The constitutional debate begins as House agrees to discuss possible amendments

** Our Enterprise 2019 CEO Poll continues this morning as we touch base with some of Egypt’s leading CEOs about the questions that will define the coming 12 months across all industries. Our conversations replace our industry news roundups, which will return next week.

The format: Each CEO answered roughly the same set of questions, tailored only for their industry. The interviews have been condensed and edited for clarity and are presented “as told to.”

Today’s participants are:

• Amr Allam, CEO, Hassan Allam Holding
• Mohamed El Kalla, CEO, CIRA

Yesterday’s interviews included Osama Bishai (Orascom Construction), and Hend El Sherbini (IDH).

Their interviews begin after Egypt in the News and On the Front Pages, below.

It looks like we might be getting the next IMF disbursement soon: The IMF’s executive board will meet today to decide on the fifth USD 2 bn tranche of Egypt’s USD 12 bn extended fund facility. IMF chief Christine Lagarde praised Egypt’s reforms last week, saying that she would recommend that the board approve the recently completed review. Egypt has signaled that it is unlikely to ask the IMF for another facility when the current program expires.

Foreign Minister Sameh Shoukry is in Brussels today for talks with other European and Arab foreign ministers. The meeting comes in preparation for the EU-Arab League summit which will take place in Sharm El Sheikh on February 24-25. The meeting could see the unveiling of a plan for EU countries to provide aid to Egypt and other regional countries in exchange for stepping up efforts to halt the flow of illegal migrants to Europe.

The Markit / Emirates NBD purchasing managers’ index for January will be out tomorrow. The gauge, which measures non-oil business activity in Egypt, recorded 49.6 in the December survey, failing to break a four-month-long contraction.

Egypt Building Materials Summit takes place on Thursday at the Nile Ritz Carlton. The event brings together construction industry investors, developers, policymakers, service providers and consultants, and over a dozen of keynote speakers.

TECH READ- Venture capital investors are urging their tech startups to have more cash in the bank “to make sure they can weather any situation,” the FT reports. General worries about economic instability and stock market volatility have fed investor fears that larger companies could cut tech spending. And there’s a worry that new funding rounds will become harder to raise. Softbank’s January decision to slash its planned investment in WeWork to USD 2 bn from USD 16 bn is a prime example, the salmon-colored paper says. As comparisons to 2008 abound, several investors have warned that startups founded in the last ten years have only ever operated within a strong economy. They’re now advising them to keep cash on hand to cover 18 to 24 months of spending — double what was recommended a year ago.

US earnings season looks good for Big Oil: 2018 was a great year for western oil giants despite the 38% plunge in oil prices in the final quarter, the WSJ reports.

Great MbS Purge rustles up USD 107 bn from 87 businessmen: An anti-corruption commission headed up by Saudi Crown Prince Mohammed bin Salman has reported that some USD 107 bn in cash, real estate, companies and securities has been recovered from 87 individuals. This comes 15 months after MBS famously detained many of the country’s most senior business leaders in the Riyadh Ritz-Carlton on charges of corruption. Reporting that those held “have been trickling out of prison for more than a year,” Bloomberg charts the fall in fortune of four of the country’s wealthiest people, including Alwaleed bin Talal, whose net worth (as KSA’s richest person) has been reduced by almost one-fifth since his imprisonment.

It was Super Bowl Sunday overnight in the US of A. The New England Patriots held off the LA Rams 13-3, tying the Pats with the Pittsburgh Steelers for the most NFL titles held by any team. The story is all over the interwebs this morning for those so inclined. Start with the Bleacher Report or ESPN.

Proposed constitutional amendments and our relationship with Germany were in the limelight on last night’s talk shows. We have the full details on both stories in this morning’s Speed Round, below.

The German delegation currently in town is one of the biggest to visit Egypt, and was likely encouraged to kick the tires in Omm El Donia after the government settled a high profile customs dispute involving Mercedes, General Authority for Freezones and Investment (GAFI) boss Mohsen Adel said on Al Hayah Al Youm (watch, runtime: 11:59). German Economy and Energy Minister Peter Altmaier broke ground on the German University in Cairo’s new branch in the administrative capital, which will open its doors to students in fall 2020, presidential aide Hany Azer told Masaa DMC’s Eman El Hosary (watch, runtime: 06:43).

The government’s draft debt control strategy is another sign that Egypt is taking its economic reform program seriously, EFG Hermes’ Mohamed Abu Basha told Hona Al Asema’s Reham Ibrahim. Abu Basha noted that reducing debt service levels will allow for more spending on government services and projects (watch, runtime: 07:20).

House agrees to consider constitutional amendments to extend presidential term to six years: House Speaker Ali Abdel Aal called for a general assembly meeting yesterday to look into the proposed constitutional amendments that could lengthen presidential terms to six years, up from a current four, Ahram Gate reports. This came after a fifth of the House’s 596 members signed off yesterday on a motion to move the proposed amendments forward. The motion, which looks set to dominate headlines this week, could also create posts for one or more vice presidents, reinstate the Egypt’s upper house of parliament (the Shura Council) and introduce a 25% quota for women in parliament.

Change to how defense minister, head of SCC are appointed? The amendments could also change the way the defense minister and the head of the Supreme Constitutional Court are appointed, Al Shorouk reports. Although it remains unclear what these changes would entail, reports in the domestic press suggest that “practical experience” since the constitution was drafted in 2014 made a revision of these procedures a necessity.

What’s next? The House Legislative and Constitutional Committee, will formally draft the proposed amendments, which will then be go through reading and debate ahead of a vote in the general assembly, where they must be approved by at least two-thirds of the House. Once parliament signs off, the president would be required to call a referendum.

The House’s decision to take up the motion is stirring debate on social media and is leading coverage of Egypt in the foreign press. Reuters, the Financial Times, the Wall Street Journal, Bloomberg, and the National all have the story.

The story also earned significant airtime on last night’s talk shows, including El Hekaya (watch, runtime: 07:29), Hona Al Asema (watch, runtime: 05:07) and Masaa DMC (watch, runtime: 04:01).

LEGISLATION WATCH- House grants preliminary nod to new tax treatment of bank holdings of state treasuries: The House’s general assembly gave its preliminary approval to proposed amendments to the Income Tax Act that would change how banks and corporations account for income from investments in government debt, Youm7 reports. The measure will force banks and companies to separately account for income derived from their holdings of government debt and could see their effective tax rate rise. A senior government official told us last week that the anticipation of the move by banks drove them to ratchet up their participation in treasury auctions, driving down yields and contributing to an influx of inflows and an appreciating EGP.

CORRECTION- We appear to have gotten it wrong last week when we said that the amendments would only be changes to the executive regulations and so would not require the sign off of the House.

Also coming from the House yesterday: Ratifying a decision taken last year by President Abdel Fattah El Sisi to introduce changes to customs duties on a range of items — including introducing 20% tariffs on all imports by hotels and tourism businesses and reducing import tariffs on hybrid and electric cars.

Egypt’s short-term USD debt down by USD 3.25 bn to USD 14 bn: The government used part of proceeds from the sale of treasury bonds to settle USD 3.25 bn-worth of short-term USD-denominated debt, Vice Minister of Finance Ahmed Kouchouk said, adding that total outstanding figure stood at USD 14 bn by December-end, according to a ministry statement.

The EGP received a boost from foreign portfolio investors last week, who scooped all 5-year bonds in auctions last week, raising their holdings in Egypt’s debt to USD 12 bn, according to statements to the press by government sources. This bodes well for the Finance Ministry as it prepares to sell between USD 3-7 bn in USD- and EUR-denominated bonds sometime in the coming few months. Officials have said they will also sell green and JPY-denominated bonds sometime this year.

Egypt’s gains last month were part of the best month for EM inflows in a year: Investors ploughed USD 51.1 bn into emerging market stocks and bonds in January, making it the best month of inflows in a year,according to an emailed report from the Institute of International Finance. Non-resident investors put USD 33 bn into emerging market bonds (compared to just USD 5.4 bn in December), with debt issued by Asian and Latin American countries proving particularly attractive. “A decisively dovish Fed has provided a fresh source of impetus for a bounce in emerging markets,” JPMorgan analyst Saad Siddiqui said in a separate letter to clients. “The Fed dropping any bias towards hiking rates and softening the rhetoric on balance sheet policy is significant for EM assets and paves the way for an extended bounce,” he wrote.

EM shares hit five-month high: Emerging market shares hit their highest level in five months at close on Friday on the back of optimism over US-China trade talks. The MSCI emerging market index closed 0.1% up, capping a month in which IIF figures show USD 18 bn was invested into emerging market stocks — over half of which (USD 9.2 bn) went into China.

Deutsche Bank sees potential rate cut in March: The Central Bank of Egypt is likely to keep interest rates on hold throughout 1Q2019, but a “100 bps rate cut cannot be ruled out” in March, Deutsche Bank said in a research note out on Friday. “Given the upside risks to inflation stemming from further subsidy cuts in Q2-19 and the adjustment to [the] customs exchange rate for luxury and nonessential goods, the CBE is more likely to start easing by the end of Q2-2019.” The CBE’s monetary policy committee will next meet to review rates on Thursday, 14 February.

DB sees Egypt missing its fiscal deficit targets this year due to the state budget assuming “unrealistic average oil price and yield levels,” despite global crude prices currently hovering at USD 60/bbl, which is below the budget’s projections of USD 67/bbl. Demand for Egyptian t-bills has picked up, the bank notes, saying that it maintains a bullish outlook on Egypt’s local assets. “However, we note that it is important for the CBE to walk a fine-line between cutting rates to support public credit growth while not front-loading the easing cycle to reduce the risk-reward for foreign investors when increasing exposure to Egyptian local products.” Deutsche notes that “the FY-19 budget projects that the fiscal deficit will narrow to 8.4% of GDP (or EGP 438.8bn) compared to 9.8% in FY-18 (this may be subject to upward revision) with a primary balance of 2% of GDP (compared to 0.2% in the previous FY). We believe the government will not be able to meet its FY 2018-19 fiscal deficit target.”

EXCLUSIVE- Hassan Allam-TAQA consortium to start operations this month at EGP 1.35 bn Benban solar plant: Hassan Allam Utilities and Qalaa Holdings subsidiary TAQA Arabia have completed construction on their EGP 1.35 bn, 50 MW solar power plant in Aswan’s Benban complex, a source close to the matter told us. The plant is now connected to the EETC’s substation and is pending performance tests before being connected to the national electricity grid under the second phase of the feed-in tariff program, our source says. Once operational, the plant will generate 154 mn KWh of energy per year and be responsible for total carbon emissions of just 65,371 tonnes per year. The project’s EGP 1.35 bn price tag is backed by a financing package created in partnership with the International Finance Corporation and Asian Infrastructure Investment Bank. Hassan Allam Utilities is a subsidiary of Hassan Allam Holding and is the group’s investment and asset development arm for the power, renewables and water-related sectors.

INVESTMENT WATCH- Infinity Solar in talks with int’l banks for funding for 1,400 MW projects: Renewable energy player Infinity Solar is in negotiations with two international banks for up to USD 1.2 bn financing for projects with a total generation capacity of 1,400 MW, a company exec told Al Mal. The executive did not name the banks, but said Infinity is looking about 1,000 MW of wind power projects and 400 MW of solar projects. The company filed for land in the Gulf of Suez and Minya from the New and Renewable Energy Authority (NREA) for the projects.

Also on the renewables front: NREA began yesterday looking into financial offers submitted by Siemens Gamesa, Danish wind turbine manufacturer Vestas, and German wind energy solutions Senvion for a EUR 260 mn, 250 MW wind farm in the Gulf of Suez, unnamed officials told Al Mal. The three companies qualified for the tender in October of last year.

Have Uber’s issues vanished as abruptly as they appeared? Uber services appear to be operating normally again after more than a week of disruption, but there remains no word from the company on the reason for the outage, one of the ride-hailing company’s agents tells Al Mal. A number of Uber drivers reportedly staged a strike until the service’s functionality was restored. The company’s local agents had also reportedly instructed drivers to rely on VPN to sidestep the disruption. In tests overnight, one of us had no problem locating a ride on Uber (without using a VPN). Another of us found that no vehicles were available, but was offered Black and Lux and Van options that were (to us) new.

Background: Earlier last month, we started poking into possible explanations for why Uber has been largely unusable over the past couple of weeks. A source with whom we spoke drew a line between the outage and what the source said is ongoing friction over unspecified “changes” to the still-not-released executive regulations to the ride sharing law.

Beltone’s appeal of 2016 trading reversals faces setback: The Board of State Commissioners has recommended to the Administrative Court that it reject Beltone Financial’s claim that the Financial Regulatory Authority and EGX did not have grounds to reverse trades in Beltone’s shares made back in 2016, reports. The FRA had submitted documents to the Administrative Court alleging that some Beltone shareholders had engaged in stock manipulation.

State pension funds won’t hike their exposure to the EGX … yet: The Social Solidarity Ministry’s Pension Funds Investment Committee, which decides how to invest the state’s pension funds, is shelving plans increase their exposure to the EGX until the government kicks off the state privatization program, government sources told the domestic press. The committee could more than double the state pension funds’ total allocation to the EGX.

Egypt signs cooperation agreement with Germany: German Economy and Energy Minister Peter Altmaier signed yesterday with Trade Minister Amr Nassar an agreement to boost trade and economic cooperation, according to a Cabinet statement. Manufacturing, trade, investment, energy, transportation, infrastructure, tourism, and higher education are the most likely sectors to see enhanced cooperation, the minister said. Altmaier also noted that German investment in Egypt has reached USD 7 bn and is slated to increase further in light of positive economic and legislative developments, per Al Shorouk.

Altmaier also met with President Abdel Fattah El Sisi to discuss bilateral cooperation, according to an Ittihadiya statement. Prime Minister Madbouly also sat down with the German minister and an accompanying business delegation of 40 German companies to talk about Egypt’s investment and legislative climate, according to a separate Cabinet statement. Among those with the delegation was Roland Busch, COO and CTO of Siemens, who indicated that the German company is working on inking new investment agreements in Egypt, according to Al Shorouk.

Egypt’s emergence as a regional gas hub is driving a decline in regional demand for liquefied natural gas, writes Verity Radcliffe for Bloomberg. While Egypt was the region’s biggest LNG importer in 2016 and 2017, we are now on track to become a significant exporter this year after several gas discoveries allowed us to pull the plug on LNG imports last September. The switch from being a net importer to becoming a net exporter positions Egypt among the main reasons for the regional turnaround from a two-year demand surge that outpaced global growth between 2014 and 2016 to a rapid reduction of 37% last year.

So what can regional and global LNG markets expect? “The Middle East is now expected to make up less than 4% of global imports for at least eight years,” Radcliffe said. Last year, almost half of Egypt’s LNG imports came from Qatar, the world’s biggest exporter of the commodity. They are unlikely to feel much pain from our absence, however, as global LNG demand is expected to grow at more than double the rate of supply — especially in Asia, which accounts for well over half the LNG demand worldwide. Jordan is also expected to increase its reliance on “pipeline imports from Egypt, trimming its need for LNG,” Radcliffe notes. Egypt has begun increasing its natural gas exports to Jordan to 100 mcf/d, with plans to increase further to 250 mcf/d during the summer.

EARNINGS WATCH- Abu Qir Fertilizers’ net profits rose 32.4% y-o-y in 1H2018-19, which ended in December, to EGP 1.7 bn, the company announced in an EGX filing. Revenues were up 19.6% y-o-y, rising to EGP 5 bn. The figures come at a welcome as the company prepares to sell a 30% stake on the EGX possibly as early as March under the state privatization program.

Credit Agricole Egypt reported a 12.6% y-o-y increase in net profit after tax to EGP 2.20 bn in 2018, compared to EGP 1.96 bn in the same period last year, according to a filing to the EGX (pdf).

Egypt will assume the presidency of the African Union on 10 February, according to an Ittihadiya statement.

A Russian expert committee will visit Sharm El Sheikh and Hurghada airports in the second half of February to run a final security sweep ahead of a decision on flight resumption, AMAY reports.

FinMin to present debt control strategy to El Sisi in March: The Finance Ministry will present the final, reviewed version of its comprehensive public debt control strategy to President Abdel Fattah El Sisi in March, Finance Minister Mohamed Maait said.

The discovery of mummies in Minya is still earning digital ink, with CNN, the Washington Post and the Independent all running pieces on the Ptolemaic burial site — a sign, as if we needed one, that there is always an appetite for stories of discovery related to Ancient Egypt.

President Abdel Fattah El Sisi’s meeting yesterday with Germany’s Economy and Energy Minister Peter Altmaier is leading the conversation in Egypt’s state-owned newspapers this morning (Al Ahram | Al Akhbar | Al Gomhuria). Al Ahram is the only one of three to take note of the proposed constitutional amendments currently making their way through parliament.

Amr Allam carries on the long tradition of his family business, which traces its roots to 1936. The construction and engineering group is a storied Egyptian contractor with a regional footprint and has a proven track record delivering large, complex projects. It is among the largest privately held groups in the MENA region, with well over 30k employees. Today, Hassan Allam Holding has subsidiaries in Algeria and Saudi Arabia and is moving into new sectors including power, renewable energy and water through its new Hassan Allam Utilities arm (see this morning’s Speed Round, above). Hassan Allam Holding (website | LinkedIn) also acquired last year PGESCo, the international engineering and project management firm focused on energy and infrastructure projects.

2018 was a transformational year for Hassan Allam Holding in terms of diversifying our offering and providing our clients with a one-stop-shop for engineering, procurement and construction services and solutions on a regional scale.

2019 for us will be a year in which we focus on efficiency and expanding our infrastructure development arm while also zeroing in on utilities and renewable energy.

Managing cashflows will be the biggest challenge in 2019. Our business is growing substantially, so managing our cash flows and matching our operational expenditure with our clients’ needs will be a significant focus for management in 2019.

Opportunity-wise, I feel this is the year of industrialization for Egypt. The private sector will start kicking in and we have to capitalize on that. I think we’re well-positioned to be a relevant player in capturing new work from the private sector.

The performance of the wider economy in 2019 will be similar to 2018, but I see private sector players pushing forward. They’ve been watching from afar and the opportunity exists today, the infrastructure is there, and the investment climate is there. I think it’s time for them to step up and I think we’re going to see more of that.

There’s a need for a more robust regulatory framework in the utilities space to help with the penetration of private sector investors. I think this is something that the private sector — and not just the government — needs to be involved in. I think the developmental finance institutions — the IFCs and the EBRDs of the world — need to be involved in this to pass on their know-how, whether it’s in the form of PPAs or WPAs.

Our 2019 budget set 15-20% salary increases. This is in line with inflation and it’s where we’re going to start our exercise. We always align raises with performance and we’ve been doing well.

Absolutely our business been constrained by high interest rates. As I said earlier working capital is the name of our game and elevated interest rates have compressed our operating margins, without a doubt. I don’t see interest rate cuts in first half, perhaps towards the second half. We’d love to see the downward trend kicking in.

We will invest whether interest rates go up or down. We’re investing in enhancing our core activity, in building materials, and of course we’re investing in our new utilities business. If the rates come down, I think we’ll be a lot more aggressive with our plan. But in all cases, we will continue to invest in our core businesses.

Inflation was not as much of an issue in 2018 as much as it was in 2017 but it was still an issue. We were able to mitigate that risk with certain clauses that we placed in our contracts — escalation clauses and such — so the impact was not as great. Again, you had certain aspects that were problematic, but nothing too major.

For M&A, we are looking at two or three acquisitions that we’re going to close during the first half of 2019. In terms of capital markets, given what’s happening today, I can’t tell you I see it as a good time for IPOs, but I don’t have a final say on that yet.

We’re investing in infrastructure development and utilities. I believe greenfield activities will play a large role in that. I think there will be a shift from the government towards pushing the private sector to invest further in infrastructure assets. So this is an area that we’ll be focusing on in 2019.

I think oil and gas is a sector that will probably outperform in 2019, and I think services in general, including construction, will have a good year.

Residential real estate will underperform this year. I think there will be a slowdown on that front.

Egypt is much more diversified as an economy than others in the region:  Outside of Egypt, we operate in Algeria and Saudi Arabia and their economies are based on oil prices; if there’s a downturn in oil prices, you see a slowdown. If there’s an upward trend, you tend to see a bit more of an uptick. Egypt is not like that — Egypt is diversified and we prefer operating in economies like Egypt given this element. Other countries are a bit more volatile given the fluctuation in oil prices, particularly in the last couple of years.

Finding the right talent in a very competitive market is the biggest issue in our industry. It’s hard to find good people, but we’ve been fortunate. In general this has been our toughest challenge.

The most common question I get from business partners, co-investors and the like is: How are we managing our margins and working capital? That is a very big concern. Ours is a cash-driven business, and managing working capital affects margins, so these are the two key concerns we have.

What have you not asked me? You’ve asked too much.

Mohamed El Kalla is on a mission not just to transform education, but to integrate sustainable practices in business. His company’s emphasis is on the middle class, not the financial elite, and that focus has driven the company’s strategy of becoming an anchor provider of educational services in new cities being developed by the government. It also sees CIRA become an early adopter of new technologies — and actively its classrooms and admissions. The company, which went public on the EGX last year, is online here. Outside of CIRA, Mohamed is a founder of the first professional consultancy in Egypt focused on CSR, social auditing, human resource benchmarking, and ethical supply chain management.

2018 was the year of recognition. CIRA has always been a fast-growing company. The problem is not many people knew CIRA or its products or the magnitude of its impact. It was always bound to dedicated investors or people dedicated to the sector. 2018 saw CIRA get recognized by the investing community, including fund managers. This recognition also translated into more awareness of the importance of the business of education in Egypt. CIRA drew the attention to the fact that there is a huge demand gap and a growing role for the private sector. Furthermore, it drew attention to the fact that there is a need to discuss private education not only for the people who able to pay, but for the middle class, the marginalized class, and the people who cannot afford to pay.

2019 will be a year of aggressive growth. Once you recognize problems within a sector, everybody pays attention. Given the level of recognition in 2018, and the understanding of the problems at the government level and the private sector level, we see a lot of aggressive growth in 2019, both in the way we do education and by access to education across the country. There is a total recognition that the system is not working and there needs to be reform. There is a recognition that there is growing demand concentrated among those with income limitations.

How will this growth play out? Some in the industry are now looking to grow, others are interested in entering the business. You can see that with the investment coming into the sector, whether it’s through more dedicated funds entering or with more companies veering into this direction. We’re seeing a lot of startups looking at the sector, and we’re seeing a lot of dedicated players teaming up with larger funds. We’re seeing much more structure and aggressive growth. The sector has been restrained for a very long time under the model of contained family-owned businesses. Furthermore, we’re seeing a lot of disruption coming into the sector, both in K-12 education and higher education.

One of the biggest challenges in 2019 is dealing with the inflation in the costs of construction, which is the main barrier now. The higher the costs, the higher the CAPEX, the more limited we are in being able to provide our services to lower income segments. We have our costs increasing 20% but incomes are only increasing by 10%. That’s the challenge that we need to work around and it needs innovation.

These problems are evident in the sector as a whole, whether in private education or on the public schooling side.

We are working on how to grow with cost-saving materials. At the same time, we are using our economy of scale to arrive at an equation whereby we are improving our margins while at the same time shielding the consumer from that inflation. A bit of cost control through innovation and scale, combined with a sacrifice on the margin for the sake of the consumer. This is something CIRA has been very good at.

The opportunity in 2019 will in urban areas outside of Cairo and Alexandria, so in places like Upper Egypt and the Delta region. With the development underway in the new cities, and the migration of economic activity to them, there will be social mobility in these areas. The traditional trend for someone looking for a better life in Upper Egypt and the Delta is to either move to Cairo and Alex or get a piece of agricultural land and convert it to residential. But the younger generation is starting to move to the new cities. We see this in New Alamein, New Assiut and New Minya.

As for the wider economy in 2019, we don’t see a lot of change over 2018, honestly. The two key challenges remain curbing inflation and increasing foreign direct investment outside the energy and gas sectors. I would definitely add to that the issue of interest rates. An ideal 2019 for me is less inflation, lower interest rates, and higher FDI.

That said, the growth potential for Egypt is much higher compared to other markets. Egypt has a key fundamental advantage over other economies, which is the demographics. This population growth is creating a real economy.

Of course CIRA has been constrained by high interest rates. When we went for the IPO we had developed a plan for growth over the next five years. We’ve had to limit what we can actually do to only a two- to three-year portion of the plan because we are very worried about debt service. Had there been a much lower interest rate, we would have had a much faster growth strategy.

We think it’s a must for interest rates to go down in 2019. We don’t think the rate cuts will be delayed any further. Any further delay will risk undoing all the government has done to improve the economy over the past three or four years.

If they do come down, we’re going to fast-track our growth plans significantly. My plan is to create 25,000 seats across higher education and K-12. If rates go down, it will help me reach this goal in three years instead of five. We’re already planning to invest EGP 1 bn: EGP 650 mn in higher education and EGP 350 mn in K-12.

Our approach to compensation is to have salaries keep pace with inflation. And we always give performance-based raises.

Did you know we are one of the nation’s biggest employers of women? We are. We have c. 3.2k women in a workforce of more than 4k — a huge figure for an Egyptian company. There’s plenty of women looking for work in these new urban communities, almost double that of Cairo. So there is always a market for new jobs.

We believe in hiring locally — we do not funnel talent in from Cairo and Alex. Local ownership is very important in our business, where our emphasis is on building not just schools, but schools that become centers of communities.

We gave out EGP 23 mn in scholarships last year. That’s scholarships for bright students from income-challenged households to enroll in higher education.

We are working on several M&A transactions now, actually, at both the K-12 and the higher education levels.

As for greenfield activity, we’re working hand-in-hand with the government in new urban areas. We want to become an anchor for educational services in these new areas.

There is a need for regulatory reform as it is currently outdated. There has been reform on the content side, but regulatory reform is the missing component, specifically in the K-12 level. A lot of things need to change: The way schools are accredited and licensed and the way they are monitored has not been changed since the past century.

There is something in the works for private schooling that is likely to come out in 2019. It is our hope that the new law will match the new vision. We have voiced to the government our concerns and our recommendations, but I wouldn’t say the private sector has had a hand in shaping it.

Healthcare and education, will outperform this year. And surprisingly, tourism. We are really optimistic about the tourism sector next year.

The automotive industry will see a lot of challenges this year.

We are investing extensively in education technology (edtech) startups. We’re right in the center of the wave in terms of innovation in the sector, whether locally or globally. I’m not talking about online access (which is what everybody thinks edtech is about). It’s about the way we teach on the grassroots level. I’m talking about the tools we teach with and the way students access and process information, whether it’s on content creation, or the tutoring, or the classroom experience side. We’re trying to update, not eliminate the classroom.

If we were to start a new business today, we would start it in the area of skill development outside of schools, such as robotics, coding, public speaking, and financial literacy. If you look at universities in the United States, every summer has a massive student engagement program where these practical skills are being taught.

The most common question we get from investors: Why can’t you grow faster? Sustainable growth (which takes time) is the key to any education endeavor, is my answer.

What you haven’t yet asked is how does CIRA see success besides growth in numbers? That touches on an important part of the business, which is that CIRA is a social entrepreneurship venture. We see success in the quality of products we’re putting out and we see success in the success of students. We keep track of the successes of our students, whether it is in the local or global level. This is a metric we measure, and we call them the student success models.