Wednesday, 7 July 2021

EnterprisePM — EFG Hermes’ Karim Moussa talks to us on its big renewables push through the Vortex Egypt IV fund.

TL;DR

WHAT WE’RE TRACKING TONIGHT

It’s a finance heavy issue today, ladies and gentlemen, new transactions, private equity funds and FDI news coming in through the pipeline.

THE BIG STORY TODAY- Our friends at EFG Hermes have reached the first close of its renewables-focused Vortex Energy IV fund, with USD 200 mn in funding secured. We sat down with head of Private Equity and Asset Management at EFG Hermes and CEO of Vortex Energy Karim Moussa who talked us through where these investments will be deployed and why and EFG’s ambitions for the fund. You can read more in the Speed Round below.

Mabrouk, consumer finance players, the Tax Authority will give you a VAT exemption following an agreement with the Financial Regulatory Authority. We dive deeper into the move in the Speed Round below.

PSA- In other finance news, state-owned banks were given the greenlight to offer commercial and real estate registry services to their clients, provided they table a request to the Central Bank of Egypt to set up a service desk in their branches. Privately-owned banks will be allowed to follow suit at a later stage, the CBE said in a letter to lenders (pdf).

Calling all brokers: A mockup session to trial a new proposed mechanism for closing auctions on the EGX is taking place tomorrow between 3-4:30 pm CLT, the exchange said in a bulletin. At least one representative from all licensed brokerage firms needs to be present at the EGX trading floor during the trial sessions. Two more sessions will be held at the same time on Sunday and Monday.

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HAPPENING NOW- El bab yefawet gammal (we hope): The Ever Given has made its way out of the Bitter Lake, where it’s been held up for nearly three months since it was confiscated by the Suez Canal Authority (SCA). The vessel got the green light to leave after the Ismailia Economic Court ordered the release of the Ever Given earlier this week.

You can catch-up on a livestream of the signing ceremony and the ship sailing out of the waterway here (watch, runtime: 7:49). Let’s hope it doesn’t get stuck on the way out.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

  • Egypt’s hotel occupancy rates rose to 35-40% in 1H2021 in key holiday destinations such as Cairo, Sharm El Sheikh, and Hurghada.
  • Nile Misr could exit the race for Alex Medical if the bidding war continues. The most recent bid set the purchase price at EGP 740 mn.
  • EGX companies will have to have 25% of their boardroom be female under new diversity targets proposed by the Financial Regulatory Authority to promote more female representation.

THE BIG STORY ABROAD- Hatian president Jovenel Moise was assassinated last night after being shot by a group of armed men who attacked his personal residence in Port-au-Prince. Moise’s wife, Martine Moise, was also wounded in the overnight attack orchestrated by an unidentified group of men, “some of whom spoke spanish,” Prime Minister Claude Joseph said. The 53 year old president’s murder comes after months of fragmented protests in the poorest Carribean nation over corruption and an alleged constitutional violation of his presidential term. Moise has been in charge of the country since 2017 after his predecessor Michel Martelly stepped down from office.

The story is dominating international headlines: (Reuters | The Associated Press | BBC | The Guardian | The New York Times | The Financial Times)

FOR TOMORROW-

The long-awaited UN Security Council meeting on the Grand Ethiopian Renaissance Dam (GERD) is taking place tomorrow. Tensions have been high after Ethiopia unilaterally began to fill the dam, causing the US and the UN to urge for calm. We had the rundown in this morning’s EnterpriseAM.

Support from our neighbors is there: Tunisia has submitted a draft resolution to the council, calling on Addis Ababa to halt the filling of the reservoir after sitting down with Egypt and Sudan, according to a copy of the resolution seen by the AFP. As expected, the draft urged Egypt, Ethiopia, and Sudan to restart African Union-brokered negotiations, with the intent of reaching a resolution within six months.

🗓 CIRCLE YOUR CALENDAR-

The EGX will hold its board elections for the 2021-2025 term on Wednesday, 14 July. Here’s a rundown of the candidates vying to fill board positions.

The Cairo International Book Fair is currently ongoing at Egypt International Exhibition Center today. The event will run through to 15 July and the fair’s committee has now allowed the exhibition ground to operate at 70% capacity.

🚙 FOR YOUR COMMUTE-

Iceland is cutting working hours, but keeping the same pay, after finding that no productivity was lost and employees reported less stress and an improved work-life balance, according to a report by Iceland’s Association for Sustainable Democracy and UK-based think tank Autonomy. The trials, conducted from 2015 to 2019, involved 2.5k workers and cut their hours down to about 35 a week. Since then, 86% of Iceland’s entire working population have either moved to shorter hours or can choose to do so.

Achieving the same level of productivity in less time involves changing the way tasks are done, which included shortening meetings or replacing them with emails, cutting out unnecessary tasks, and rearranging shifts, the report said.

Heading in the opposite direction, meanwhile, is Saudi: Saudi Arabia is contemplating changes to the pension system that will increase the retirement age (which is now at age 60) and require citizens to work for longer, people familiar with the matter told Bloomberg.

The move comes as the kingdom looks for ways to fill in the USD 213 bn gap at the state-controlled pension fund. They could also begin requiring workers to contribute more of their salaries to the country’s pension organization, the General Organization for Social Ins.. The changes are still being weighed and no final decision has been set, the sources added.


YOUR MANDATORY COVID STORY- PF4 amino acids have been identified as the link to rare blood clotting in people who have received AstraZeneca and J&J jabs researchers at Canadian McMaster University have found in a new study published in Nature. Viral vector vaccines like AstraZeneca and Johnson and Johnson’s, which effectively instruct the immune system to produce covid-19 spike proteins, have been found in the very rare cases where clotting does occur, to inadvertently cause proteins to cling on to a blood component known as PF4 amino acids and stimulate simultaneous bleeding and clotting. The new findings could pave the way for doctors to improve treatment of the condition, according to the WSJ.

📺 ON THE TUBE TONIGHT-

Dwayne 'The Rock' Johnson’s new sitcom is out on OSN Streaming. Young Rock is a family comedy based on the outrageous stories of his youth and his journey to become a famous wrestler and an even more famous actor. From being a young child in Hawaii to a high schooler in Pennsylvania to a college student and football player at the University of Miami. We’re personally big fans of The Rock and we’re sure that he has a lot of mischief and fun in his youth to make for a great TV show. Check out the trailer for a glimpse (watch, runtime: 01:16).

Italy is on to the finals after beating Spain yesterday. The match tied at 1-1, went into overtime with no more goals, and finally ended in a penalty shootout.

Either Denmark or England will go up against Italy, with the semi final match tonight at 9pm. The finals will take place on Sunday, 11 July.

🎤 OUT AND ABOUT-

Lamasatt Art Gallery is opening a new exhibition titled Art Through tonight at 7pm, featuring works done by young artists from babies to teenagers.

Bardo Clubhouse is hosting A Day Out with Alan-K & Friends on Friday — a day of music, cool vendors, and food.

💡 UNDER THE LAMPLIGHT-

The economics behind the pandemic: Economics in One Virus by Ryan A. Bourne draws on the dramatic events of 2020 to explain the economic decisions and mishaps we all saw during the covid-19 pandemic. From hand sanitizer running out to airlines getting government bailouts, the economic tour of the past year will help readers understand what they went through using supporting data and new academic evidence. As the pandemic continues, the book will help you analyze the policies and choices by political leaders while also applying economic thinking during your own day-to-day reasoning.

☀️ TOMORROW’S WEATHER- Another boat of 40°C weather for Cairo tomorrow, while Sahel enjoys a nice 31°C breeze, our favorite weather app taunts us.

SPEED ROUND: GREEN ECONOMY

Big ESG private equity funding coming, courtesy of EFG

EFG Hermes makes first USD 200 mn close for Vortex Energy IV fund: EFG Hermes announced its first close of USD 200 mn for the fourth fund of its flagship renewable energy platform Vortex Energy, including a USD 25 mn of conditional commitment, the company said in a press release (pdf). The Vortex Energy IV fund is anchored by EFG Hermes, “Abu Dhabi sovereign institutional investors” (which we will assume involves ADQ) and family offices, and an unnamed Asian family office, the company said.

EFG Hermes plans to grow the fund to USD 750 mn in the coming two years, head of Private Equity and Asset Management at EFG Hermes and CEO of Vortex Energy Karim Moussa said.

c.USD 2 bn pipeline in Europe and the US: “We are already looking at a very interesting pipeline of [transactions] and companies worth c. USD 2 bn in Europe and the US,” CIO of Vortex Energy Bakr Abdel-Wahab said.

The fund will look at acquisitions of existing projects and building new ones, Moussa adds. “Most of our targets are growth capital, meaning someone who needs capital to build, as opposed to somebody selling out,” Moussa tells us in a separate interview.

Pipeline for Vortex IV: Currently, Vortex IV is looking at a wind and solar energy developer in Spain, and is assessing transactions in Poland, Greece, UK and the US, Moussa tells us. A lot of developers now tend to do wind and solar together, to leverage renewable energy sources during the day and night, he tells us, noting that “that is going to be the future.”

Why Europe and the US? “Europe is a market that we’re very familiar with and it’s very diverse,” he says. “We’ve been contemplating a lot of investments there.” Vortex IV will also be selective with some markets in Latin America and Australia.

Moussa points to major infrastructure projects such as US Biden administration’s USD 2 tn infrastructure plans, which includes decarbonization and green energy, as one of the main drivers for investing in these markets. He believes that a lot of push in the next few decades will come from “That is why EFG is launching this fund,” Moussa says.

A timeline for a second or final close is still unclear, Moussa says. It is very difficult to raise investments in light of travel restrictions. “This is really slowing us down. You can do hundreds of Zoom meetings, but you’re not going to acquire a company if you’ve never seen someone. You really need to physically meet people,” Moussa says. The process will be expedited once travel opens up in a few months, he adds. So far, EFG has raised from a group of investors that it was very familiar with, but once “business-as-usual” resumes, they will be able to go and close much faster, according to Moussa.

SPEED ROUND: INVESTMENT WATCH

Saudi German Hospital to build a new medical complex by 1Q2022

The Saudi German Hospital will start building a new medical complex in 6 October City by 1Q2022, Regional Manager Mohamed Hablas told us, confirming reports from Al Mal this morning.

The centerpiece will be a new 300-bed hospital: The Saudi German Hospital will open a new hospital with a capacity of 300 beds in the new medical complex, doubling the group’s current capacity in Egypt, which stands at 300 beds at its hospital in Heliopolis.

The new hospital will provide new services to its lineup, including radiotherapy. The Saudi German Hospital just signed an agreement with Valu yesterday, which aims to offer payment programs up to 60 months, with no interest and no down payments for a period of six months.

Medical expansion in Upper Egypt and Alexandria: The Saudi German group also aims at expanding in Upper Egypt and is currently studying which governorates it will target there. It is also setting its eyes on Alexandria with plans to launch a new hospital there by 1Q2022 as part of its Batterjee Medical City, its medical complex there.

Saudi Arabia has been eyeing our healthcare sector: The Saudi German Hospitals Group pledged last year to pump EGP 40-50 bn into its Egypt operations over the next 15 years. But it isn’t the only one. Saudi healthcare investment fund Humania plans establish specialized medical facilities in Egypt and Morocco, securing USD 108.5 mn from the International Finance Corporation, France’s Proparco and the Danish Investment Fund for Developing Countries

TAXATION

Mabrouk consumer finance players

Consumer finance providers are in line for an exemption from value-added tax (VAT), under an agreement the Financial Regulatory Authority reached with tax authorities, FRA Deputy Chairman Islam Azzam said in a statement (pdf). This came as the regulator sought to give consumer finance players the same VAT treatment afforded to other non-banking financial services (NBFS) providers including mortgage finance firms, leasing and factoring companies, and securitized bonds advisors under its purview.

The Tax Authority will still need to amend the list of VAT waivers in VAT Act’s executive regulations for the exemptions to take effect, but the prospect seems very likely. This will simply need the Finance Minister’s sign off and won’t need to go to the legislative branch.

Why weren’t they already exempt? That’s because consumer finance is now under the FRA’s purview. The industry was brought under the umbrella of the nation’s NBFS regulator after the Consumer Credit Act was signed into law last year. FRA-regulated NBFS providers are automatically subject to exemptions under the executive regulations of the 2016 VAT Tax Act, Azzam noted.

How big is this sector? Consumer finance providers doled out nearly EGP 5.5 bn to some 515k borrowers during the first five months of the year alone, Azzam said. Since the Consumer Credit Act passed last year, 12 companies specialized exclusively in consumer finance and 13 other non-specialized players were awarded licenses, he noted.

GO WITH THE FLOW

OIH, Dice report 1Q2021 earnings

EARNINGS WATCH- Orascom Investment Holding (OIH) reported net losses of EGP 31 mn in 1Q2021, compared to a net income of EGP 51.6 mn in the same quarter last year, according to its consolidated financials (pdf). Operating revenues were up to EGP 206.6 mn during the quarter from EGP 179.4 mn in 1Q2020. Earlier this year, OIH spun off its non-bank financial services holdings into Orascom Financial Holdings through a horizontal demerger.

Dice reported a consolidated bottomline of EGP 4.06 mn in 1Q2021, reversing a net loss position to the tune of EGP 43.3 mn during the same quarter of the previous year, according to its latest financials (pdf). The EGX-listed clothing manufacturer's total sales jumped almost 15% to EGP 297.6 mn in 1Q2021, up from EGP 260 mn in 1Q2020.

MARKET WATCH-

The EGX30 rose 1.2% at today’s close on turnover of EGP 1.06 bn (14% below the 90-day average). Local investors were net sellers. The index is down 5.2% YTD.

In the green: CIB (+2.5%), TMG Holding (+2.2%), and CI Capital (+2.2%).

In the red: Fawry (-1.5%), Orascom Development Egypt (-0.9%) and Sodic (-0.2%).

ENTERPRISE EXPLAINS

Futures are coming to Egypt, so let’s brush up on them…

Enterprise explains: What are futures? 2021 could be a significant year for the development of Egypt’s capital markets, with derivatives trading set to launch before the year is out. The Financial Regulatory Authority is keen to get Egypt’s futures exchange up and running before 2022, which would mark the first time that investors are able to buy and sell derivatives contracts on the EGX, according to its deputy chairman Eslam Azzam. So let’s dive deeper into what futures are.

Put simply: Futures are derivative contracts where a buyer and a seller exchange an asset at a future date at a price they both agree upon in advance.

How do they work in practice? Picture this scenario: An auto manufacturer needs to purchase aluminum to produce cars. The market price has been stable for a few years, but recent price rises and increasing talk of a commodities supercycle has the company worried that it could soon be paying three times as much per ton of the metal.

Hedging risk: One option for the company to mitigate the price risk is to enter into a futures contract with its supplier. Instead of paying market value (AKA, the spot price), the manufacturer will sit down with its supplier and negotiate a different price for the metal — let’s say, USD 2k per tonne — in three months’ time. If, after three months have elapsed, the market price of aluminum has risen to, say, USD 2.5k, the manufacturer has successfully hedged against price risk, saving itself USD 500 per tonne.

And on the other side of the trade…: In this scenario, the producer loses out in the transaction, and must sell at the futures price, which, in this case, is USD 500 below market.

But this works both ways: Should the market price move in the opposite direction, the manufacturer becomes the loser. In the event that the price falls to USD 1.5k per tonne after the three months, the company will still have to pay the agreed USD 2k — USD 500 above the market price.

Futures are useful for producers, too: Imagine the reverse scenario taking place. Prices are dipping and there is growing talk of a bear market. Fearful of a fall in prices, the aluminum supplier could choose to hedge the risk by agreeing with its clients to sell at a specific price in the future.

Futures are commonly used for commodities: Energy commodities such as oil, natural gas; foods such as corn, wheat and soy; and metals like gold, silver and aluminum.

But they go far beyond that: Investors use “forward rate contracts” to both speculate on and hedge against fluctuations in interest rates. “Currency forwards” do the same for exchange rates. Stock forwards allow traders to speculate on future share prices, and bond forwards do the same for fixed income.

Futures are more often used by investors for speculation, who buy and sell contracts based on the direction that they think the underlying asset’s price will move. Index futures — which will be the first type of contracts open to investors in Egypt — allow traders to speculate on the fluctuations of a share index such as the EGX.

For a clearer idea on speculation, think oil markets. Oil contracts are frequently bought and sold on exchanges by speculators. They allow traders to benefit (or lose) from fluctuations in the price of the key commodity, all without having to, you know, own any physical oil.

Further reading:

DOWNTIME

Add these to your Sahel packing list

Creating culturally relevant board and card games has been a trend over the past few years in Egypt. While we all grew up playing classics such as Monopoly, Park Place never struck a note to us as much as Garden City does in the Egyptianized version of the board game Egytopoly. When game maker Nilco first introduced the product, they changed everything from the places you could buy to the metal characters you move across the board. The game resonated with the local audience who was excited to have a game that depicted their own realities and the fight to own New Cairo, Sheikh Zayed, or Maadi was not in the slightest less flip-the-board-over-inducing than its predecessor.

More homegrown games have continued to pop up, paying homage to our jokes, films, and history… or just promising a good time. Here are a few to look out for:

For the full-fledged Egyptian TV experts: 2ool AMeme is an Egyptian game development company that offers a few games, mostly to do with ‘efehat aflam’ or memes from popular Egyptian films or dramas. Their inaugural game, also called 2ool AMema — Egypt’s take on cards against humanity — featured photo stills or quotes that players would have to match to the right film. Since then, they’ve also released ‘2ool aw e3mel’ which is a Franco-Arabic language game derived from truth or dare.

The wonders that emerged from quarantine… : Oshfot Kershak was released during quarantine and makes fun of the fact that many of us tended to gain a little weight during the lockdown. The premise is simple… avoid the kersh card (belly card) while trying to get rid of your other cards before the other players. The cards are all amazingly illustrated and include strategy cards such as the ‘meezan’ which allows you to look ahead at the next three cards in the deck or ‘3amel diet’ to skip your turn.

Test out your knowledge about all things Egypt: The first thing we love about Baladna is its packaging, with the board game coming in a vintage suitcase decorated with Egypt-inspired stickers. The trivia game will ask questions about Egypt’s creatures, places, seas, deserts, and people to help you move across the board and to the finish line. Baladna is created by Makouk, a local game development brand that offers fun and creative games for children and adults alike.

Make your friendships closer: English-language game The Bonfire Experience is meant to spark meaningful conversations between friends, families, or strangers by asking personal and deep questions for people to open up, closely interact, get to know each other, or reminisce. This game is our personal pick for the upcoming Sahel season during relaxing beach days or nighttime rendezvous with friends.

May the greatest foul cart emerge victorious: Bee3 is an elaborate new game that looks more like an arts and crafts kit than a game. The purpose of the game is for players to utilize their social and negotiation skills to build businesses in different districts whether it’s a koshk or a foul cart. Characters such as the baltagi and the harami will pop up and threaten the businesses during the game with the most successful entrepreneur taking it all.

A variety of games in one box: Carnaval 2020 consists of 4 flashcard games that remind us of non-card games we’ve played since childhood. Our favorite two are “Habasat’halak”, where a team needs to guess two of three things written on a flashcard, and “Mo’assasa”, where all players have a word whispered into their ear except for one (the spy) and everyone is tasked with finding out who the spy among them is.

It’s in our blood: Playing board and card games is literally taking us back to our Ancient Egyptian roots, seeing as one of the earliest known board games was found right here. Beloved by Tutankhamun and Queen Nefertari alike, the game ‘Senet’ dates to around 3100 BC and involved two players to race all their pieces to the end of the board, according to the British Museum.

Where to purchase the games: You can order these games from their pages on Instagram or find them at Virgin Megastore and Diwan Bookstore.

CALENDAR

1-10 July (Thursday-Saturday): The government’s fuel pricing committee will meet to announce 3Q prices.

8 July (Thursday): The UN Security Council will meet to discuss the GERD crisis with Egypt, Sudan and Ethiopia.

11 July (Sunday): Ismailia Economic Court will hold a hearing on Ever Given compensation case.

14 July (Wednesday): The EGX will hold board elections for the 2021-2025 term.

Mid-July: Legislative session expected to end.

19 July (Monday): Arafat Day (national holiday).

21 July (Wednesday): Clean Energy Business Council’s webinar Women entrepreneurs in clean energy (3pm)

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday).

23 July (Friday): Revolution Day (national holiday).

23 July-11 August (Friday-Wednesday): Tokyo 2020 Olympics.

2-4 August (Monday-Wednesday): Egypt is hosting the Africa Food Manufacturing exhibition at the Egypt International Exhibition Center.

5 August (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

9 August (Monday): Islamic New Year.

12 August (Thursday): National holiday in observance of the Islamic New Year.

3-5 September (Friday-Sunday): The World Karate Federation will hold the third competition of the 2021 Karate 1-Premier League in Cairo.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

16 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

1 October (Friday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

1 October (Friday): Expo 2020 Dubai opens.

6 October (Wednesday): Armed Forces Day.

7 October (Thursday): National holiday in observance of Armed Forces Day.

12-14 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

18 October (Monday): Prophet’s Birthday.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

28 October (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

29 November-2 December (Monday-Thursday): Egypt Defense Expo.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

16 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

May 2022: Investment in Logistics Conference, Cairo, Egypt.

27 June-3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

**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 below 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. © 2021 Enterprise Ventures LLC.