Though Nassef Sawiris predicts Egypt’s turbulence will continue until the summer, he says there are sectors right now that are still attracting investors.
What is your outlook on the situation in Egypt, and what does it mean for foreign direct investment?
Sawiris: I’m quite positive on Egypt. I think we’re going to have a few more months of turbulence until there is an election and we have a new president and a new parliament. But a timeline has been set for three to four months. I expect that by July all this will be accomplished. And then people will have an address to talk to and all that. So in the short term, these are the next milestones for Egypt. In general, I think the political situation will converge. Obviously there will be some negative implications for some of the court rulings that made the news. What people don’t understand is that, regrettably, the first round of court rulings in Egypt is almost immaterial. It’s such a junior court; it’s almost like a traffic court.
What are you telling investors, then, who don’t possess such knowledge of the internal workings of Egypt? Such headlines, for instance, are also keeping tourists away.
Sawiris: There are sectors of the Egyptian economy that have been on fire in the last one or two years, despite all the political turmoil. Consumer goods are doing amazingly well. Building materials businesses are now getting attention. The government is doing a lot of infrastructure projects, so infrastructure will be an opportunity. There is energy legislation — including price reform — that has to be passed to make that sector attractive. And then the last important sector, after the stabilization of the security situation: the return of tourism. And usually once security stabilizes, the tourists will return. There will be pent-up demand, because everybody wants to come to Egypt. You’ll move to 80% to 90% occupancy from 10% to 20% occupancy.
Can you talk about the inflows of investment into Egypt from the Gulf, now that it has shifted from Qatar to Saudi Arabia and the United Arab Emirates?
Sawiris: I don’t think Egypt would be in the position it is today without the $20 billion of infusions that happened to support the ouster of the Muslim Brotherhood. It had to come, it came at the right time, and it created strong support for the Egyptian economy. You saw the reaction on the stock market, the stabilization on a lot of inflationary issues. It’s not like the normal $1 billion or $2 billion investments and loans that we used to get in the past. This is what you call putting in a floor to any possible decline of the Egyptian economy.
During the Arab Spring, there was a split in investor mentality toward the MENA region that looked at Arab Gulf economies as stable, versus Egypt or Libya. Is it time for investors to look at the region as a whole again?
Sawiris: It depends on the sector. If you’re in the consumer goods business — if you’re Procter & Gamble, if you’re Unilever — (there is opportunity). In the midst of all this, we’re building a plant for Mars in Egypt, and we just finished an expansion for Procter & Gamble. So you have to be selective about the sector. Obviously, it’s a huge market with great opportunities. Health care is one, real estate is another, building materials is huge.
(In the MENA region) there are economies that rely 90% on a single product. Look at Saudi, Abu Dhabi, Kuwait and Qatar. If oil prices tank to $40, it might be very negative for those economies, but it might be great for Egypt. So the importance of this one-trick pony economy is huge. Iraq moved from averaging two million barrels a day last year to exporting 3.5 million barrels per day in February. That’s 70% growth in oil exports from Iraq. So you have to continue to segregate the economies. What’s good for Egypt and Morocco may not necessarily be good for Saudi Arabia and Kuwait.
OCI (Sawiri’s company, editor’s note) delisted from Egypt and moved to the Netherlands. Can you talk about that experience?
Sawiris: I think you have to look at the decision in the context of the time. This was done in the context of a government that was extremely hostile to women, minorities, Christians and a lot of businessmen. So I would say that if we hadn’t moved to Holland we would have moved to Siberia or Alaska under the Muslim Brotherhood. It wasn’t a matter of choice to move the company headquarters when we were being harassed on a daily basis. (But) it didn’t change any of our dynamics. We didn’t move any of our plants from Egypt; we’re actually hiring more in Egypt. Delisting didn’t dramatically change our shareholders. Historically, outside the family, we had a big following in London. The bulk of shareholders moved from London to Holland, rather than from Egypt to Holland.
The storyline during the Arab Spring was that the Gulf economies were stable, and received a number of Egyptians, Libyans and Syrians escaping the troubles, and bringing their money. Do you see a reversal of that trend?
Sawiris: In the Middle East, you never know what place is safe. It’s the place of the week.
In Egypt, your company has dealt with some inhospitable conditions in the past couple of years. How did you keep your employees focused?
Sawiris: As the saying goes, what doesn’t kill you makes you stronger. We’ve been having crises for the past 12 years. So we laugh when we see some problems that we face in Iowa or Texas, compared to that sort of environment. I would say that it’s a good training ground.
This is an excerpt from an interview by Knowledge@Wharton.