptions, leading to a pivot toward direct sales to Arab investors, primarily from the UAE. The move resembled a dual-purpose transaction—both to attract foreign currency and to project an image of Egypt as an open economy.
Speaking to Zawia3, Abdel Muttalib elaborates: “While profitable companies like CIB, Abu Qir Fertilizers, and Alexandria Container were sold to Gulf investors, it would have been logical for the government to focus on developing these companies to reap their revenues. Instead, the urgent need for cash led to direct sales to ADQ Holding without resorting to public offerings. The government failed to adopt alternative solutions that align with sustainable development, such as restructuring the companies, injecting new investments, or upgrading technology to boost productivity and GDP growth.”
The expert attributes the state’s actions to its pressing need for substantial cash reserves, describing the move as part of a long-term strategy ahead of anticipated negotiations with the International Monetary Fund (IMF). “It’s as if the government preemptively implemented IMF conditions before formally approaching the fund for loans,” he adds.
Abdel Muttalib raises a critical question: “Was the state’s goal genuine investment, or merely plugging the debt deficit? Foreign capital always seeks profits and does not invest in loss-making companies. Unlike the privatization efforts of the 1990s, when investors aimed to turn failing companies around, today’s landscape is different. The UAE, for example, prioritizes domestic opportunities, and when investing abroad, it targets profitable, high-yield companies.”
The expert concludes that the government adopted a path allowing it to claim adherence to a free-market economy while addressing the foreign currency deficit. Yet, with the offerings program failing to materialize, Egypt ultimately resorted to direct sales as a quick-fix alternative to development.
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Egypt’s Investment Pie
The five companies acquired by ADQ are among the most prominent and influential in Egypt’s market, ranking within Forbes’ list of the country’s 50 strongest companies. Together, these firms possess total assets valued at approximately $19.6 billion and a market value nearing $10 billion. They collectively account for 39% of the main EGX 30 index, underscoring their strategic significance in the Egyptian economy.
Within just 26 months of acquiring stakes in these major companies, ADQ Holding reaped profits of $890 million, representing nearly half of its $1.8 billion investment. Analyzing annual budgets and financial performance reports reveals staggering gains, particularly in CIB and Fawry. The Abu Dhabi sovereign wealth fund holds 17.15% of CIB, Egypt’s largest private bank, with assets exceeding EGP 1 trillion as of July 2024. Over the past two years, the bank achieved profits of around EGP 73 billion, with 2023 profits rising by 84% year-over-year. Fawry also recorded notable earnings, with profits increasing by 198% in 2023 compared to 2022, reaching EGP 715 million.
Meanwhile, Alexandria Container and Cargo Handling achieved profits of EGP 4.3 billion in the 2022/2023 fiscal year—a 110% increase from the prior year—rising to EGP 6.3 billion in 2024. Abu Qir Fertilizers posted historic earnings of EGP 14.6 billion in 2022/2023, driven by global demand for fertilizers and rising prices amid the Russia-Ukraine war. Mopco Fertilizers reported net profits of EGP 10.2 billion in the first half of 2024, marking a 114% increase year-over-year.
These investments allowed ADQ Holding to recoup nearly 50% of its initial investment within just two and a half years, benefiting from robust operational profits and rising stock values in the market.
Debt Crisis and Dollar Liquidity
According to Ahmed El Agamy, Professor of Economics and Public Finance at Pharos University in Alexandria, the government’s decision stems from its urgent need for dollar liquidity amid growing debt obligations. “The government is trying to minimize its losses by selling portions of its assets while retaining other shares to ensure ongoing dollar inflows,” El Agamy explains to Zawia3.
El Agamy raises a critical question: “Is it better for the state to invest these funds itself, especially when these companies are generating profits for foreign investors? The answer is complex because the information driving this decision remains unclear. Why were these specific companies chosen? Is there an underlying agenda?”
El Agamy offers multiple explanations: “One possibility is that the companies were unprofitable, which does not apply here. Alternatively, the state may have opted for the sale to improve performance through capable foreign management. In some cases, selling stakes can benefit the state, regardless of whether the buyer is local or foreign, as these companies remain within the national economic framework and adhere to tax obligations.”
Another explanation, according to El Agamy, lies in IMF conditions requiring the sale of military-affiliated companies to investors. “Given the limitations of domestic capital, foreign buyers became the preferred option,” he notes.
Domestically, El Agamy speculates that the state may have needed immediate cash flow to fund specific projects or address pressing resource shortfalls, likening the situation to businesses selling assets during financial crises to cover expenses.
The Key: Investment Freedom
Mohamed Mahmoud, an economic researcher and member of the Economic Committee at the Egyptian United Nations Association, argues that the value of previous deals and their returns highlight Egypt’s market appeal. Mahmoud emphasizes that privatization’s historical challenges stemmed from undervaluing assets and poor public-sector management, compounded by bureaucratic inefficiencies.
He suggests that some state-owned enterprises can thrive under private-sector management, especially export-oriented companies capable of generating sustainable dollar flows. Mahmoud advocates for alternatives to direct sales, such as boosting industrial exports and reducing reliance on luxury imports or products with local alternatives.
Addressing Egypt’s dollar crisis, Mahmoud stresses the urgency of stabilizing exchange rates and securing sustainable foreign currency sources, particularly in light of declining Suez Canal revenues—a key contributor to Egypt’s dollar reserves.