A resignation suggests that Egypt’s president has accepted defeat in the struggle to privatize military-owned companies.

President Abdel-Fattah al-Sisi is rightly seen as the most powerful individual in Egypt, but the resignation of his appointee to head the country’s sovereign wealth fund shows that he is not all-powerful. It has not yet been confirmed officially, but Ayman Soliman, who became the first chief executive officer of the Sovereign Fund of Egypt (SFE) soon after Sisi established it in 2018, reportedly submitted his resignation last June. The immediate cause appears to be persistent obstruction by the Egyptian armed forces to the sale of military-owned companies active in civilian markets, which was formally placed in the SFE’s hands in February 2020. The fact that not a single military company has actually been put on the market despite the president’s persistent advocacy in this regard is a measure of the limits to his power.

Soliman’s failure, and indeed Sisi’s, to bring one of the president’s pet projects to a successful conclusion has not been for lack of trying. According to Sisi, his administration had started to discuss the idea of floating military-owned steel and cement companies on the Egyptian Stock Exchange in 2016. He made his endorsement public in August 2018, and again a year later. But flotation required disclosure of company financial data that a highly secretive military was clearly loath to do. Sisi did not confirm this was the reason for delaying, but admitted that “listing in the stock exchange has many requirements that I don’t want to talk about.”

So, a new tack was tried. In February 2020, the SFE signed an agreement with the National Service Projects Organization (NSPO), an affiliate of the Ministry of Defense, to prepare ten of its commercial companies for offer to private investors. Crucially, the shift to the SFE may have been seen both as a means of raising capital without handing over management or control to investors, and as a way of sidestepping questions about land title, held by the Ministry of Defense, and the legal status of investments in designated “strategic zones” around the country, where numerous military-owned ventures are located and where state land may not be transferred to private ownership.

Widely varying explanations have been provided since then of how sales would proceed, and of likely forms of ownership. At one end of the spectrum, following preparation by the SFE, shares in NSPO companies would still end up being offered on the stock exchange, where the open market would determine share price, or by private placements using an over-the-counter setup monitored by the exchange but not listed publicly. In both instances, outright ownership would necessarily pass to buyers, along with a degree of control proportional to their shares. At the other end of the spectrum, the SFE would retain the NSPO companies in an investment portfolio under its management, acquiring private capital through direct negotiation with investors or closed auction. In this case, Soliman explained, investors would probably hold their assets on a long-term leasehold basis.

None of these arrangements have come to pass. Nor for that matter has it ever been made clear how control of company finances and distribution of profits (or losses) would be managed. This is significant because official statements about the precise proportion of company shares to be offered to private investors have varied considerably. In their initial comments on the agreement between the SFE and the NSPO in February 2020, both Soliman and Minister of Planning and Economic Development Hala al-Saeed, who is chairperson of the SFE’s board of directors, suggested that investors might acquire up to 100 percent stakes in the companies on offer. A year later Soliman stated that the SFE sought to sell 80–90 percent of the first NSPO company likely to be offered, the National Company for Petroleum (Wataniya), while retaining a 10–20 percent stake for itself. Later reports suggested that only 20–30 percent of the second NSPO company likely to be offered, the National Company for Natural Water (Safi), would be sold.

Crucially, anything short of allowing private investors to buy out NSPO companies entirely puts them at risk of partnering with a military that is neither under obligation to divulge financial data nor subject to civilian laws and courts. Even acquiring a supposedly controlling stake under these conditions presents real risks for outside investors. Risk was clearly highest in the formulas Soliman initially proposed, in which, “The [SFE] may invest in these assets with potential investors or help the NSPO create partnerships in these assets directly.” This may explain the apparent preference in Egyptian government circles for “strategic investors,” implicitly in the Gulf, who would perceive lower risk due to their political alliance with the Sisi administration and the military.

In any case, Soliman explained at the outset that an immediate task in taking on the NSPO companies was to “get our hands around the sizes of those assets, the valuations of those assets, and the market space.” Having apparently done so, Wataniya Petroleum and Safi Water were reportedly added to the SFE’s pre-initial public offering (IPO) subfund by January 2023, with the aim of marketing them to sovereign wealth funds in the Gulf. The purpose of this mechanism, the SFE explained, was “to offer a chance to institutional investors to obtain stakes in partially or fully State-Owned Enterprises (“SOEs”) ahead of their Initial Public Offering.” A month later, Prime Minister Mostafa Madbouly and Minister of Petroleum Tareq al-Molla somewhat confusingly announced that the two companies would be among other state-owned enterprises that would be offered on the stock exchange, but a cabinet spokesperson subsequently stated that the offer would take place through an IPO advisor outside the stock exchange.

These options were not put to the test, in any event. There are various explanations for why sales have not taken place. Successive sharp devaluations of the Egyptian pound against the U.S. dollar between October 2022 (14 percent) and January 2023 (25 percent) prompted asset prices to soar more than 47 percent when measured in pounds in the Egyptian Stock Exchange, but to contract by over 30 percent in U.S. dollar terms in the year up to November 2022. Potential investors, even “strategic” ones in the Gulf, were reluctant to pay above local currency market rates for shares in state-owned companies generally; the same was probably true when negotiating the price of shares in NSPO companies. The Egyptian military was presumably equally reluctant to sell at a depreciated price.

There were other problems. Insider accounts, partly confirmed by knowledgeable independent media platform Mada Masr, suggested that evaluation of NSPO companies was proving difficult, as they did not follow a standard legal format for their acquisition of land and other assets, could not account for staff salaries, and followed divergent and often undocumented or untraceable procurement processes. This probably explains the resort to a SFE subfund, relieving the companies of making public disclosures of risks, ongoing litigation, and other aspects of their operations and financing, potentially putting investors at risk of limited liquidity, higher fees, financial loss, and an inability to list the companies on stock exchanges.

Whatever the truth of these accounts, the Abu Dhabi National Oil Company withdrew its interest in the Wataniya chain of petrol stations in early 2022, instead buying a 50 percent stake in the fuel-distribution business of TotalEnergies in Egypt. The NSPO was later believed to be stripping assets from its Wataniya chain and transferring them to its second chain, ChillOut, which was not for sale, reducing the potential attraction of Wataniya for buyers. The SFE was also reported to have split Wataniya and Safi into two separate companies each, in time to open bidding in March 2023, but more than a year later there is no evidence the hived-off companies exist.

Throughout, senior officials have announced the imminent opening of bidding on the two NSPO companies, but successive deadlines for both submissions and decisions have come and gone: June 30, 2021, then “before the summer vacation” of 2022, April 2023, May 2023, December 2023, and finally “soon” according to Saeed in both February and May 2024. Military opposition is clearly the cause. Mada Masr has confirmed this, citing a senior source at the Ministry of Planning who referred to “a state agency”—understood to mean the military—that had repeatedly backed out of painfully-negotiated agreements with purchasers that were ready for signing. The military appears to have balked even at splitting Wataniya, although the SFE’s proposal would have left it with the more lucrative network of fuel stations in Greater Cairo.

In this context, the decision to publicize a meeting in mid-November 2022 between Sisi and key armed forces generals to review the status of preparations for floating Wataniya and Safi on the stock exchange now appears to have been a last-ditch attempt to break the deadlock. Soliman’s resignation nearly two years later indicates that Sisi has accepted defeat. Indeed, military appetite for commercial ventures has only intensified: the number of NSPO companies operating in civilian markets has doubled since he took office in 2014, reaching 66 (including partnerships and joint ventures), with its latest acquisition, of Beshay Steel company, coming as recently as September 2023.

But considerably more than the sale of shares in military-owned companies is at stake. Sisi’s recent reshuffle of armed forces commanders comes against a backdrop of differences with his generals over leasing land and facilities in the Suez Canal zone to foreign investors and, more recently, over the potential resettlement of displaced Palestinians from Gaza in Egypt (which Sisi is believed to support and the military-security establishment opposes). Sisi’s final presidential term was always going to be challenging, but developments at the SFE suggest he is already on the back foot.