One of the major obstacles of our country, is the inherited time bomb known as the public sector; Mostly made up of non-performing assets, heavy in debt, limited management capabilities, and under-paid inefficient human resources. All of these factors have resulted in a closed loop of diminishing investment returns and low funding resources leading to lower growth potential. To escape this cycle, the government has often either relied on cheap debt subsidized by national banks or through failed, and often attacked, privatization attempts.
I believe that if the the public sector is revamped, our country can truly benefit from a huge untapped and reserved wealth. Efficient use of capital, financial, and human resources will lead to higher returns, translated into higher valuations, leading to realization of an enormous wealth. Sovereign Wealth Funds (SWF) have proven to be one of the most successful vehicles in which governments can manage their wealth. With the right steps, our time bomb can follow the steps of UAE’S ADIA, Norway’s GPF, or Saudi’s SAMA.
Merge all the public companies into one Sovereign Wealth Fund, Egypt Investment Fund, with ten subsidies divided by their business lines: Egypt Hospitality Holding; Egypt Pharmaceuticals Holding; Egypt Real Estate Holding; Egypt Petrochemicals Holding; Egypt Food & Beverage Holding; Egypt Heavy Industry Holding; Egypt Maritime & Logistics Holding; Egypt Construction Holding; Egypt Textiles Holding.
Egypt Investment Fund should be lead by a CIO or CEO of an international asset management company with a strong performance track record such Mohamed El Erian. Each Holding Company should have its own executive team including CEO, CIO, COO, CFO, and CTO (Chief Talent Officer). Head hunt the best executives worldwide for each holding company, with extremely competitive compensation packages with bigger variable income tied to ROIC.
The Executive management level at the holding level and the group level would be responsible for maximizing their asset’s Return on Invested Capital (ROIC) through the implementation of innovative financial tools in order to sustain growth through debt or equity without burdening the country’s budget. The investment committee which will include members from both the group and holding level will be free to choose which financial tools to use with the goal of maximizing their company’s ROIC, while minimizing risk, and maintaining low Weighted Average Cost of Capital (WACC).
A major role of the Fund’s board and Chairman (independent of the CEO) would be to monitor and establish a reliable corporate governance system. The governance system should include: Auditing (internal and external); Board and management structure and process; Corporate responsibility and compliance; Financial transparency and information disclosure; Ownership structure and exercise of control rights. The establishment of such system will ensure the integrity of the decision making process.This will delegate the authority and trust from the public and bureaucratic bodies to the board, freeing the management team from political and public debates, allowing them to concentrate in the efficient and effective management of their assets.