Thursday, 8 July 2021

EnterprisePM — Inflation is up in June, but it was not as bad as everyone was expecting.

TL;DR

WHAT WE’RE TRACKING TONIGHT

There’s technically six working days until wa’fa, which is expected to land on Monday, 19 July. We, like many, are marking the days like Robert De Niro in Cape Fear.

THE BIG STORY TODAY- Have we been shielded from the worst of the commodities boom? Annual headline inflation inched up marginally last month, defying everyone’s expectations of a steady upward trend for the rest of the year on the back of the global commodities boom and mounting cost pressures on businesses. The slower-than-expected reading came as monthly food prices were little changed from May.

A rate hold coming: Consequently, analysts we’ve spoken with today are expecting the central bank to keep interest rates on hold when it meets early next month. We have chapter and verse in the Speed Round, below.

Meanwhile, the European Central Bank is taking less of a hardline on inflation, announcing in a landmark policy review today that it will let the headline rate exceed its target of close to 2% whenever necessary, tolerating temporary price growth. This suggests that the ECB is following in the Fed’s footsteps and is less likely to raise rates soon. The new strategy will first be put to the test when the Governing Council holds its interest-setting meeting on 22 July.


HAPPENING NOW- The GERD showdown should be happening today: Egypt, Sudan, and Ethiopia are in New York for today’s UN Security Council meeting on the Grand Ethiopian Renaissance Dam (GERD) dispute.

Egypt and Sudan’s foreign ministers have been coming up with a gameplan (with a little help from our Tunisian friends): Egyptian Foreign Minister Sameh Shoukry and his Sudanese counterpart Mariam Al Mahdi sat down yesterday to prepare for today’s meeting — the second time this week — ahead of the long-awaited GERD talks, the ministry spokesman said on Twitter. The two countries will back Tunisia’s draft resolution to the council, which Shoukry describes as “balanced”, he told the Associated Press. The push at the security council came after Ethiopia announcing that it has unilaterally begun the second filling of the dam.

Meanwhile, we’re still drumming up last minute support: President Abdel Fattah El Sisi had a call with DR Congo President Felix Tshisekedi to discuss the latest developments in the dam dispute, according to an Ittihadiya statement. Tshisekedi supported a trilateral resolution between the three sides and said that the Security Council meetings would act as a pathway for peaceful negotiations for other African disagreements.

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

  • The EGX is putting closing auctions to the test today, a new system to calculate closing share prices that is hoped to improve accuracy, increase trading volumes and boost foreign investment in local stocks.
  • Made-in-Egypt Sinovac vaccines could be available in clinics in two weeks, earlier than the previously announced August date.
  • A contractor will be assigned to collect waste from around Cairo until the procedures are completed for launching an official public tender.

THE BIG STORY ABROAD- Operations have resumed at Jebel Ali Port after an explosion lit up the sky over Dubai at midnight, Bloomberg writes. No casualties were reported at the blast, which happened on a small 130-container ship in Terminal 1. Sabotage is also out of the question at this point, as the blast may have been caused by friction or high temperature, according to a person familiar with the matter, cited by Bloomberg.

🗓 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-

UAE wants to pollute the world even more so it can quit oil 😕: The UAE is looking to sell as much crude as it can before demand drops, in order to wean its economy off oil, the Wall Street Journal reports. The aim is to generate revenue for the diversification of the economy, including new energy and revenue streams, the WSJ cites a person close to the matter as saying. It’s a matter of market share at this point. To support those plans, Abu Dhabi is seeking investors to build hydrogen-export facilities and long-term supply contracts, according to Bloomberg.

This comes after the UAE rejected a proposed OPEC agreement on oil production earlier this week, arguing that its production quotas were unfair and rallying up prices to a three-year high. OPEC members did not set a date for their next meeting. The UAE may be following the lead of Saudi Arabia, which is looking to lead a future market for blue hydrogen.

Google is getting slapped with yet another lawsuit: This time, three dozen US states are alleging that the Alphabet-owned firm has an illegal monopoly with its Google Play app store, according to the Wall Street Journal. The lawsuit points to Google’s collection of a 15-30% service fee on sales through its Play Store, while also accusing the Big Tech firm of trying to “buy off” Samsung and convince the competitor to let go of its Galaxy app store. Google has since responded in a blog post, saying it competes fairly and aims to support and aid developers.

📺 ON THE TUBE TONIGHT-

One for the Egyptian NBA fans (we know you exist): HBO Sports’ documentary The Day Sports Stood Still is now available to us through OSN Streaming, providing a deep look into the world of sports during a year full of racial reckoning and the pandemic. The documentary covers the surreal and sudden shutdown of sports in early 2020 and the complex return to competition in the summer and fall through initiatives like the “bubble” system. A broad swath of voices is brought to the spotlight to explore how covid-19 pressed pause on their lives, but still managed to push them to bring race issues front and center in the sports field. The trailer is sure to get you excited (watch, runtime: 01:38).

WE CAN’T WAIT FOR- Season three of Succession which is due to be out this Fall on HBO Max. The series follows a family that owns a media empire as they battle for leadership after their father steps down. We’re not sure if the episodes will be released all at once or once a week, but you should definitely check out the trailer and catch up on the first two seasons until then (watch, runtime: 01:23).

England versus Italy, here we go. England is going to the Euro 2020 finals after beating Denmark 2-1 last night during extra time. The England versus Italy match is expected to be a doozy and will take place on Sunday at 11pm. This is the first major international final for England’s national men’s team since 1966.

Al Ahly is playing today: The Egyptian Premier league will see El Entag El Harby play against Pyramids at 7pm, while Al Ahly is going up against Al Mokawloon at 9pm.

Also, if you are so inclined (some of us are) UFC 264 will kick off late night Saturday, with the preliminary fights starting at 12am CLT Sunday morning. The main draw of the event: McGregor vs Poirier 3, which isn’t due to start until 4am CLT Sunday. You can sign up for the pay-per-view event at UFC Arabia.

🥐EAT THIS TONIGHT-

What’s a Sahel beach party without a good cookout: BBQ Bros, the formidable barbeque joint is opening up all over Sahel with their signature grill setups that are sure to draw you in from a mile away. From burgers to steaks to imposingly large kabobs, the meat lovers among you will discover your eden. However, they also offer a range of delicious appetizers and platters such as honey glazed salmon, creamy chicken breast, and fried chicken gravy. You can find BBQ Bros in Marassi, Diplo, and Seashell in Sahel as well as in El Gouna and Cairo (at Zed Park).

🎤 OUT AND ABOUT-

Rock N' Roll cover band Retrograde are playing at Garden City’s The Room tonight at 9pm.

Try out kayaking with Egyptian Rowing Club’s weekly kayak ride that is suitable for all levels of experience. The rides will take place on Friday at 9am and Saturday at 10am.

A talk titled ‘The sustainability of analogue photography will be given by photographer Mafric tomorrow at Dawar Arts at 1pm.

Catch Dina El Wedidi back from her hiatus at Cairo Jazz Club in Agouza on Saturday at 9pm.

💡 UNDER THE LAMPLIGHT-

We all need a jumpstart in networking: With so many ways to connect with people, often business relationships can feel transactional and dehumanizing… a means to an end. The Lost Art of Connecting by Susan McPherson and Jackie Ashton focuses on creating a guide to ensure that your networking efforts bring more knowledge and insight, and possibly even friendships. The book poses the ‘Gather, Ask, Do Method’ which urges that you shouldn’t wait for the perfect chance to network, but be more open to sudden circumstances and new things where you can ask a lot of questions. The most important part is the ‘Do’ which advises you to follow through on the promises you made and keep in touch.

☀️ TOMORROW’S WEATHER- Cairo temperatures will inch down to 39°C over the weekend, which is why we urge you to visit the 31°C amazingness that is Sahel, thanks to forecasts from our favorite weather app.

SPEED ROUND: ECONOMY

Monthly prices in urban Egypt hold steady, keeping inflation in check

Annual urban inflation inched up slightly in June, at a pace slower than everyone had expected, thanks to a favorable base effect and a slowdown in the growth of monthly food prices. Figures released today by state statistics bureau Capmas showed the headline rate accelerated to 4.9% at the end of the month, up from 4.8% in May. Despite being the highest headline reading so far into the year, the urban figures were still more muted than analysts and policymakers had penciled in.

The overall rate in both urban and rural areas (pdf), however, rose more sharply to 5.7% in June from 4.9% a month earlier.

Inflation continued to cool down on a monthly basis: Urban prices rose only 0.2% during June, compared to 0.7% the previous month.

Food prices were kind to us this time around: A sub-gauge measuring food items only edged up 0.2% over May, despite registering a 3.4% uptick over last year. This was much lower than the 1.5% m-o-m growth in urban food prices between April and May.

Other goods and services including education, health, and utilities also rose nationwide on an annual basis but remained largely unchanged from May.

Were the figures in line with expectations? Not at the slightest. “The annual rate comes below our estimate of 5.5% as we had expected a higher monthly change of 0.7%, maintaining last month’s momentum,” Beltone’s director of macro and strategy Alia Mamdouh said. Pharos Holding’s head of research Radwa Elswaify and Naeem Brokerage’s Allen Sandeep echoed Mamdouh, noting that they had expected a higher annual reading and that monthly prices bucked the trend of spiraling global commodity prices.

Analysts and policymakers alike had expected the increase to be more significant, citing unfavorable near-term base effects and the global commodities boom that began late last year and hit everything from food to energy to key metals.

But the signs are still pointing to more inflationary pressures in coming months: Inflation is seen picking up this month and in August, after the new round of electricity price hikes took effect at the start of the state’s fiscal year last week, says Sandeep. “We expect that the headline rate will rise further over the coming months largely on the back of stronger food and energy inflation,” Capital Economics, meanwhile, said in a research note, adding that higher global commodity prices and freight charges, as well as supply shortages, will also weigh in on the headline reading.

Not so fast, says Elswaify: Elswaify, however, suggested that any increase we see down the road will be better explained by base year effects and not the macro pressures noted. Even then, we will still be less than the 5.5% some analysts had earlier expected.

Inflationary pressures have been largely muted since the start of 2021, shrugging off the global commodities boom, which took a while to filter through here at home. The cycle began to catch up in May, leading to a spike in food prices and a 70 basis points increase in the annual rate. Before that, inflation unexpectedly slowed to 4.1% in April, after having held steady at 4.5% in March from February and even dropped in January to its lowest level since September 2020.

How will this factor into the upcoming CBE decision? Analysts still unilaterally agree that the CBE’s Monetary Policy Committee (MPC) will keep rates unchanged at its upcoming meeting in August. While there’s room for a rate cut on the back of slower-than-expected inflation, the MPC will opt for a hold to protect inflows into sovereign debt and as there’s “political anticipation of developments in the GERD dispute,” Elswaify says. Alia Mamdouh, Prime Holdings’ Mona Bedier and Capital Economics are also penciling in a hold on rates at the coming meeting. The latest inflation reading remains below the CBE’s inflation target of 7% (±2 ) on average by 4Q2022.

The MPC is due to meet on 5 August. Policymakers left rates on hold for the fifth consecutive time last month, as they looked to preempt a possible rise in inflation on the back of the commodities cycle. The central bank slashed rates by 400 bps last year, including an emergency 300-bps cut in March to protect the economy from the fallout from covid-19, as well as two 50-bps cuts in September and November.

IN OTHER MACRO NEWS-

Remittances from Egyptian abroad rose to USD 2.5 bn in April, up 34% y-o-y from USD 1.8 bn April 2020, the CBE said in a press release (pdf).

SPEED ROUND: GREEN ECONOMY

One plus one makes two

Eni is on board with the government’s clean hydrogen plans: Italy’s Eni will work on feasibility studies to produce green and blue hydrogen under an MoU signed with state-owned Egyptian Natural Gas Holding Company (EGAS). Eni will help authorities explore projects to produce green hydrogen from renewable energy, as well as open itself up to partnerships with the government on either green hydrogen production or other projects to produce blue hydrogen using carbon dioxide stored at mature natural gas fields it operates in Egypt, according to a government press release (pdf). Eni will also conduct market research to estimate how much of the produced hydrogen will be needed domestically, and how much can be shipped abroad.

Eni joins Siemens as the second global energy player to sit down with government officials in recent months as authorities work toward a pilot project to produce green hydrogen in Egypt as an alternative source to power industry and eventually be exported abroad. The government is expecting to integrate green hydrogen, which is produced without burning fossil fuels, into its 2035 energy strategy.

How big are those plans? Electricity Minister Mohamed Shaker said last month that we’ll be seeing major announcements soon, and that the early stages of green hydrogen production could cost some USD 3-4 bn at its early stages. Studies for one of several planned green hydrogen plants is expected to be finalized and presented to the Sovereign Fund of Egypt, which was said to be taking in promoting green hydrogen to the private sector.

SPEED ROUND: STARTUP WATCH

Eight Egyptian startups raise USD 52 mn in June

Egyptian startups were the second highest recipients of funding in MENA in June, with eight businesses raising USD 52 mn, according to Wamda. The majority of that figure comes from Trella’s USD 42 mn funding round co-led by Maersk Growth that was closed late last month. The Trella financing was the fifth largest across the region in 1H2021.

MENA startups raised a total of USD 267 mn in June through 44 agreements, bringing 2Q2021 investments up to over USD 552 mn — a 33% y-o-y increase compared to 1Q2020. UAE startups led the region in startup funding, raising USD 137 mn in total last month across 14 transactions.

Breakdown by industry: Fintech attracted the most investment with USD 306 mn, a number propelled by the USD 110 mn raised by Saudi Arabia startup Tamara in its Series A round. E-commerce came in next with USD 181 mn raised by startups in the sector, followed by logistics which accounted for USD 103 mn in total funding.

MENA almost broke the USD 1 bn mark in 1H2021, coming in short at USD 978 mn investments raised across 249 agreements. Some 44% of funding went to UAE startups, 27% to Saudi Arabian startups, and 12.5% to Egyptian startups.

Something we’re not happy about: In June, no female-led startups received funding. Instead, 37 of the investments went to male-led businesses while seven agreements were signed by mixed founding teams. Across 1H2021, startups founded by men received 96% of funding agreements, while female-founded startups attracted a mere 0.9%.

SPEED ROUND: DEVELOPMENT FINANCE

EBRD launches USD 120 mn Youth in Business program, provides NBE with USD 20 mn credit facility for SME lending

The European Bank for Reconstruction and Development (EBRD) is launching a USD 120 mn Youth in Business program that will offer young entrepreneur-led SMEs access to financing and technical assistance to offset youth unemployment and high emigration levels, according to a press release (pdf). “Limited capital and gaps in know-how are among the biggest barriers standing in the way of young entrepreneurs’ success,” said Heike Harmgart, EBRD Managing Director for SEMED, adding that the program aims to build “a stronger, fairer economy that works for all.”

The pilot phase includes a USD 20 mn credit facility for the National Bank of Egypt (NBE), to allow the state-owned bank to use for on-lending to SMEs. Other banks will also be eligible to receive financing through the USD 120 mn package. Partner banks and microfinance institutions will also be provided technical assistance to strengthen their lending capacity.

It’s unclear how much individual SMEs could rake in from the program, but the release added that eligible businesses will also be given advisory support to attract, recruit, train and retain employees.

CATCH UP QUICK-

GO WITH THE FLOW

CI Capital could be saying goodbye to Souhoola

MARKET ROUNDUP-

The EGX30 fell 0.9% at today’s close on turnover of EGP 1.23 bn (0% above the 90-day average). Regional investors were net sellers. The index is down 6.1% YTD.

In the green: Palm Hills Development (+3.1%), Sidi Kerir Petrochemicals (+1.4%) and CIB (+0.3%).

In the red: Fawry (-4.6%), Pioneers Holding (-2.6%) and Cleopatra Hospital (-2.5%).

MARKET NEWS-

Is CI Capital looking to sell Souhoola? The investment bank hired Karvy Financial (LinkedIn) to conduct a fair value study for its consumer finance arm, Souhoola, it said in a regulatory filing (pdf), without citing a reason for the move. An official from CI Capital refused to comment on the news.

SCIENCE & TECH

The Crispr system could be the solution to covid-19, sickle cell disease, HIV, and more

Crispr gene-editing therapy has had a huge scientific breakthrough: US startup Intellia Therapeutics managed to treat patients’ internal organs by using a Crispr gene-editing therapy for the first time in history, they announced in a press release last month. Crispr technology had previously been restricted to editing the cells outside the body or in the eye, but the new development has the potential to open the door to treat once-untreatable diseases. Intellia was co-founded by Nobel Laureate Jennifer Doudna and Nessan Bermingham. The Boston-based startup teamed up with biotech company Regeneron to treat transthyretin amyloidosis, a disease in which a build-up of a problematic protein hits a patient’s heart and nervous system and shortens their life expectancy.

Crispr — a refresher: Crispr stands for clustered regularly interspaced short palindromic repeats and was first discovered as the way that bacteria protects themselves from viruses. The bacteria has DNA sequences known as CRISPRS that exactly match viral sequences and attach itself to the virus instead and proceed to cut it, disabling the negative effects of the virus. In 2012, Doudna and her French colleague Emmanuelle Charpentier presented their research which had been trying to manipulate that same process to change genes entirely, by cutting harmful DNA and replacing them with a healthy copy through the Crispr technique.

If this sounds familiar, then it should. Crispr helped give us mRNA vaccines: The Crispr system was used to cut your genes and replace them with the engineered stretch of mRNA that allows your cells to crank out the necessary spike proteins that fight the covid-19 virus. You can check out our explainer for more.

WANT TO KNOW MORE? Check out this video by MIT’s The Jackson Laboratory (watch, runtime: 04:12)

There really is so much potential: Crispr has already been used to successfully treat sickle cell anemia in trials by biopharma firm Crispr Therapeutics, while another company Editas Medicine is currently in trials to treat a form of inherited blindness, according to the Financial Times. These two, plus Intellia, are the three companies with the original patents from the Crispr discoveries. However, it goes beyond even that, with the Crispr system and the ability to cut and paste whatever DNA sequences are best for us, could lend a hand in treating diseases such as cancer, muscular dystrophy, and HIV, according to Labiotech.

For Intellia, Africa is a great place to roll out their treatments. The firm is working with the Bill & Melinda Gates Foundation to treat patients in Africa with sickle cell disease. Intellia is hoping to edit bone marrow to treat blood-based diseases without transplanting cells.

However, Crispr can pave the way for some real sci-fi weirdness: Although controversial, Crispr could be used to create “designer babies” with inheritable genetic changes, writes Time Magazine. In 2018, a young Chinese doctor used Crispr to engineer twin girls to render them resistant to HIV, introducing the world’s first gene-edited babies. A year later, the girls were studied once again and it was found that their brains had been changed in a way that enhanced cognition and memory, reports MIT Technology Review. Regardless, the biophysicist He Jiankui, was sentenced to three years in prison for “illegal medical practice”. This shock and opposition to genetically engineered humans might not always be the case, as the emergence of the pandemic may make RNA-guided genetic editing more accepted as people look to make our species less receptive to viruses.

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.

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.