AM — Italy’s Intesa Sanpaolo in talks with gov’t to acquire the rest of Alexbank

Good morning, nice people, and welcome to a very busy hump day with the big news being a development that we hope could break the privatization “logjam” and signal the seriousness of the Madbouly government’s rebooted program: Italian lender Intesa Sanpaolo is said to be looking past short-term uncertainty and will acquire the 20% of Alexbank it doesn’t already own.

A sale would be a very big, very important milestone for the rebooted privatization program: Investors and market watchers alike are waiting for the first big, tangible outcome after Prime Minister Moustafa Madbouly unveiled the contours of the program earlier this month. Investors need to see something substantial — not a secondary sale of equity in an already-listed state-owned enterprise — to have confidence. Intesa Sanpaolo doubling down on Egypt would unquestionably be one such signal, as would be progress on the sale of a stake in any of the world’s largest combined-cycle power plants built by Siemens, Orascom Construction and Elsewedy Electric.

Watch this space: The transaction could go through within days, we’re told. Timing may hinge on how soon a court can quash or rule on a decade-old nuisance lawsuit that aimed to unwind the privatization of Alexbank, which was previously a member of the Big Four club of state-owned banks (it’s now the “big three,” with members including NBE, Banque Misr and Banque du Caire — the latter of which is itself a perennial privatization prospect.)

^^ We have mode in this morning’s news well, below.

The EGX’s Gulf roadshow wraps: A delegation from the EGX, the Central Bank of Egypt, and the Financial Regulatory Authority (FRA) wrapped up on Friday its week-long roadshow in Riyadh, Abu Dhabi, and Dubai where they met with 20 investment funds and institutions to drum up interest in the government’s privatization program, according to a joint statement (pdf). Saudi sovereign wealth fund PIF and Abu Dhabi’s ADQ together invested USD 3.1 bn in government-owned shares in EGX-listed companies last year, and have reportedly expressed interest in several of the 32 companies earmarked by the government for privatization.

Good vibes? Institutions from both countries showed “great interest” in investing in Egypt, according to the statement.

Speaking of roadshows… A delegation from the Japan Overseas Infrastructure Investment Corporation (JOIN) will soon visit the SCZone to explore potential investments, the SCZone said yesterday. The news comes after SCZone Chairman Walid Gamal El Din’s visit to Tokyo, during which he met more than 100 companies and financial institutions to drum up interest in Egypt.

The roadshow has found “interest in the SCZone from the Japanese business community,” Gamal El Din told Prime Minister Moustafa Madbouly yesterday in Cairo. He said Japanese companies are mainly interested in planned green energy projects in the zone.

HAPPENING TODAY-

Will Egypt get the all-clear to move ahead with its first-ever sovereign sukuk sale? Investment banks yesterday wrapped up conversations with investors regarding a potential sukuk issuance by the Egyptian government. Both Bloomberg and Reuters have reported that the Finance Ministry is planning to sell a benchmark-sized USD-denominated sukuk — usually at least around USD 500 mn — with a three-year tenor.

President El Sisi will hold talks today with his Uzbek counterpart Shavkat Mirziyoyev, who arrived in Egypt yesterday for a two-day visit, according to a statement by Ittihadiya. Mirziyoyev yesterday met with reps from top local companies including Orascom Construction, Elsewedy Electric and El Araby Group, the president’s office said.

ICYMI- The results of the 2023 Enterprise Reader Poll are out: We published the results of our latest reader survey in yesterday’s EnterpriseAM. You can check out the results of the poll here.

THE BIG STORY ABROAD-

There are two stories dominating the global front pages this morning:

#1- Fresh earthquakes in Turkey: Southern Turkey has been hit by a fresh pair of tremors, two weeks after major quakes left tens of thousands of people dead and thousands of buildings in ruins. Twin earthquakes with magnitudes of 6.4 and 5.8 hit Turkey’s southeastern Hatay province yesterday, killing three and hospitalizing more than 200. The fresh earthquakes have further damaged buildings, with Hatay Mayor Lutfi Savas telling Turkish TGRT TV that some people were trapped under the rubble.

The quake was felt in Egypt, with no casualties or damage to property reported, the National Seismic Network said yesterday. (AP | Reuters | Bloomberg | NYT | BBC)

#2- Biden’s surprise visit to Kyiv: In a show of solidarity with the war-torn country, the US president made an unannounced visit to Kyiv today a few days before the one-year anniversary of Moscow’s invasion. During talks with Ukrainian President Volodymyr Zelenskiy, Biden affirmed Washington’s “unwavering” commitment to defending the country from Russia’s invasion which is expected to intensify in the coming weeks as Moscow launches a spring offensive in the country’s east. (AP | Reuters | Bloomberg | CNN | NYT | Washington Post | WSJ | BBC)

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MORNING MUST-READ-

The four-day workweek is getting serious traction in the UK, with 90% of companies participating in the country’s largest-ever trial of the idea saying they’re going to keep testing it and 18 companies saying they’re making it permanent.

Why is a four-day workweek a good idea? Most participating companies said they found “sharp drops in worker turnover and absenteeism while largely maintaining productivity.”

It’s not just the UK: Companies in the US and Canada concluded similar studies (led by the same organizers), the idea is being tested in Australia and Brazil, and Unilever is piloting it in New Zealand.

The key to success: No goofing off, fewer meetings. Participating companies tried to ensure “work days more efficient with hacks such as cutting back on meetings and ensuring employees had more time to focus on completing tasks.”

SOUND SMART- Not every corporate “season” may lend itself to a four-day week — periods such as earnings season, for example, may demand an all-hands-on-deck approach even after you move to a four-day workweek, a whitepaper from the organizers suggests.

Go read all about it here in the Wall Street Journal or CNBC.

OR GO DEEPER in the official website for the trial, which is home to a white paper (no charge) and a paid book.

COME TO OUR NEXT ENTERPRISE FORUM-

We’re excited to unveil our next C-level event: The Enterprise Exports & FDI Forum, where we will take a deep dive into two of the most critical topics affecting our community.

Exports and foreign direct investment (FDI) have never been more important to our economy — or our businesses — than in the wake of the float of the EGP. We think we have a once-in-a-lifetime chance to build an export-led economy that makes us a magnet for FDI and all the benefits that will come with it for our nation.

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Downtown’s Egyptian Museum is sliding into a new era: The Tourism Ministry yesterday unveiled a refurbished wing of the Egyptian Museum in Downtown Tahrir, which is now home to a 16-meter ancient papyrus discovered last year. The renovated wing marks the first phase of a refurbishment plan for the country’s oldest museum, which is being repurposed after the relocation of its collection to the soon-to-open Grand Egyptian Museum. The ministry used the inauguration to unveil the Waziry Papyrus, which was discovered during excavations in Saqqara last May and features 113 inscriptions from the Book of the Dead. The Associated Press also took note of the story.

SO WHEN IS THE GEM OPENING? The talkshows put that to Supreme Council for Antiquities chief Mostafa El Waziri earlier this week. She said that while the GEM itself needed about three months to finish preparations to open, the actual date is up to “the political leadership” to decide.

CIRCLE YOUR CALENDAR-

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Egypt’s renewable energy generation capacity treaded water in 2022,

with wind and solar capacity even registering slight declines. But despite the apparent halt in bringing new projects online, renewable energy output grew nearly 7%. What happened?

Italy’s Intesa Sanpaolo could soon own all of Alexbank: Italy’s Intesa Sanpaolo is in advanced talks with the government to acquire the remaining 20% of the Bank of Alexandria (Alexbank) it doesn’t own, a government source with first-hand knowledge of the potential sale told Enterprise yesterday. The Italian lender has been the majority shareholder of Alexbank since 2006 when it purchased 80% of its shares from the government in a major USD 1.6 bn acquisition.

The transaction would make it easier for the state to exit its stakes in three other banks that it has earmarked for privatization: Banque du Caire (BdC), Arab African International Bank (AAIB), and United Bank are on the list of 32 names the state has identified as near-term priorities for privatization. BdC has been in the government’s IPO plans for years while United Bank has been rumored to be subject to a takeover bid by the Saudi wealth fund and Saudi financial institutions. AAIB, a well-respected full-service bank with a leading corporate franchise, was run for years by Central Bank of Egypt Governor Hassan Abdalla before he entered government service.

A potential sale was telegraphed by the EGX last month: The lender was absent from the list of 32 state-owned companies recently put forward by the government for privatization though it was named by the EGX in January as being in the pipeline of forthcoming offerings.

There’s just one hurdle: An Egyptian court will need to rule on a long-standing legal challenge against the original sale to Intesa before a takeover can go through, two sources told Reuters yesterday. The Egyptian Center for Transparency mounted a legal challenge against the sale over a decade ago, claiming that the government had agreed to sell the stake at a price below the bank’s market value.

The courts cleared a legal barrier to the sale just last month then the Supreme Constitutional Court (SCC) voted to uphold a law passed in 2014 that prohibits third-party lawsuits against contracts between the state and investors. The law was originally conceived to prevent outside legal challenges to the government’s privatization agenda.

A decision before the end of the week? The SCC’s ruling will now allow decisions to be made on a number of outstanding cases, including the sale of Alexbank to Intesa. One of Reuters’ sources said that the court could make a decision as early as 25 February while a separate legal source said that the challenge to the sale would likely now be dismissed.

By the numbers: Alexbank’s bottomline grew 21% y-o-y to EGP 834.5 mn in 3Q 2022, supported by rising net interest income and higher revenues from fees and commission, according to the bank’s most recent financial statement (pdf).

REMEMBER- The privatization push is part of the country’s new state ownership policy, which outlines how the government intends to more than double the private sector’s role in the economy to 65% and attract USD 40 bn in private investment by 2026. The government says it will reduce its involvement in a number of sectors via public share offerings, stake sales to strategic investors, and expanding public-private partnerships.

More funds for Egyptian SMEs: Avanz Manara, a private equity vehicle focused on Egyptian SMEs, plans to make three new investments during 1H 2023, Haytham Wagih, senior director at Avanz Capital Management, reportedly told Al Mal. The firm is considering investing in three funds targeting SMEs, he said, without disclosing further information about the plans.

Avanz Manara has a lot of state backing: Avanz Capital launched Manara last March with initial capital of EGP 905 mn, and plans to raise this to EGP 2 bn via two capital increases over the course of this year, he said. The company’s founding shareholders are a who’s who of state financial institutions including the National Bank of Egypt, Banque Misr, Banque du Caire, Misr Insurance Holding Company, Suez Canal Bank, and the United Bank. Also shareholders: Attijariwafa Bank Egypt and Ahli United Bank, both private-sector entities.

The story so far: The fund has currently invested EGP 7 mn in local firms: EGP 5 mn it handed to Egypt-focused PE outfit Ezdehar and EGP 2 mn into logistics startup Trella, Wagih said.

EgyCop is expected to go live next month, the newspaper quotes Avanz Capital co-founder and chief portfolio and risk officer Hany Assaad as saying. The fund, which is being managed by Avanz, will invest in low-carbon projects that issue carbon credits, and plans to raise an initial EGP 1 bn, he said, adding that they’re still waiting on a license from the Financial Regulatory Authority. The FRA previously said it was working on the license as well as on amendments to the Capital Markets Act that would validate the use of carbon certificates as a tradable security.

Background: Planning Minister Hala El Said announced the creation of the fund at COP27 in November. It is set to complement the EGX’s voluntary carbon market, which is set for launch in the middle of this year.

Africa-wide low-carbon fund in the works: Avanz Capital and MGM Financial & Banking Consultants are considering launching an Africa-wide fund investing in low-carbon projects that issue carbon credits “in partnership with an international financial institution,” Assaad was quoted as saying in a separate Al Mal article. The fund will target an initial capital of USD 200 mn and is envisaged as an Africa-wide version of EgyCop, Assaad said.

The African fund is eyeing investing in Ghana, Nigeria, and Morocco as a start, Assaad said. The companies are in talks with investors from South Africa, Tanzania, and Kenya to participate in the fund, MGM board member Sherif El Diwany is quoted as saying.

ALSO IN CAPITAL MARKETS-

National Navigation Company mulls a return to the EGX: The board of the state-owned National Navigation Company (NNC) will propose re-listing the company on the EGX in the next shareholders’ meeting in March, Al Mal reports, citing unnamed sources.

The company was kicked off the bourse in 2009: The EGX delisted NNC in 2009 for failing to comply with listing regulations, including the requirement to freefloat a minimum of 5% of the company, according to the newspaper.

Why go back? The company is looking to re-list on the EGX in order to fund new capital expenditure that includes the purchase of seven new cargo vessels for USD 189 mn, according to the news outlet.

Shareholder structure: The company is majority-owned by the Holding Company for Maritime and Land Transport (HCMLT) (69%), while the Suez Canal Authority’s Canal Shipping Agencies owns 20%, according to the Public Enterprises Ministry. The remaining shares are held by state-owned banks and financial institutions.

The European Bank for Reconstruction and Development (EBRD) now sees Egypt’s GDP growing at a 4.6% clip in 2023, down 1.0 percentage point from its 5.6% estimate in September, according to updated projections (pdf) out last week.

On an FY basis: The London-based bank is expecting the domestic economy to grow at a 4.3% clip in the current fiscal year, which runs through June, down from its previous estimate of 4.7%. It sees GDP coming in at 5.0% in its first prediction for next fiscal year.

More optimistic than some: The IMF and the Madbouly government see GDP growing 4.0% this fiscal year. A recent Reuters poll predicted growth of 4.8% in the current fiscal year, while the World Bank expects 4.5%, and Fitch has penciled in 4.4%.

The rationale: The lender took note of a slowdown in the most recent official growth figures to 4.4% in 1Q 2022-2023, down from 9.8% in the same period a year earlier, on the back of higher commodity prices, “lower investor sentiment, higher borrowing costs and greater pressure on external accounts.” It also pointed to drag on the economy thanks to the latest depreciation of the EGP and high inflation, which have led the state to make cutbacks and squeezed local demand.

On the upside: “The implementation of structural reforms, supported by the IMF program, and the shift to a durably flexible exchange rate regime are expected to relieve the pressure on external financing and accelerate reforms,” the EBRD writes, forecasting growth to improve in the medium term thanks to a stronger private sector.

Expat car-for-FX scheme extended to May: The Cabinet has approved a two-month extension to its expat car-for-FX scheme, which has so far failed to gain traction among Egyptians abroad. The program, which was supposed to end in the middle of March, will now remain open until mid-May, giving people more time to sign up, Parliamentary Affairs Minister Alaaeddin Fouad told MPs yesterday.His statements came during a meeting held by the House Budget Committee yesterday to continue discussing how to increase participation in the scheme.

REFRESHER- The scheme provides incentives to Egyptians living abroad to purchase cars overseas and import them into Egypt, and was designed by policymakers to bring more FX into the country. Under the rules, expats will receive full rebates on customs fees, VAT, and other taxes within five years of purchasing a vehicle, provided they pay them upfront in FX

Three months in and it is yet to get off the ground: The scheme has brought in just USD 202 mn since its launch in November, just 8% of the original USD 2.5 bn target, the Finance Ministry said (pdf) this week. The head of the Customs Authority last week put the figure at USD 38.5 mn. Some 42k people have now registered with the scheme, 12k of which have paid, according to the ministry.

Another two months: “The cabinet took note of last week's amendments introduced by MPs, but it decided that expats will have six months to take advantage of the initiative and pay their dues to the Finance Ministry," Fouad said. Some lawmakers last week had called for the scheme to be extended until the middle of May.

Some aspects of the bill remain up for debate: MPs have not agreed on a response to a proposal to grant Egyptians living in the Gulf a 50% discount on taxes and customs, House Planning and Budget Committee Deputy Chairman Yasser Omar said on Kelma Akhira last night (watch, runtime: 7:25). “Discussions [yesterday] saw a legal argument over an article offering 50% to expats in the Gulf,” he said. The measure was put forward to help buyers in the Gulf vis a vis their Europe-based counterparts who don’t have to pay customs duties when importing cars to Egypt. The debate will be settled next week when the House reconvenes, he said.

What’s next: The amendments will make their way to the House to be up for a final discussion and vote when it reconvenes on Monday, 27 February.

ALSO FROM THE HOUSE–

Temp licenses for industrial projects approved by House committee: The House Industrial Committee approved yesterday a government-drafted bill that would allow unlicensed industrial projects to obtain temporary licenses. Their approval comes one day after the Senate greenlit the bill in a bid to provide temporary relief to the informal businesses. The House Budget Committee will prepare a report on the bill to be up for a final discussion and vote when the House reconvenes on Monday 27 February.

Committee green-lights development fee exemption for phone components: The House Budget Committee approved a recent decision by the cabinet to exempt mobile phone components from the 5% development fee. The move is designed to encourage the local manufacture of the components and lower the industry’s reliance on imported goods.

FROM THE SENATE-

Gov’t could hike local wheat prices: The Cabinet may raise local wheat procurement prices again, Agriculture Minister El Sayed El Quseir told senators yesterday. "I would like to indicate that the government is currently revising the wheat purchase price and that there could be a new increase when the delivery season begins," he said. His statements came in response to many senators calling for higher purchase prices to encourage increased production.

REMEMBER- The suggestion of a new increase comes nearly a month after the government raised local wheat procurement prices by 40% to EGP 1.25k per ardeb for the coming season.

Mic drop: The Senate adjourned this week's sessions yesterday, and is set to reconvene on Sunday, 5 March.

Yesterday’s earthquake in southern Turkey dominated the airwaves last night, with the pair of fresh tremors hitting Hatay again getting everyone talking. Kelma Akhira’s Lamees El Hadidi focused on the impact on the ground and panic caused by the quakes, which were felt in Egypt, Lebanon and Palestine (watch, runtime: 6:28). Masa’a DMC (watch, runtime: 3:24) and Ala Masouleety (watch, runtime: 4:39) also had coverage.

An Egyptian navy ship carrying “hundreds of tons” of relief aid to Syria was featured on from Al Hayah Al Youm (watch, runtime: 4:31), Masa’a DMC (watch, runtime: 3:41), and Kelma Akhira (watch, runtime: 3:36). Al Hayah Al Youm also took note of 200 tons of relief aid sent separately to the Syrian Arab Red Crescent (SARC) from the Egyptian Red Crescent (watch, runtime: 6:25).

Changes to the government’s expat car import scheme received heavy coverage on the airwaves last night: Kelma Akhira (watch, runtime: 7:25, Ala Mas’ouleety (watch, runtime: 6:08) and Al Hayah Al Youm (watch, runtime: 6:24). We have more on this in this morning’s news well, above.

Three global mobile phone manufacturers are considering setting up shop in Egypt, MP Yasser Omar told Ala Mas’ouleety’s Ahmed Moussa last night, without providing further details (watch, runtime: 1:35). Omar was on the show to discuss the government’s recent decision to scrap development fees for importers of mobile phone components.

INVESTMENT-

Outsourcer Transcom to invest EUR 40 mn to expand Egypt operations: Sweden-headquartered outsourcer Transcom wants to invest EUR 40 mn over the next four years to grow its Egypt operations, Ahmed Gamaleldin, company regional manager and managing director in Egypt, told Al Mal (watch, runtime: 48:27.) Transcom earlier this month opened a center in Sixth of October’s Smart Village, employing some 650 people with plans to hire another 1k employees within three years.

Mountain View to invest EGP 6 bn this year: Real estate developer Mountain View plans to invest EGP 6 bn (USD 196 mn) in 2023, Zawya reports, citing a company statement. The money will be used to speed up construction at existing projects, launch new projects, and look at scaling outside of Egypt, the company said. Mountain View wants to accelerate deliveries by a third to 2k units this year, and is targeting EGP 31 bn in sales on the back of newly launched projects in East and West Cairo and Ras El Hikma.

Next stop KSA? Mountain View formed a JV with Saudi Arabia’s Omar Kassem Alesayi Group in November to study new urban developments and tourist resorts in KSA.’

MANUFACTURING-

Croatia’s Koncar and Saudi’s Al Massa could build EV chargers, electrical infrastructure here: Croatian electrical equipment manufacturer Koncar could establish a factory for manufacturing EV chargers, cabinet said in a statement on Sunday. This came during talks between Prime Minister Moustafa Madbouly and Saudi contractor Al Massa Group, which acts as Koncar’s local agent. Al Massa Chairman Al Sharif Saud said the firms are also considering manufacturing electrical components for power transmission infrastructure.

New Future Pharma factory next year: Local pharma player Future Pharma Industries plans to finalize the construction of its new EGP 1 bn factory in Badr City during the first quarter of 2024, Chairman Gamal El Din El Leithy told Amwal Al Ghad. The factory, which will go by the name of Future Pro, will be home to four production lines with an annual production capacity of 20 mn vials and 10 mn eye drops. The factory will also help in providing imported pharma raw materials, he said. Two local banks are funding 60% of the project, El Leithy said, without disclosing which lenders are involved.

FINTECH-

PaySky, Dahab Masr to offer gold investment via app: E-payments firm PaySky and gold investment platform Dahab Masr inked a partnership agreement on Sunday to launch an online service, Yalla Invest, that will allow users to invest in gold through PaySky’s Yalla Super App, according to a joint statement.

NBFS-

Edge Holding For Investments to launch consumer finance arm this quarter: Edge holding for investments will establish a consumer finance arm with initial capital of EGP 100 mn during 2Q 2023, Al Mal reports citing Ahmed Selim, CEO of Edge subsidiary Tadbiir for Leasing & Factoring. The new company will aim to build an EGP 1 bn portfolio in its first year, funded by loans from local banks. The new entity will begin with car financing and home refurbishment before expanding into other sectors, Selim said.

PLANET STARTUP-

COREangels sets up shop in Cairo: COREangels, a global network of angel funds and investors, has launched its first MEA-focused fund, according to a press release (pdf). The Cairo-based fund will be jointly managed by COREangels and PTS Holdings’ ORO Partners, and will invest in pre-seed and seed stage tech startups across the Middle East and Africa.

EMPLOYMENT-

British Embassy launches initiative to help grads find jobs: The British Embassy in Cairo has launched a GBP 2 mn initiative to help Egyptian graduates improve employability skills and land jobs, it said in a statement (pdf) yesterday. The Higher Education for Career Guidance and Employability scheme is being run in partnership with the Higher Education Ministry and the International Labour Organization.