London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
This article is from last year but it summarizes well the current situation which has only worsened.
Egyptian entrepreneurs have warned that uncertainty over the exchange rate is suffocating business and impeding their ability to plan and invest, as the country endures its worst foreign currency crisis in years. A new devaluation is expected, economists and business leaders say. Meanwhile, the dollar shortage has led to a black market in foreign currency.
The private sector has struggled to fund imports.
Adham Nadim, who heads his family’s company Nadim Group, which makes furniture for hotels and corporate clients, said he was having problems importing crucial inputs such as hinges, accessories and paints.
“Everyone gives me speculative prices based on what they think the price of the dollar on the black market will be if I plan to purchase in two months,” he said. “It is a bigger problem if the project extends to six or 10 months.”
Samih Sawiris, a leading Egyptian tourism and real estate investor, told Saudi Arabia’s Al Arabiya television this month that the foreign exchange situation had deterred him from further investments in Egypt.
“Everyone is waiting for clarity on the exchange rate,” he said, describing the issue as “hurdle number one, two and three” for investors. “How can I know if a project would make profits or losses?” he said. “Which rate should I use — the international [forward] rate, the black market rate or the official rate?”
https://www.ft.com/content/b69bbce2-11e1-4da8-9608-b7af2a6fd329
The Bottom Line:
Sisi's privatization push of government assets remain and will remain stalled as there is no consensus over the exchange rate to be used to value Egyptian assets (goods, land, properties). The prime beachfront property development (sale) Siko mentioned is an exception - a crown jewel so to speak. But was it correctly valued or done out of desperation? Egypt is over a barrel of crude oil lit on fire hanging by a spider web. Why not also auction off the pyramids?
In the end free markets decide what the exchange rate ought to be not a Central Bank - unless that Central Bank ALREADY has sufficient foreign reserves (think Japan & China) to manipulate the exchange rate on the FX market by buying and selling in large quantities.
Egypt does not have this ability. But Egypt does have a literal stranglehold on the Egyptian people's ability, and Centamin's ability, to get a fair exchange on foreign currency. Thus, Centamin's shareholders are being extorted every time they are forced to sell gold to the CBE (which is monthly) at the artificially low exchange rate.
Not surprisingly, Sukari employees agree with that assessment -->
https://www.linkedin.com/posts/don-lawson-98619370_egypts-central-bank-boosts-gold-reserves-activity-7166942232908955648-rZN
(Thus, Centamin's shareholders are being extorted every time they are forced to sell gold to the CBE (which is monthly) at the artificially low exchange rate)..
Ok..let's say there is no such agreement.. Centamin sold all its gold abroad (for the same price in dollars as they get from the CBE, because the CBE pays the international price in dollars).. let's say Centamin needs 80 Million Egyptian pounds a month to pay salaries and local expenses.. what do you suggest they do?
Where will they get Egyptian pounds from?
You suggest they go to the black market to get more for their dollars?
You suggest there is an illegal way of getting more money?
There are many other ways to get more money illegally, but we are talking about a responsible reputable company, like many other companies working in Egypt..
If this agreement did not exist, Centamin would sell the gold abroad, then convert dollars to Egyptian pounds through the legal and official channels in Egypt, for the same price they get from the CBE.. so I can't see how this agreement is bad for Centamin..
Also Egypt doesn't trigger this agreement every month.. it's only done on the Egyptian government request, which does not happen every month.. you could tell by the CBE reserve, which does not go up every month as they don't have the ability to purchase every month.. so what does Centamin do during those months when the CBE does not buy gold and does not give them Egyptian pounds?
The black market in Egypt is for people travelling abroad on holidays.. people wanting to send money to their children studying or living abroad..
But essential imports and tuition fees abroad are covered by the banks through the official rate.. the government banned all unnecessary and luxury imports to help the local economy..
Centamin is like all companies working in Egypt .. no exception..
And for Egypt, if the UAE 150 billion dollar investment is an exception, that's enough for them!!
The developed area in Egypt is only 7% of the total country.. 120 millions are living on 7% of the country.. the rest is desert.. so to develop such a large area in the desert, you have to look at the added value.. even if 150 billion investment is an undervalued, it's what this investment would add in terms of creating jobs, paying taxes and pumping foreign currency in the economy.. all that in an area that would have never been touched without such investment..
There is a black market in Egypt.. yes.. definitely.. but not for companies to exchange their millions of dollars.. anyone involved in such scale would be behind bars by now..