The Private Sector is Alive in Egypt.

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The Private Sector is Alive in Egypt.

Post by Hafiz »

The Private Sector is Alive in Egypt.

No its not.

The Egyptian Stock Exchange capitalization of shares as a measure of the private sector says.

1. Confidence is down badly, has been going down for more than a decade and is showing no sign of improving.

2. The Stock Exchange is small, very small, and the capitalization of firms is minuscule and dropping dramatically.

Some charts:

The market peaked in 2008 and is less than a third now in $ terms so taking inflation into account its probably 1/5th of the peak in absolute terms. I can find no stock exchange in the world as bad. The fact that the stock market has not recovered better is not unconnected with political and security issues just as its not unconnected with the fact that these forms are appallingly managed and in many/all cases corrupt. In some ways the fact they did well under Mubarak illustrated they had 'Mubarak skills', skills which generally don't make money elsewhere in the world or under different Egyptian arrangements.


Looking at it as a percentage of GDP – the share of GDP compared with big firms ‘wealth’ – its less in relative terms than 1996 and in absolute terms well down on 1996.

Small firms not on the stock exchange might be expanding but this particular view suggests that the private sector has been retreating dramatically for a long time which poses the question of who is expanding - I think we know.

The largest traded firm on the Cairo Stock Exchange is the dodgy and part government owned Commercial International Bank – worth about $US5 billion which is very small for a bank in a country that likes assertive, prominent and big. The third company Abou Kir Fertilizers is worth about $2 billion, doesn’t seem to make a profit and is 2/3rds owned by the government – the rest by government entities. The fourth is the Eastern company, worth less than $2 billion, claims to be into tobacco but I think does whatever mad things its told and is overwhelmingly owned by government. The next is a family owned electricity firm about which its hard to get reliable information. A bit later is Alexandria Containers and Goods, an industry sector hard to loose money in – but it does, its worth about $1 billion and government owned in a transportation/haulage industry that wouldn't meet anyone's minimum standards. Presumably its a monopoly - a 'benefit' of many government companies and a broader problem in the private sector that is sometimes diluted into an noncompetitive oligopoly.

So the big end of the stock market is dominated by the government, not well run firms, overseas investors would be stupid to give them money and they continue the long Egyptian traditions – government pulling the strings, nepotism, bad management, low technology and innovation and their utter failure to go outside Egypt because they have no ideas or skills to sell to anyone else. They survive because government keeps competition out.

The chances of raising capital on the stock market even for good ideas seem close to zero and the Vulture Capital firms like putrid Citadel and EFG Hermes are never interested in start ups of high ideas high growth firms but mainly predatory purchases of government assets offered for sale in utterly corrupt processes. I imagine they will have some new opportunities in the next 6 months.

The chances of raising capital from banks is zero unless you are connected and the extreme government borrowing (forced) by government from the local banks and the extreme borrowing from banks by government and Army trading enterprises (forced) means that there is little cash for the banks to loan to others. There are no stats on this let alone international comparison stats but I venture to assert that there is no country on earth that has so little capital to loan to the private sector – as a percentage of its GDP. This lack of capital is a garrote on the private sector and jobs creation – along with other garroting involved in trying to get through this aggressive Armada of large companies that hate competition, don’t like new ideas and hate outsiders and change.

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