Wednesday, 25 May 2022

AM — Some foreign companies have suspended car exports to Egypt

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, friends. We’re past hump day, but there’s lots of work in sight before we can declare victory and slide into the weekend.

SIGN OF THE TIMES #1- The EGP has eased almost 2% against the greenback over the past two days. The USD was changing hands at EGP 18.55 yesterday, down from EGP 18.30 on Sunday.

SIGN OF THE TIMES #2- CIB has launched two new high-interest certificates of deposit: A three-year certificate at a 13.5% rate, and a four-year 14.0% certificate. The minimum deposit is EGP 100k.

WHAT’S HAPPENING TODAY-

It’s Day #3 at Davos: The third day of the World Economic Forum (WEF) in Davos will see more discussions on the current geopolitical uncertainty, the future of globalization, poverty reduction and climate change.

Representing Egypt: International Cooperation Minister Rania Al Mashat will join two panel discussions on how globalization can survive the current global crises (13:00 CLT) and efforts to cure infectious diseases (17:30 CLT). Former social solidarity minister and current executive director of the US Office on Drugs and Crime Ghada Waly will discuss internet safety in a session in the afternoon (13:15 CLT).

Defense Minister Mohamed Zaki is in the Democratic Republic of Congo (DRC) today to hold talks on strengthening military ties, the Armed Forces said in a statement yesterday.


LISTEN TO OUR PODCAST ON WHAT AI CAN MEAN FOR YOUR BUSINESS. Last month, we explored how the government has made artificial intelligence a national priority. We spoke with the former ICT Ministry’s advisor for AI Sally Radwan about the government’s national AI strategy and how it is being implemented (Part 1 | Part 2).

In another of our podcast roundtables, we sat down with the companies building AI systems in Egypt to get a bird’s eye view on what’s happening in the sector: Who’s adopting it, how they’re going about it, and what challenges they’re facing.

You can catch the episode on our website here (listen, runtime: 44:01), or tune in via Apple Podcasts | Anghami | Google Podcasts | Spotify). Or you can read edited excerpts of our conversation here.

MARKET WATCH-

Saudi Arabia has no intention of pumping more oil and bringing down prices: That was the main message delivered by the kingdom’s Foreign Minister Prince Faisal bin Farhan, who told the World Economic Forum (WEF) yesterday that it had done “what it can” to calm volatility in the oil markets, Bloomberg reports. “As far as we are aware there is no shortfall of oil,” he said. “It’s much more complex than just bringing barrels to the market … Our assessment is that actually oil supply right now is relatively in balance.”

The US, UK and other countries have pleaded with Riyadh in recent weeks to up its supply and bring down prices, which have remained above USD 100 a barrel since late February when Russia invaded Ukraine.

When will stocks bottom out? Not before the Federal Reserve eases its tightening cycle, Goldman Sachs says in a note cited by Bloomberg. The Fed isn’t likely to loosen its grip and switch to monetary easing until the US economy enters a recession, the bank adds. “Monetary policy has historically stopped tightening about three months before equities bottom, and shifted to easing about two months afterwards,” Goldman Sachs strategist Vicky Chang wrote. The value of equities has been slipping since the Fed halted its stimulus and began tightening monetary policy in a bid to curb inflation, raising interest rates by an aggressive 50 basis points earlier this month. Major US indices have either entered a bear market (like the Nasdaq) or are teetering on the brink of one.

MORNING MUST READ-

Is the US mediating an agreement between Egypt, the KSA and Israel that could pave the war for normalization of Saudi-Israeli relations? That’s according to Axios, which cites five US and Israeli officials with knowledge of the matter. According to the report, the Biden administration is working with the countries to finalize the transfer of Tiran and Sanafir islands from Egypt to Saudi Arabia, a move that it believes could open the door to warming ties between Riyadh and Tel Aviv. The US hopes to finalize the agreement ahead of the US president’s upcoming trip to Israel ⁠— and possibly Saudi ⁠— in June, sources say.

REMEMBER- Egypt agreed to hand over control of the two Red Sea islands to Riyadh back in 2017, but a final agreement has remained elusive in the years since as the two countries wait on Israel’s sign-off. Tel Aviv has a say in what happens with the islands under the terms of the 1979 peace treaty, in which Egypt pledged to guarantee Israeli ships access to the Tiran Straits.

THE BIG STORY ABROAD- Yet another mass shooting is dominating the front pages in the US this morning. Nineteen children and two adults were murdered yesterday when an 18-year-old gunman opened fire in a Texas elementary school. (AP | Reuters | NYT | Washington Post | WSJ)

CIRCLE YOUR CALENDAR-

The Madbouly government will hold public consultations on its privatization plans over three months, according to a cabinet statement out yesterday. “We as a government are ready to hear all opinions and approaches because our objective is the interest of the country and the advancement of the economy,” PM Moustafa Madbouly said at a Cabinet meeting.

We got our first look at its policy document last week: The government intends to fully withdraw from as many as 79 industries over the next three years as part of plans to restructure the economy in favor of the private sector, according to a draft copy of its state ownership policy document obtained by the local press last week. The final version of the document is expected to be published before the end of this month.

The Fin Expo Egypt is kicking off tomorrow and will run until Thursday at the Intercontinental Citystars. The expo will feature over 25 companies exhibiting their fintech products and services with 3k visitors expected.

El Gouna International Squash Open 2022 will kick off on Friday and run until the following Friday, 3 June. The competition will feature some of Egypt’s top seeds including world #1 Nouran Gohar and world #2 Ali Farag (who just earned the PSA squash championship cup). The prize pool for each of the men’s and women’s competitions is USD 180k.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

enterprise

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We continue our coverage of the USAID Alternative Finance conference with one of the liveliest and engaging panel discussions we’ve seen in a while. This time, the focus was squarely on Egypt’s PPP framework, with the various stakeholders defining their roles in the framework and what they would like to see the other party do more of.

enterprise

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AUTOMOTIVE

Don’t hold your breath if you expect to buy a new car anytime soon

Need a new car? Good luck. Some foreign car manufacturers have suspended sales to Egypt after a change to how imports are paid for has left local dealers unable to purchase vehicles, industry sources say, confirming reports first published by Al Borsa and Al Mal on Monday.

The new supply constraints will only add to existing shortages in the market caused by the scarcity of microchips and shipping snarls — and comes as dealers grapple with rising inflation. The shortage of inventory in the market became much worse after new rules were handed down in March requiring importers to use letters of credit (L/Cs) to purchase goods, instead of documentary collection, a quicker, more accessible, and less capital-intensive way of facilitating trade. The change in policy sparked criticism at the time from trade and industry associations.

International car manufacturers are now rerouting shipments away from Egypt because local importers and distributors haven’t been able to make transfers, Abed El Kader Talaat, a board member at the Automotive Information Council (AMIC), the industry group, told us. “No letters of credit were opened, no transfers were made, and therefore suppliers have made the decision to not produce for Egypt and instead divert to other markets,” he said.

Which brands have pulled out? We’ve so far counted 13 that no longer appear to be delivering to Egypt, including some of Europe’s biggest brands — Citroen, Volkswagen, Audi, Fiat and Peugeot among them — as well as Jeep and Asian companies including Geely.

The situation provides no certainty for overseas suppliers: “Foreign companies now don’t know the future of their exports to Egypt, and seeing as there is demand in other countries that can’t be met due to the global crisis, they started redirecting some of the cars bound for the Egyptian market to other countries,” Abou Ghaly Motors’ commercial director, Tamer Kotb, told Enterprise. Abou Ghaly’s portfolio of brands includes Mercedes, Jeep, Alfa Romeo and Subaru, among others, as well as a stable of mobility solutions.

Few new cars have entered the market since March, Kotb said. Talaat told us that there are around 29k vehicles waiting to be released from port, which could help to ease the supply squeeze should the import issues be resolved.

“We have lost credibility with foreign car manufacturers, because we have cars that Egyptian distributors ordered, that have been produced and we can’t take them,” said Karim Naggar, chairman of Egyptian Automotive and Trading and Kayan, which imports and distributes brands including Volkswagen, Audi and Seat. “We are unable to give them an outlook on how long this will go on because nobody is telling us when we can expect to see changes.”

There’s no quick fix: Foreign car manufacturers won’t look to export to Egypt until the current backlog is cleared, Talaat said. It takes around three months from when an importer puts in an order for the cars to arrive here, he said. If import difficulties are cleared up, there will be a significant lag as manufacturers return to the Egyptian market, he added.

Another year of standstill? In the best case scenario, the market will start to stabilize in mid-2023, Kotb told us.

Distributors also have to compensate consumers for recent price hikes + supply issues: Customers who made a down payment on a vehicle prior to 12 April, but who have not received their car, are entitled to receive a refund from the dealer plus 18% interest, the Consumer Protection Agency said this week. Those who had paid for the car in full before this date will be protected against any recent price hikes, it said. Distributors are waiting for clarity on how the refund system will work and are angling to minimize how much interest they’re required to pay on, for example, downpayments made before Banque Misr and NBE hiked rates to 18% earlier this spring.

We could hear more about consumer refunds today: Kotb told us that he expects the decision to be published in the Official Gazette today.

One thing is clear: Whenever supply returns, prices are going up — but it’s anyone’s guess by how much. Between the wide gap between supply and demand, local car prices are set to rise between 15-20%, and that’s on top of the 2-5% hike in the global market due to the rise in raw materials prices on the back of war in Ukraine, Kotb added. Talaat is less optimistic, forecasting a 35-45% price hike, taking into account the devaluation earlier this spring of the EGP and ongoing market turmoil. “Cars are going to continue to be much more expensive than they currently are — it’s all about supply and demand,” Naggar said.

In the meantime, the CPA is saying dealers can raise prices only 5%, a figure that won’t move the needle for distributors — and that’s largely academic, anyway. You can’t price up that which you do not have in hand to sell.

ECONOMY

IMF program in 2 months?

Egypt hopes to finalize a fresh assistance program with the IMF “within two months,” Prime Minister Moustafa Madbouly told lawmakers yesterday in an address focusing on the government’s response to what he said was the worst global crisis since the Second World War, according to cabinet statements (here and here). Madbouly did not provide details on the program during the meeting, but said it would aim to “sustain [the state’s] economic reform programs … and affirm that Egypt is moving in a disciplined manner.”

BACKGROUND- We’ve been in talks with the Fund for several months on a new assistance program to help us mitigate the fiscal strain and balance of payments pressure caused by spillover effects from the war in Ukraine. Madbouly said earlier this month that it could take months before an agreement is sealed, while CBE governor Tarek Amer said we would only receive limited funding due to it already exceeding its quota. Finance Minister Mohamed Maait said earlier this week that talks were going “very well.”

COMMODITIES

We’re getting another USD 3 bn for wheat imports from the ITFC

We’re getting an additional USD 3 bn from ITFC to help us through the commodities crunch: The International Islamic Trade Finance Corporation (ITFC) has raised the ceiling for its financing agreement with Egypt to USD 6 bn from USD 3 bn, Supply Minister Ali El Moselhy told Al Hekaya’s Amr Adib on Monday (watch, runtime: 3:08). The extra funds will help us pay for imported wheat and oil, El Moselhy said, without clarifying the exact breakdown or when it was disbursed.

The original agreement goes back more than four years: Egypt signed a USD 3 bn agreement with the ITFC in January 2018 to fund the purchase of basic goods and commodities, such as petroleum, wheat, and other subsidized food staples. Since then, Egypt has taken out more loans from the corporation, including USD 1.5 bn earlier this year and USD 2.3 bn late last year, both to fund commodity imports.

Ballooning commodity prices are hitting our budget: The government is having to find an extra EGP 15 bn this fiscal year to cover the extra costs of imported wheat, which has soared in price following Russia’s invasion of Ukraine. This had knock-on effects on the budget, with the government having to add another EGP 6 bn to its 2021-2022 budget allocation to fund debt repayments. Current wheat prices are also far above the price the government has used to calculate its expenditure in the coming fiscal year: the draft budget released this month forecasts prices to average USD 350 per ton during the year, 20% below the current market price. This has caused some MPs to raise doubts about the ministry’s forecast.

The news got ink in the foreign press: Bloomberg | Reuters.

IMF BOSS TO INDIA: PLEASE DON’T BAN EXPORTS

IMF chief Kristalina Georgieva has urged India to reconsider its wheat export ban in an interview with India’s NDTV on the sidelines of the World Economic Forum (WEF) at Davos (watch, runtime: 8:01). The restrictions could have a major impact on countries most vulnerable to the wheat crisis, including Egypt and Lebanon, “where what we see is not only risk of hunger but risk of social unrest and impact on global stability.”

REMEMBER- Egypt is already in talks with India for exemption from the ban, which was introduced in response to surging domestic prices in India and a heatwave that threatened to impact the harvest. Supply Minister Ali El Moselhy said earlier this month that an agreement to buy 500k tons of Indian wheat will not be impacted by the ban, but clarified later that the purchase has been agreed but not signed.

enterprise

MINING

Four miners land licenses to prospect for gold

Four miners have landed licenses to explore for gold in the Eastern Desert in the Madbouly government’s latest tender, Dostor reported yesterday. They reportedly include Ankh Resources, Sawiris-backed Akh Gold, Canadian miner Lotus Gold, and Marine Logistic.

Lotus and Akh are familiar faces: Naguib Sawiris-backed Akh Gold signed contracts for nine exploration concessions worth USD 4.1 mn in last year’s tender of exploration rights, while Canada’s Lotus snagged a USD 9 mn agreement for 11 blocks.

…but Ankh Resources is a newcomer: Established last year in the UK, Ankh Resources won its first gold exploration license for one block — known as Dara — in the northeastern desert, Ankh Resources Managing Director Mostafa Talaat told Enterprise. The miner has committed a seven-figure USD investment to the block, the company’s chairman, Hossam Allam, added. Ankh is ready to exploration as soon as the block is handed to them — likely in three or four months’ time, Talaat said.

Ankh looks to be gearing up to invest more aggressively: “We’ll definitely be pushing more investments in the Egyptian market,” Talaat said, adding that they hope to expand beyond Egypt at some point. The miner is primarily eyeing the Red Sea-adjacent Arabian-Nubian Shield, which is one of the “last major under-explored frontiers for the global mining industry,” Allam said.

This is the government’s second gold tender in as many years: Four mining companies signed 10 new gold exploration contracts with the Oil Ministry in February. Later in July, the government signed four gold exploration contracts with Canadian miner B2Gold and Australian gold miner and Sukkari operator Centamin. Back in 2020, the Oil Ministry said it would launch new gold exploration tenders every four months.

LEGISLATION WATCH

“Mud tax” could be suspended until July 2023

The mud tax” could be suspended for another year: The House Planning and Budget Committee has approved a draft bill from the government to extend the suspension of the 14% tax on agricultural land (known as “mud tax”) for an additional year to July 2023, Hapi Journal reported.

Why the extension? The decision aims to “alleviate tax burdens on those working in the agricultural sector and to encourage them to boost agricultural production,” Rep. Yasser Omar, the deputy head of the committee, said. The suspension was set to expire in July 2022.

Background: The House approved in 2020 a two-year suspension of the 14% tax, extending an existing three-year suspension approved in 2017 under efforts by the state to support farmers through the covid-19 crisis.

ALSO YESTERDAY- The House gave its final approval to a draft law organizing Hajj trips and setting up an online Hajj portal, Ahram Gate reports. Would-be pilgrims will be able to use the portal to apply for travel visas to Saudi Arabia to undertake the pilgrimage. Travelers’ data will be available on the portal, with each person assigned a code number to be stamped on their passport.

enterprise

ENTERPRISE ON THE ROAD

DAY THREE- Lagos doesn’t cease to amaze us — and frankly, it feels like we’ve been here for three weeks, not just two and a half days. The energy of the local entrepreneurship scene has kept our adrenaline pumping, along with the little bits and pieces of chaos that remind us of home. Day three was more of a cultural day, although we did meet a few startups and an angel investor.

Quick update on the trip participants: We’ve been joined by Cairo Angels Syndicate Fund (CASF) portfolio company FlexPay from Kenya. Founders Richard Machomba and Johnson Gituma flew in to explore Lagos’ ecosystem with us. They are pictured above, along with CASF CEO Aly Shalakany, Nawah Scientific CEO and founder Omar Shoukry, co-founder of fintech player Lnddo Adham Azzam (who just launched new fintech startup Balad), and co-founder and CEO of Nigerian fintech Credpal Fehintolu Olaogun.

The highlight of our day was meeting Biola Alabi (LinkedIn), cofounder and GP of Atika Ventures. Also serving as the deputy chair of the Lagos Angel Network, she is the senior advisor and executive producer of Biola Alabi Media and Entertainment. Before going into angel investment, Alabi was a media pioneer who, among other things, brought Sesame Street to African markets via local productions. She spoke about what makes the Nigerian scene so attractive and legislation on startups now waiting to pass the National Assembly and Senate. We’ll have plenty for you on what she and other investors told us once we’re back in Omm El Donia.

Our other stops today included Impact Hub Lagos, the national museum, and a Khan El-Khalili lookalike. Impact Hub Lagos is the local chapter of the global collective of startup communities, which connects entrepreneurs to large organizations, cultural, and public institutions.

Fintech and culture: We also sat down with local BNPL fintech CredPal and digital bank Carbon to talk about their insights into the local fintech scene, hit a museum to learn more about Nigeria’s colonial history, and made a brief stop at a Hussein-like local market for some retail therapy.

There is no better way to describe Nigeria’s spirit than emphasize that they do not produce sad music. Nigerian music is very upbeat, taking the form of what the West likes to call afrobeats. Among the most popular Nigerian songs currently are Emiliana by CKay and Kwaku The Traveler by Black Sherif. But locals are most enamored with late Nigerian artist Fela Kuti, who was a “philosopher, prophet, and musician,” our good friend Tomi Davies, investor and collaborator-in-chief of TVC Labs, told us. Fela is considered the pioneer of afrobeat and has a shrine dedicated to him which also serves as a host location of the annual Felabration music festival.

What about the food? It is, in a word, spicy. Some of us consciously opt for a classic burger at some meals because Nigerian food is crazy spicy. For the first time in our lives, we appreciate the concept of palate cleansers, which can either be some fried plantain (the brothers of bananas) or yams in different shapes and forms. On a different note: pineapples here are at a different level of deliciousness.

The staple Nigerian drink is called a chapman. The non-alcoholic drink consists of Fanta, Sprite, cucumber, lemon, grenadine and angostura bitters, which is a kind of tonic water. Some of us have had it at least twice in the past two days.

Also: People in Lagos generally do not smoke. We’re used to the sight of cigarettes everywhere in Cairo. But in Nigeria, a mere 10% or so of the population is enslaved to tobacco, according to a study. And it is very noticeable in the streets of Lagos: No cigarette butts on the floor, no smell of smoke.

LAST NIGHT’S TALK SHOWS

Illegal construction was back in the conversation on the airwaves last night after the House of Representatives discussed amending the law on reconciling building violations. Legal changes have been discussed this month in a bid to get the government’s ambition to tackle informal settlements back on track.

Why the amendments? Some governorates have been implementing the law differently than others, Rep. Amr Darwish, head of the House Local Development Committee, told Salet El Tahrir’s Azza Mostafa (watch, runtime: 11:34 ), who stressed that a unified set of rules had to be applied nationwide. He said that the government is currently drafting amendments on reconciliation, adding that they would set a “red line to ensure no new violations'' are made.

Reconciliation has stalled: Property owners have submitted some 2.8 mn reconciliation requests since the law came into effect in 2020, but not everyone has paid the settlement fee.

And the government has only responded to a handful of requests: Of the 2.8 mn requests, only 50k-60k have been responded to, Rep. Ahmed El Segni, head of the House Local Administration Committee, told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 7:06). Some of those who have paid the fees have complained about not receiving a response from the government. The amendments would include new rules to ensure that authorities make a decision on every request submitted.

Also talking reconciliation last night: Local Development Ministry spokesperson Khaled Qassem, who phoned in to Yahduth Fi Masr (watch, runtime: 7:45).

EGYPT IN THE NEWS

The global economic crisis and its impact on Egypt is in focus in the foreign press this morning: Egypt’s balance of payments is vulnerable to the “double shock” of monetary tightening and the rise in global prices, and faces tighter capital controls if it does not agree a new financing package with the IMF, FX Empire writes. Meanwhile, Reuters reports that JPMorgan has classified Egypt as being highly vulnerable to fiscal and debt shocks over the longer-term, and Voice of America is the latest foreign outlet to examine how rising food prices are impacting Egypt.

Archiving the fading sounds of Cairo: Two Egyptians set out to record the sounds of the city as new infrastructure transforms the soundscape. (Washington Post)

ALSO ON OUR RADAR

Al Ahly Sabbour Developments could take a sukuk issuance to market, Al Borsa quotes Managing Director Ahmed Sabbour as saying. Industry sources tell us the plans are still at an early stage, and company officials did not reply to requests for comment when we reached out. The developer is also in talks with the National Bank of Egypt for an EGP 850 mn facility to finance its Keeva project in Sixth of October

It’s been another quiet year for sukuk so far: Palm Hills Developments in March took its maiden EGP 3.25 bn sukuk issuance to market in our first corporate sukuk sale of the year. The sale came after a very quiet 2021 for sharia-compliant debt issuances, which by our count witnessed a single EGP 2.5 bn sale from Contact Financial Holding (formerly Sarwa Capital).

Will we see any more issuances in 1H? Wadi Degla Developments’s EGP 2 bn sukuk sale and Amer Group’s EGP 1.1 bn offering — both quarterbacked by Contact — had been slated to take place during the first half of the year, Contact Financial’s CFO Ayman Elsawy told us in January.

Other things we’re keeping an eye on this morning:

  • France’s Thales has completed the new Tanta train station and two other stops along the railway linking Asyut and Nag Hammadi. (Statement)
  • Yemen confirmed that Egypt has approved direct flights between Cairo and Sanaa under a UN-brokered truce that last month brought fighting between the Saudi-led coalition and Houthi rebels. (Twitter)
  • Local delivery app Gooo has closed a pre-seed funding round from angel investors, Al Borsa reported. The company, which says it wants to raise USD 5 mn in unspecified future rounds, did not disclose how much it raised.

PLANET FINANCE

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EM currencies are standing strong in the face of a strengthening greenback: Emerging-market currencies have outperformed those in developed economies since January despite a strengthening USD, which has hit its highest level in years on the back of concerns over inflation and global growth, the Wall Street Journal writes. Currencies of commodity producers such as the BRL, CLP and ZAR have all seen strong gains this year, as investors try to ride the wave of surging commodity prices. The BRL has risen 13% against the USD thanks to its position in the coffee and soybean export markets, while the CLP has gained due to the country’s dominant status as a copper producer.

The RUB is hot: The RUB defied western sanctions to become the world’s best performing currency on Tuesday, after strengthening 30% against the USD to 56.80 — a level not seen since 2018, Reuters reports. The currency has benefited from exporters converting FX to tax payments and new rules forcing European importers to purchase oil and gas in RUB.

The TRY is not: The TRY crashed to a five-month low yesterday as dwindling reserves and the central bank’s refusal to raise interest rates to combat decades-high inflation heaped more pressure on the currency, Bloomberg writes.

MEANWHILE- The ECB thinks crypto could pose “systemic” threat to financial system: The European Central Bank has warned that the financial sector’s increasing involvement in crypto assets could pose a “systemic risk” to the global financial system, and called for tougher supervision of the unregulated market. (ECB)

Also worth noting this morning:

  • Marafiq taps HSBC, Riyad Capital for IPO: Saudi utility Marafiq has tapped HSBC and Riyad Capital to manage its upcoming USD 1.2 bn IPO. (Bloomberg)
  • Look out for a blockbuster tech acquisition: US-based semiconductor and software firm Broadcom could acquire cloud computing leader VMware for USD 60 bn, in what would be one of the biggest acquisitions of the year so far, according to people close to the talks. (Wall Street Journal)
  • JPMorgan’s UK Chase launch isn’t going to plan: JPMorgan’s retail bank, Chase, will lose more than USD 1 bn on its new international operations, which launched in the UK last year as a digital bank. The bank expects to break even on the bank by 2027 or 2028 and “generate significant income thereafter.” (FT)

Down

EGX30

10,416

-1.0% (YTD: -12.8%)

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USD (CBE)

Buy 18.46

Sell 18.55

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USD at CIB

Buy 18.49

Sell 18.55

None

Interest rates CBE

11.25% deposit

12.25% lending

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12,301

+0.5% (YTD: +9.0%)

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ADX

9,472

-2.5% (YTD: +11.6%)

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DFM

3,259

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3,941

-0.8% (YTD: -17.3%)

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FTSE 100

7,484

-0.4% (YTD: +1.4%)

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3,648

-1.6% (YTD: -15.1%)

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USD 113.56

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USD 8.85

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USD 1,870.50

-0.1%

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BTC

USD 29,591

+1.3% (YTD: -36.2%)

THE CLOSING BELL-

The EGX30 fell 1.0% at yesterday’s close on turnover of EGP 609 mn (28.1% below the 90-day average). Foreign investors were net sellers. The index is down 12.8% YTD.

In the green: Rameda (+3.7%) and Oriental Weaver (+0.3%).

In the red: Ibnsina Pharma (-7.0%), Palm Hills Development (-5.9%) and Orascom Construction (-5.1%).

It’s another mixed open in Asia this morning following yesterday’s sell-off on Wall Street ⁠— and it’s looking like much the same in Europe and the US, according to stock futures.

DIPLOMACY

Prime Minister Moustafa Madbouly met with the president of the Arab-Brazilian Chamber of Commerce to discuss boosting economic and trade relations, according to a cabinet statement. The PM also received an invite to take part in the Arab-Brazilian Economic Forum in Sao Paulo in July. A delegation of Brazilian companies recently visited Egypt to discuss upping imports of Egyptian fertilizer.

AROUND THE WORLD

Turkish President Recep Tayyip Erdogan is threatening to launch a new military incursion into Northern Syria, where it has invaded several times in recent years to attack Kurdish militia. (AP)

Iran is ready to find a “middle ground” compromise to revive its nuclear accord with the US, according to Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani. (Statement)

hardhat

How stakeholders in Egypt’s PPP framework see their roles and what they want to see from their counterparts: We continue our coverage on the USAID Alternative Finance conference, which concluded yesterday. One of the sessions that piqued our interest focused on the future of the public-private partnership (PPP) model in Egypt. The talk saw representatives from the private sector, the lenders, and the regulator engage in a back-and-forth about their roles within the current framework, and how it could be improved.

*** Missed our coverage of day 1 of the conference? Check it out here.

The government has at least five major projects in the pipeline: “We have several projects on the pipeline that will be tendered under a PPP framework across a variety of sectors,” said Atter Hannour, director of the Finance Ministry’s PPP unit. These include a wastewater treatment plant, a desalination plant, eight new waste-to-energy plants, a hospital in Obour, a series of new dry ports and warehouses across Upper Egypt with a combined storage capacity of 75k pallets (think storage shelves), he revealed. Desalination seems to be popular, with Hannoura noting that 64 companies are looking to bid on the project.

That’s not to mention the revival of the PPP schools program: The government is also looking to reboot the long-dormant PPP schools program with plans in store to launch a second phase soon, Hannoura said. “Phase 2 will go out with around 57-65 new schools,” he added. The program has been in limbo after structural issues with the tendering process in the first phase led to few takers. The program in its entirety hopes to build 1000 new schools across the country, with the private sector owning a stake in each school and building it with the government providing the land. You can catch our in-depth coverage on the PPP schools program here.

What does the private sector want?

#1- A pipeline of projects: “As a private sector operator, I am waiting for a pipeline,” said Khaled El Degwy, executive director of concessions at Orascom Construction (OC). OC is interested in cooperating with the government via PPPs in a wide array of projects, he said. “This could be your standard infrastructure projects, such as roads and wastewater plants, and it could be in areas such as schools and hospitals.”

#2- A broader range of sectors: “We would like to see more projects being offered in a wider variety of sectors,” said Mohamed Mehany, investment officer and PPP specialist at the International Finance Corporation (IFC). “We also want to see fresh approaches and new structures to PPP projects,” he added. These include spreading the financial burden between the private sector and the government if the economics of a particular project allows for it.

#3- A lower risk profile: “Risk profile is one of the main things we use to evaluate a project,” said El Degwy. “When looking at the risk profile of a given project there are certain risks that the private sector can control, namely technical and operational risks.” But there are certain risks that the private sector cannot control, such as inflation risk, FX risk, and risk of fees private sector players pay for government services (such as water and electricity), he added.

“As such, we are asking the government to work with us on lowering the risk profile for current PPP projects, with the understanding that we cannot have a one-size-fits-all perspective on the structure of transactions,” he said. “Transactions that worked for projects in 2008 cannot be emulated today.”

An example: One way the government can lower risk is by paying the private sector contractors in FX. This would allow them to pay off their foreign currency-denominated loans more easily, and reduce the FX risk, he said.

DFIs also have a role to play in all this: Once stakeholders are happy with the risk profile of the project, we then must obtain funding from development finance institutions (DFI) for very long tenors as these are usually long-term projects, El Degwy said.

And the IFC concurs: One of the most important roles DFIs play in PPP projects is to provide loans in FX under long tenors running up to 30 years, said Mehany.

Why DFIs as opposed to banks? It’s a simple matter of risk and FX, many sources in the infrastructure sector have told us, including Infinity co-founder and CEO Mohamed Mansour. “These projects need very long tenors of 15-20 years, and need to be financed in USD because components will be bought from abroad, which local banks are not allowed to do,” he told us earlier this year.

But their roles aren’t limited to purely financing projects: “DFIs also provide governments with technical assistance that includes helping them evaluate and identify projects that are better suited for a PPP,” El Mehany said. “We also play a major role in advising governments on setting regulations governing PPP projects,” he added.

So, how does the IFC assess our PPP regulations? “Recent progress I’ve been hearing on the regulatory front has been very positive,” said Mehany. He seemed particularly encouraged by recent news that the long-awaited executive regulations to the PPP Act should be out soon, and praised the decision to allow the private sector to propose PPP projects through a special private- public-sector committee.


Your top infrastructure stories for the week:

  • Orascom Construction and Al Ahly Capital to build West Cairo industrial park: Orascom Construction (OC) subsidiary Suez Industrial Development Company (SIDC) signed an agreement with Al Ahly Capital Holding to build an industrial park in West Cairo’s Abu Rawash. The industrial park will bring together companies working in logistics, light industries, and MSMEs.
  • Automobile manufacturer Stellantis is interested in assembling electric vehicles in Egypt, considering establishing a factory to produce EVs for the local and overseas markets.
  • Elsewedy Electric has launched Africa’s first busway epoxy system factory in Tenth of Ramadan City at an estimated cost of around USD 10 mn. The factory will come online in mid-July.
  • Packaging company Taiba Pack will spend EGP 300 mn to build a new plant to make packaging for the pharma industry.

CALENDAR

OUR CALENDAR APPEARS in two sections:

  • Events with specific dates or months are right here up top
  • Events happening in a quarter or other range of time with no specific date / month appear at the bottom of the calendar.

MAY

22-26 May (Sunday-Thursday): Davos 2022.

25 May (Wednesday): The deadline for private companies to pre-register ahead of bidding for the second phase of the PPP national project to establish and operate 1k language schools.

25-26 May: (Wednesday-Thursday): Fintech gathering FIN Expo Egypt is taking place at Intercontinental Citystars, Cairo, Egypt.

27 May-3 June (Friday-Friday): El Gouna International Squash Open 2022.

30-31 May (Monday-Tuesday): Egypt Can with Industry, Cairo, Egypt.

31 May (Tuesday): Last day for EGX-listed companies to file 1Q2022 earnings

31 May (Tuesday): The application deadline for ITIDA’s annual Export IT program.

31 May (Tuesday): Extended deadline for EGX-listed companies to disclose 1Q 2021 earnings.

May: Investment in Logistics Conference, Cairo, Egypt.

May: General Authority for Land and Dry Ports to issue the conditions booklet for the tender to establish and operate the Tenth of Ramadan dry port.

May: Egypt to sign contracts for second and third high-speed rail lines with Siemens by the end of the month.

May: Government to announce its automotive strategy by the end of the month.

JUNE

1-4 June (Wednesday-Saturday): The Islamic Development Bank will hold its 2022 annual meetings in Sharm El Sheikh.

2-3 June (Thursday-Friday): Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) will hold two high-level parallel meetings on climate action and digital transformation during IsDB’s 2022 annual meetings in Sharm.

5-7 June (Sunday-Tuesday): Africa Health ExCon, Al Manara International Conference Center, Egypt International Exhibitions Center, and the St. Regis Almasa Hotel, new administrative capital.

5 June (Sunday): GB Auto is hosting an extraordinary general assembly meeting (pdf).

7 June (Tuesday): Technology conference Tech Invest 4 will take place at the Grand Nile Hotel in Cairo.

9 June (Thursday): European Central Bank monetary policy meeting.

14-15 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15-18 June (Wednesday-Saturday): St. Petersburg International Economic Forum (SPIEF), St. Petersburg.

16 June (Thursday): EU-Egypt Sustainable Food Value Chain conference, Grand Nile Tower Hotel, Cairo.

16 June (Thursday): End of 2021-2022 academic year for public schools.

21-22 June (Tuesday-Wednesday): Aswan Forum for Sustainable Peace and Development, Cairo.

23 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

27 June-3 July (Monday-Sunday): World University Squash Championships, New Giza.

30 June (Thursday): June 30 Revolution Day, national holiday.

30 June (Thursday): Deadline for bids for National Democratic Party HQ redevelopment contract.

June: Egypt will launch a unified ticketing system for all means of transport at the Adly Mansour Interchange Station.

June: Polish President Andrzej Duda will visit Egypt to coordinate ways to ship Ukrainian wheat to Egypt amid the war in Ukraine.

JULY

July: A law governing ins. for seasonal contractors will come into effect.

July: Fuel pricing committee meets to decide quarterly fuel prices.

1 July (Friday): FY 2022-2023 begins.

1 July (Friday): Official rollout of e-receipt system begins.

8 July (Friday): Arafat Day.

9-13 July (Saturday-Wednesday): Eid Al Adha, national holiday.

21 July (Thursday): European Central Bank monetary policy meeting.

26-27 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

30 July (Saturday): Islamic New Year.

Late July – 14 August: 2Q2022 earnings season.

AUGUST

August: Work to extend the capacity of the Egypt-Sudan electricity interconnection to 600 MW to be completed.

18 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

SEPTEMBER

September: Egypt will display its first naval exhibition with the title Naval Power.

September: Central Bank of Egypt’s Innovation and Financial Technology Center to launch incubator for 25 fintech startups.

8 September (Thursday): European Central Bank monetary policy meeting.

18 September (Sunday): Deadline for brokerage firms, asset managers and financial advisors to register with the Egyptian Securities Federation.

20-21 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26–27 September (Monday-Tuesday): The Africa Women Innovation and Entrepreneurship Forum (AWIEF) at the Cairo Marriott Hotel.

OCTOBER

October: World Bank and IMF annual meetings in Washington, DC

October: Fuel pricing committee meets to decide quarterly fuel prices.

1 October (Saturday): Use of Nafeza becomes compulsory for air freight.

6 October (Thursday): Armed Forces Day, national holiday.

8 October (Saturday): Prophet Muhammad’s birthday, national holiday.

18-20 October(Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

27 October (Thursday): European Central Bank monetary policy meeting.

Late October – 14 November: 3Q2022 earnings season.

NOVEMBER

November: Cairo Water Week 2022.

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

4-6 November: The Autotech auto exhibition kicks off at the Cairo International Exhibition and Convention Center.

7-18 November (Monday-Friday): Egypt will host COP 27 in Sharm El Sheikh.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15 December (Thursday): European Central Bank monetary policy meeting.

DECEMBER

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

JANUARY 2023

January EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

January: Fuel pricing committee meets to decide quarterly fuel prices.

EVENTS WITH NO SET DATE

2Q2022: The Sovereign Fund of Egypt will invest in two companies in the financial inclusion and non-banking financial services sectors.

End of 2Q2022: The Financial Regulatory Authority’s new Ins. Act should be approved.

End of 2Q2022: Door for bidding for the contract to redevelop the site of the former National Democratic Party HQ to close.

1H2022: Target date for IDH to close its acquisition of 50% of Islamabad Diagnostic Center.

1H2022: e-Finance’s digital healthcare service platform, eHealth, will launch its services.

1H2022: The government will respond to private companies’ bids to build desalination plants.

1H2022: Egypt’s second corporate green bond issuance expected to be announced.

End of 1H2022: Emirati industrial company M Glory Holding and the Military Production Ministry will begin the mass production of dual fuel pickup trucks that can run on natural gas.

2H2022: The inauguration of the Grand Egyptian Museum.

2H2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

2H2022: The government will have vaccinated 70% of the population.

3Q2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release its first financing product.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

**Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish above between the actual holiday and its observance.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.