Hisham El-Khazindar, Co-Founder and Managing Director of leading African investor in infrastructure and industry Qalaa Holdings (formerly Citadel Capital) gave the opening keynote speech at Al Mal’s 10th annual Money & Finance Conference.
“During the past three months we have witnessed the implementation of an ambitious set of long-overdue reforms that have already had a positive impact on the economy,” said El-Khazindar. “In the next period we can expect to see a gradual shrinking of the budget deficit which is an important early indicator for both local and international investors of where things are headed,” he added.
El-Khazindar also noted that the removal of energy subsidies and the liberalization of the energy sector in general, which will allow private sector participation, was a particularly encouraging step that will be of benefit to the country on multiple levels, according to the company’s release.
“Egypt’s production capacity has been suffering tremendously during the past period because of limited energy supplies. If we look at the cement sector as a case in point we can see that Egypt’s cement capacity went down from 50 million tons per annum to c. 30 million tons because factories did not have access to fuel,” said El-Khazindar. “Allowing the private sector to import coal and natural gas will improve the efficiency of our industrial sector across the board and that alone will translate into growth before we even begin to factor in the impact of new investments.”
The challenge according to El-Khazindar will be moving beyond the short-term growth that is largely the result of a rebound effect to sustainable long-term economic development that will result in a tangible improvement in the standard of living for all Egyptians.
“Long-term growth will only be possible if we have an integrated vision with clearly communicated goals and a plan to minimize the negative impact of fiscal reforms,” said El-Khazindar. “Raising taxes was a must but the next step is coming up with a way to move the informal sector into the real economy so that they can start paying taxes. Putting a cap on public sector salaries was necessary but we have to keep in mind that without competitive salaries we compromise our ability to attract high caliber employees.”
Regarding the negative impact of energy subsidy removal, El-Khazindar noted that a proper social welfare system must be put in place whether it’s the further activation of smart cards or conditional cash transfers for those in need.
Qalaa Holdings executives Mohamed Shoeib, Managing Director and Head of the company’s Energy Division and Amr El-Garhy, Managing Director and Head of Agrifoods and the Corporate Finance and Investment Review Function also participated in panels on managing Egypt’s energy needs and tapping into new sources of financing.