After facing losses for years, state-owned factories could get a helping hand from the private sector: The government is looking to formally enter partnerships with the private sector to step in and revamp state-owned companies and factories across several industries as part of a broader plan to cut down the public enterprises sector’s losses, according to several sources Enterprise spoke with. A handful of lossmaking companies have received specific directions to seek out new partnerships with the private sector, or increase existing levels of cooperation with private sector players, to improve their factories’ operations and how they manage their assets, our sources say.

Why now? The public sector has been struggling for years with losses and accumulating debt piles, with just 73 out of 121 state-owned companies in the black, Deputy Chairman of the Senate’s Industry, Trade, and SMEs Committee Mohamed El Manzalawy said earlier this year. These companies’ combined net income stands at EGP 14.8 bn, while the other companies’ combined losses stand at EGP 7.4 bn, meaning state-owned enterprises are eking out just EGP 7.5 bn in net income, El Manzalawy said.

This isn’t the first time we’ve seen the private sector step in to manage a public sector company: Back in 2019, the Public Enterprises Ministry moved to hand over management rights of state-owned Heliopolis Housing and Development (HHD) to a private investor as part of the state privatization program. The ministry planned to award management rights and a 10% stake in the company to a private investor as part of its wider plan to sell a 25% stake, before scrapping the plans the following year after seemingly failing to find an interested buyer.

We could see more of that in the near future: The Holding Company for Construction and Development (HCCD) and HHD are expected to move forward on a handful of private-public partnership agreements to develop investment zones, which would benefit from and connect to national megaprojects such as the monorail and the new administrative capital, according to our sources in private sector construction and contracting players. Earlier this year, HCCD was also reportedly in talks with Gulf investors over its land bank and other assets, with a company source telling us at the time that the arrangement would be a “partnership.”

Gov’t is getting its ducks in a row before going to the private sector: The chemical industries sector is currently working on restructuring a number of fertilizer factories ahead of bringing in private sector players to move things ahead, according to our sources. A portion of the proceeds from the sale of Paint and Chemical Industries(Pachin) earlier this month has been earmarked for restructuring two companies in the sector before offering them up to the private sector, one official who asked to remain anonymous told Enterprise.

The strategy moving forward: Partnerships for maximum value: The government is primarily looking at setting up partnerships with the private sector to improve how state-owned companies’ assets are managed and to maximize their value, our sources told us.

Which companies are getting in on this? It’s pretty much open season for partnerships between the public and private sectors to cut down on operating costs and losses, our sources told us. The Public Enterprises Ministry is currently working on a detailed roadmap with the partnerships it’s making available at its companies, with specifics such as the sector they operate in, their geographic location, the value of investments, and a study on each project. The ministry is also meeting with private sector investors to pitch this roadmap, our sources told us.

There are a handful of contenders at the forefront of the push: Public Enterprises Minister Mohamed Esmat and representatives of porcelain manufacturer Eissa Group discussed earlier this year a partnership to develop and upgrade state-owned Ceramic and Porcelain Products General Company’s ceramic factory. The planned upgrade would see the factory produce porcelain products using Italian technology to help fulfill local demand and earmark output for export. The government is also looking at making vacant branches of Omar Effendi and Holding Company for Tourism and Hotels subsidiary Banzaioun available to private sector furniture and wood product manufacturers.

Your top industrial development stories for the week:

  • The General Authority for the Golden Triangle Economic Zone received three offers to establish fertilizer complexes in the Red Sea governorate’s Golden Triangle.
  • Chinese textile manufacturer Shanghai Shengda will establish a USD 40 mn ready-made garments factory in the Abo Khalifa Industrial Zone, under an agreement inked with the Suez Canal Economic Zone.
  • Local pharma outfit Gennecs plans to invest USD 1 50 mn in its Gennvax pharma factory in the Suez Canal Economic Zone, which will produce 300 mn vaccines a year, making it the largest of its kind in the MENA region.
  • The local arm of Chinese home appliances giant Midea Electric will establish a USD 105 mn factory in Sadat City to manufacture home appliances, providing some 3.1k new jobs.
  • Medical supplies manufacturer Balm & Africa will invest EGP 885 mn to build a packaging plant in Ismailia, which is expected to create up to 350 jobs.
  • Japanese manufacturer Yazaki will begin construction of its EUR 30 mn factory in Fayoum’s first freezone after signing land contracts with local authorities.
  • Torishima Pumps will establish a USD 5 mn water pump factory in the Suez Canal Economic Zone.
  • Egypt is set to allocate industrial land plots in the cities of October, Fayoum, Beni Suef, the 10th of Ramadan, and Sadat, to investors within a month, as part of the government commitment to exit from various sectors of the economy in favor of the private sector.
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