Sunday, 3 October 2021

EnterprisePM — Could the global economy be headed for a rough 4Q? And where does that leave the ‘tapering’?

TL;DR

🔎 WHAT WE’RE TRACKING TONIGHT

We’re kicking off a shortened workweek today, with the nation getting Thursday 7 October off in observance of Armed Forces Day. We can also expect to have a Thursday off later in the month thanks to the Prophet Muhammad’s Birthday, which is formally observed on Monday, 18 October.

THE BIG STORY OF THE DAY

#1 Auto sales up in August: Car sales continued to rise in August, growing 15% y-o-y to reach 18.3k, industry data revealed today. Total vehicle sales — which include buses and trucks — saw stronger growth during the month, rising 18% to 24.5k units from 20.8k in August 2020.

HAPPENING NOW-

The Cairo International Fair continues today at the Cairo International Conference Center, running through 8 October.

It’s day two of Techne Summit, with the three-day investment and entrepreneurship event in Alexandria held under the auspices of the CIT ministry bringing together some 600 startups.

For the first time ever, EgyptAir is flying to Israel: EgyptAir completed its maiden flight to Israel earlier today, landing at Tel Aviv’s Ben Gurion Airport, Israel speaks Arabic, according to an Israeli government statement. The state-owned carrier will operate four weekly flights between the two countries, it said. The flight comes a few weeks after Israeli Prime Minister Naftali Bennett and President Abdel Fattah El Sisi met in Sharm El Sheikh, the first time leaders from the two countries have met publicly in Egypt in more than a decade.

THE BIG STORIES ABROAD- The pressure is building on IMF chief Georgieva: Hundreds of former World Bank employees have called allegations that IMF head Kristalina Georgieva manipulated data in favor of China “a form of institutional corruption” and called for “decisive” action by the Fund’s executive board as it prepares to launch its investigation this week, the Financial Times reports. A report commissioned by the World Bank recently accused Georgieva of pressuring staff to artificially boost China’s ranking in the Doing Business report when she was chief executive of the bank. Georgieva has denied all accusations, and instead pointed the finger at staffers working in the office of former World Bank head Jim Yong Kim.

Former World Bank employees want her out: In a letter handed to the Fund, the 331 former employees — which included one former managing director, two former executive directors and four former vice-presidents of the bank — wrote that the findings “constitute a form of institutional corruption” and “represent gross abuse of management oversight authority.” The report has brought “unprecedented reputational risks” for the bank, they wrote, calling on the IMF to take “decisive and substantive action to restore public confidence.”

Her fate could be decided this week: The IMF’s executive board will launch an investigation into the allegations this week by interviewing Georgieva and the law firm responsible for the report, sources tell Reuters.

All of this is happening at an inopportune time for the IMF and World Bank, which will hold their annual meetings next week on 11-17 October. Georgieva will face the board on Tuesday, the same day in which she is due to give a virtual speech about the upcoming event, two sources said.


Bloomberg is warning of a harsher global economy in the fourth quarter: The outlook is less than ideal as we head into the final stretch of the year, as the delta variant, spiralling food and fuel prices, the supply-chain crisis, worker shortages, the China slowdown, and US budget rows all combine to threaten the recovery and increase fears of a coming stagflation situation, analysts and researchers at a number of global banks tell Bloomberg.

Calls for a delay in the stimulus tapering are growing louder: With a question mark hanging over whether high inflation will be as transitory as central banks insist, their turn toward a more hawkish policy might not be the cure the global markets need, some are insisting. “Central banks are playing with fire by tapering to avert inflationary pressures without being fully sure of where we stand in the cycle,” one chief economist at French investment bank Natixis told Bloomberg.

China’s Evergrande is facing another big debt test — we think: The Chinese developer, whose debt crisis saw global markets take a nose-dive earlier this month, is facing a USD 260 mn principal payment coming up on Monday. If Evergrande defaults on the bond, it risks a cross-default on its other bonds, Bloomberg writes. But given the opaque nature of private placement debt, the details of which are not listed publicly, it’s hard to get a sense of just what Evergrande’s liabilities are — adding to jitters over the company’s demise and potential contamination in the rest of China’s development sector. Evergrande was supposed to pay USD 83.5 mn to investors a few weeks back, but the company does have a 30-day grace period before bond holders can call a default.

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

  • E-Finance could be one of the EGX’s biggest IPOs in years: State-owned fintech firm E-Finance is looking to raise up to EGP 3.6 bn from its upcoming IPO in October in what would be the biggest offering on the EGX in years.
  • EFG Hermes eyes minority stake in Ignis Energia: The group is in talks to acquire a significant minority stake in Spanish renewable energy company Ignis Energia in a transaction that would value it at around EUR 1 bn.
  • Egyptian debt is well-placed to weather a Fed taper: Emerging-market debt — including Egyptian bonds and T-bills — could become less attractive to investors but analysts say that Egypt is one of the better placed emerging markets to weather a potential storm.

FOR TOMORROW-

The Union for the Mediterranean’s ministerial climate conference takes place tomorrow in Cairo. Chaired by the EU Commission and the Jordanian environment ministry, the hybrid event will bring together ministers from the 42 European and Mediterranean countries to discuss collaborative efforts to protect biodiversity, reduce emissions and maintain food security. Check out the agenda here (pdf).

Also attending the conference: VP of the EU Commission Frans Timmermann is in Egypt for a two-day visit starting tomorrow while a number of European officials will hold talks with their counterparts at the Egyptian Foreign Ministry, the EU said in an emailed statement.

OPEC+ could agree to add more crude than expected when it meets this week: Oil producers are considering accelerating the end of supply curbs as prices continue to tick upwards, unnamed sources told Reuters. The OPEC+ alliance of producers earlier this year agreed to increase output by 400k bbl/d each month but sources say that they could exceed this, with one suggesting that a one-off 800 bbl/d increase is possible. This comes as oil prices hit a three-year high amid concerns that the global gas crunch will impact the crude markets.

🗓 CIRCLE YOUR CALENDAR-

The final quarter of 2021 is here. Get these dates in your diary:

  • PMI: September’s purchasing managers’ indexes for Egypt, Saudi Arabia and the UAE will land on Tuesday, 5 October.
  • The Senate will convene for its 2021-2022 legislative season on Tuesday, 5 October.
  • Egypt and Saudi Arabia are set to ink contracts to start linking their electricity grids on 5 October, with implementation of the project set to begin in 2022, Electricity Minister Mohamed Shaker said Thursday, Al Mal reports.
  • Foreign reserves: September’s foreign reserves figures will be out sometime during the first week of October.
  • Public schools are back in session this coming Saturday.
  • Inflation: Inflation figures for September will be released on Sunday, 10 October.
  • IMF + World Bank meetings: The IMF and the World Bank will hold their annual meetings during the week beginning 11 October.
  • Interest rates: The Central Bank of Egypt will meet to review interest rates on Thursday, 28 October.

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

☀️ TOMORROW’S WEATHER- It’s another day of surprisingly warm 32°C weather tomorrow, with the mercury dropping to 19°C at night, according to our favorite weather app.

🚙 FOR YOUR COMMUTE

Europe’s energy crisis will test its ambitious green energy plans, analysts and energy execs told Bloomberg, as soaring electricity prices could see households and industries balk at the idea of absorbing yet further costs to fund the transition to renewables. The EU is looking to set a global example under its newly unveiled green strategy for net-zero emissions by 2050, with a binding goal of a 55% decrease in carbon emissions by 2030. But the plan still needs the approval of each of the bloc’s 27 member states — and as power prices surge to all-time highs on the back of a dire supply squeeze and low storage levels heading into winter, it will likely prove a much harder sell.

Someone will have to pick up the energy bill: The EU may have to sweeten the green plan with funds to European governments, who are already paying through the nose in an emergency attempt to soften the blow to consumers of spiralling prices. Greece and the Netherlands have announced subsidies and VAT cuts to help households and businesses through the winter. Meanwhile, Spain’s introduction of a windfall tax on power utilities and caps on household bills has angered energy execs, with one telling Bloomberg that the move “puts at risk the whole energy transition.” The unexpected cost of such measures could stymie investment in renewables, and with a return to investing in fossil fuels off the table, the pain is expected to last: “There are likely to be a couple of difficult years to navigate in terms of consumer prices,” one analyst told Bloomberg.


The App store made Apple a gaming industry leader. Can it keep it up? With gaming making up a sizable portion of Apple’s bottom line, the tech giant is increasingly keeping gamers in mind when designing its products, the Wall Street Journal notes. Apple’s latest announced smartphone, the iPhone 13 Pro comes with an advanced screen that gives users a smoother video experience, making it ideal for gamers on the go who might be using their phone for gaming. Reviewers are calling the iPhone 13 Pro Max THE iPhone to buy for gamers, while others have gone as far as comparing it to the Nintendo Switch, a device made specifically for gaming.

Since when has Apple been a gaming leader? Since the App Store became a leading gaming platform that charges developers 30% fee on sales through the store. Apple made around USD 15.9 bn in revenue from the App Store in 2019, 69% of which came from games. The contribution of games to its bottom line was greater than gaming giants Microsoft, Sony, Nintendo and Activision Blizzard combined in 2019.

The company’s push to retain its leadership position in gaming is being challenged by the arrival of other tech giants like Facebook, which has invested heavily in virtual reality. Apple’s dominance of the gaming industry through its App Store has generated much regulatory scrutiny and allegations of antitrust behavior. Just last month a US court ruled that Apple was engaged in “anti-competitive conduct” — in a case brought against the company by Fortnite developer Epic Games — by forcing its users to use App Store’s payment tools exclusively when buying an app, instead of using the developers’ tool.

👌 ENTERPRISE RECOMMENDS

📺 ON THE TUBE TONIGHT-

(all times CLT)

If off-beat sci-fi dystopia is your thing, the guy behind District 9 has you covered: A series of shorts produced by Neill Blomkamp’s Oats Studios has landed on Netflix, bringing the director’s idiosyncratic visual style and high-concept sci-fi to TV. From aliens and evil politicians to uncomfortable cooking shows, the 10 shorts each follow a different tale from a different location, with the common thread being that humanity is suffering. The intriguing stories are all left open-ended, leaving you to fill in the blanks. Think Love, Death and Robots and Black Mirror, but with more violence.

It’s Klopp v Guardiola in the Premier League this afternoon: Last season’s champions Man City take on Liverpool at Anfield in today’s 5.30pm kick-off in a huge game that may help determine who eventually wins the league.

There are four matches in La Liga this afternoon: League leaders Real Madrid travel to Espanyol for today’s 4:15 pm kick-off, while third-placed Real Sociedad also play away from home at Getafe at 6:30 pm. Villarreal play Real Betis at 6.30pm while Granada and Sevilla kick off at 9 pm.

Serie A: Fiorentina take on league leaders Napoli and Jose Mourinho’s fourth-placed Roma play Empoli at 6pm. Atlanta and AC Milan kick off at 8:45pm.

🍣 EAT THIS TONIGHT-

Mori Sushi’s new menu is kinda insane, but give it a chance: Egypt’s most famous sushi joint is out with a new menu inspired by Brazil’s Sao Paulo that combines some of the weirdest flavors we’ve ever seen. From fruits in your dragon roll to green beans and cheetos in a crunchy roll, the options had us raise our eyebrows several times. However, if your palate is a bit more on the adventurous side, we actually love the unique and diverse flavor profiles in the 40 new additions to the menu. We recommend the nigiri salmon truffle, the Salvador roll, the Sao Paulo roll, and the Fuji roll (yes, it does have strawberries on top). They’ve also added new sweet rolls such as a Reese’s roll that mixes chocolate, peanut butter, banana, and rice. The caveat with Mori Sushi is that the quality hasn’t been consistent across all branches. We recommend the branches at Cairo Festival City, CityStars, and Mall of Egypt.

🎤 OUT AND ABOUT-

(all times CLT)

The Cairo Video Festival kicked off during the weekend and will run through 20 October. The festival presents nine programs with 78 films from 27 different countries that will be screened in 10 different places across Cairo including Zawya in Downtown, Cairo Jazz Club 610 in Sheikh Zayed and Cairo Jazz Club in Agouza. Tonight, six experimental films will be screened in Zawya — all from Egypt — under the theme “The Motion of the Images,” which kickstarts at 7 pm. You can check the full screenings and event schedule here.

A live improv and interactive comedy theatre performance Irtigali by Ramsi Lehner will be held today at 9 pm at Room Art Space in New Cairo.

💡 UNDER THE LAMPLIGHT-

A novel about a criminal outfit battling it out with AI: The All-Consuming World by Cassandra Khaw follows Maya — who has died and been resurrected as a cyborg multiple times — in her final mission with the galaxy’s most infamous crew, the Dirty Dozen. After decades apart, the group of misfits comes back once again to save a fellow comrade. In their search, they fall upon a conspiracy among the ruling artificial intelligence species to take over the human race.

🌊 GO WITH THE FLOW

The EGX30 fell 1.4% at today’s close on turnover of EGP 1.18 bn (24.7% below the 90-day average). Local investors were net buyers. The index is down 4.4% YTD

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In the green: Abou Kir Fertilizers (+1.1%), Mopco (+0.9%) and Pioneers Holding (+0.4%).

In the red: MM Group (-3.3%), Telecom Egypt (-3%) and Ibnsina Pharma (-3%).

🌍 THE MACRO PICTURE

Pandemic restrictions on workers threaten a supply-chain collapse: Travel restrictions and contradictory testing and vaccine mandates have put a huge strain on transport workers, according to a coalition of transport companies representing over 65 mn workers worldwide. In an open letter to delegates at the UN General Assembly in New York last Wednesday, the major global shipping, trucking, and aviation organizations warned of a “global transport systems collapse” unless international institutions and governments step in to address the crisis in working conditions.

Stuck on the road and stranded at sea: It’s easy to forget that cargo backlogs at sea and land ports mean seafarers and drivers are also stuck in place. At the height of the pandemic, an inability to conduct crew changes due to global restrictions on movement meant that over 400k seafarers were stranded aboard ships, according to the letter. Some have now continued to work months past the end of their contracts. Meanwhile, mandatory PCR testing has seen record queues at overland border crossings, with truck drivers at times forced to sleep for weeks in their vehicles at sub-zero temperatures, without proper access to food, CNN reports.

Workers are at the end of their rope: Industry heads say that in the absence of a systemic response to the logistics crisis, workers have endured mistreatment to keep supply chains afloat. But while business wrings its hands over the Great Resignation among office workers, the mass exodus of labor from the transport sector poses a much bigger problem. The impact of labor shortages is already being felt in the UK, where army drivers now double as fuel delivery workers amid a worsening supply crisis. “All transport sectors are also seeing a shortage of workers, and expect more to leave as a result of the poor treatment mns have faced during the pandemic, putting the supply chain under greater threat,” the letter read.

So what can be done? Global vaccine inequality has meant that only 25-30% of seafarers have been jabbed, International Chamber of Shipping Secretary-General Guy Platten told CNN. At the other end of the scale, he said some seafarers have received multiple different vaccinations to keep up with varying requirements between countries. The industry letter demands that the WHO, the International Labor Organisation (ILO) and governments work to put an end to the confusion by drawing up a plan to recognize transport workers as essential, exempting them from labyrinthine and inconsistent testing rules and prioritizing them for vaccines. For now, it says, “the delays look set to worsen ahead of Christmas and continue into 2022.”

Transport troubles are a major factor hampering manufacturing: Supply-chain bottlenecks have combined with factory disruptions caused by the rise of the delta variant and other input shortages to slow manufacturing just as demand rebounds. Asian markets have been particularly hard-hit: China’s Purchasing Managers’ index (PMI) showed an unexpected contraction in September due to curbs on factories’ electricity use, while growth also weakened among European manufacturers, Reuters reports. The ongoing chip shortage means manufacturing activity “is likely to remain constrained for some time to come," in affected sectors, one economic advisor said.

As prices continue to rise: The supply crunch is having a knock-on effect on prices as producers pass on higher costs to consumers, while inflation continues to rise globally. Preliminary data recorded a eurozone price hike of 3.4% in September, marking a 13-year high, with no signs of a levelling coming any time soon.

But shipping companies are expecting to make bank: Maersk, which accounts for around 20% of global shipping and is a general indicator for the state of the industry, told the FT that it expects to deliver record profits amid the spike in freight rates, with a return to normality not expected till 2022 at the earliest.

📆 CALENDAR

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

October: Romanian President Klaus Iohannis could visit Egypt mid this month to discuss ways to boost tourism cooperation between the two countries.

2-4 October (Saturday-Monday): Techne Summit, Bibliotheca Alexandrina, Alexandria, Egypt.

4 October (Monday): Union for the Mediterranean ministerial climate conference, Cairo, Egypt.

5 October (Tuesday): Senate returns from recess; new legislative session begins.

6 October (Wednesday): Armed Forces Day.

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

9 October (Saturday): Public schools begin 2021-2022 academic year

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

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

18 October (Monday): E-Finance begins trading on EGX.

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.

28 October (Thursday): Second tranche of overdue subsidy payouts will be handed to eligible exporters.

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

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

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.

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

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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

16-17 November (Tuesday-Wednesday): Africa fintech summit, Cairo.

26 November-5 December (Friday-Sunday): The 43rd Cairo International Film Festival.

29 November-2 December (Monday-Thursday): Egypt Defense Expo, Egypt International Exhibition Centre.

7-8 December (Tuesday-Wednesday): North Africa Trade Finance Summit.

8-10 December (Wednesday-Thursday): Global Forum for Higher Education and Scientific Research (GFHS), Cairo, Egypt.

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.

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

15 December (Wednesday): Deadline for joint stock companies and investment companies in Cairo to join e-invoicing platform.

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

1Q2022: Launch of the Egyptian Commodities Exchange.

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.

22-24 April 2022: World Bank-IMF spring meeting, Washington D.C.

May 2022: Investment in Logistics Conference, Cairo, Egypt

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

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

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

**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.

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