PM — The automotive strategy is coming this month

Good afternoon, ladies and gents, and a very happy almost-THURSDAY — as we like to call it here at Enterprise — to us all. It’s one of those days that can’t quite be called “quiet” but also isn’t entirely remarkable.

THE BIG STORY TODAY-

Auto manufacturing incentives could be ready this month: After years of delays, revisions and overhauls, the long-awaited automotive strategy could finally see the light this month, Prime Minister Moustafa Madbouly announced during a sitdown with representatives from General Motors International and Al Mansour Automotive, according to a cabinet statement. The strategy, which aims to grow the domestic auto industry and its feeder industries, would grant local assemblers incentives that enable them to manufacture vehicles using local components, as well as work on providing the technology infrastructure needed for manufacturing components to local industry players.

HAPPENING NOW-

Unvaccinated citizens were barred from entering government facilities, notary offices, and Egypt Post branches as of this morning, as per directives from the Madbouly government. Individuals without proof of vaccination or a PCR test no older than 72 hours were prevented from entering several buildings.

The local press were all over the news: Youm7 | Ahram Gate | Al Masry Al Youm | El Watan | Akhbar El Yom

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

• Egypt is starting to get hit with travel restrictions: Canada barred non-citizens traveling from or through Egypt in the previous 14 days from entering Canada, after Ecuador introduced similar restrictions on Egypt and seven countries from southern Africa.
• Real estate developers may soon be coming under closer scrutiny after the Madbouly cabinet yesterday greenlit new regulations designed to protect consumers and reduce market risk.
• A cocktail of ESG bonds: Companies in Egypt will soon be able to list social, ESG, gender equity and women’s empowerment, and sustainable development bonds on the EGX under new amendments to the executive regulations of the Capital Markets Act

THE BIG STORY ABROAD-

Did you think it was going to be anything other than Omicron? The new variant is still occupying prime real estate on most international outlets’ front pages this afternoon, as the strain continues to spread and more countries impose travel restrictions. Saudi Arabia, Nigeria, and Norway are among those reporting their first cases of Omicron. Bloomberg, BBC, and the New York Times have more.

MARKET WATCH-

Turkey’s central bank steps in to stymie TRY collapse: The currency soared 8.5% against the greenback earlier today before cooling down to clock a 3.3% rise on the back of the central bank’s announcement that it is intervening in the FX market for the first time in seven years. The move, which came after the TRY fell to record lows yesterday, could temporarily temper the currency’s volatility but is unlikely to have a long-term stabilizing effect, as Turkey’s dwindling FX reserves mean the central bank is unlikely to be able to sell “substantial amounts of USD on a regular basis,” one analyst says. President Recep Tayyip Erdogan’s unorthodox economic policy of lowering interest rates to power economic growth and create jobs has wiped out a third of the currency’s value in the past month. Bloomberg and the Wall Street Journal have the story.

Volatility is also the name of the game in oil markets ahead of tomorrow’s OPEC+ meeting, with prices rebounding today from an Omicron-fueled selloff yesterday, according to Bloomberg. Market watchers expect the oil cartel to postpone ramping up supplies after US President Joe Biden decided last month to tap into reserves and release 50 mn bbl of crude. OPEC+ was expected to increase production by 400k bbl/d as of January, but could decide to step back and take stock of the effect of Biden’s oil dump and the Omicron variant on markets. WTI futures for January are up 4.4% to USD 69.07/bbl and Brent crude futures are up 4.6% to USD 72.43/bbl.

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???? CIRCLE YOUR CALENDAR-

It’s a new month. The key news triggers to keep your eye on at the start of December:

• PMI: Purchasing managers’ index figures for November for Egypt, Saudi Arabia, and Qatar will be released on Sunday, 5 December. Figures for the UAE, which normally come out on the same day as Egypt and Saudi, will be released two days later on Tuesday, 7 December.
• Foreign reserves: November’s foreign reserves figures will be released during the first week of the month.
• Inflation: Inflation figures for November will be released on Thursday, 9 December. Data for inflation typically appears on the 10th of every month, but is moved up one day if that falls on a Friday.
• Interest rates: The Central Bank of Egypt’s Monetary Policy Committee will hold its final meeting for the year to review interest rates on Thursday, 16 December.

You have until 24 January to submit your local project proposals to Germany’s KfW Development Bank’s investing for employment facility (pdf). The bank will give grants to projects that drive job creation, especially those that are considered green. You can find more information on how to apply here.

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

☀️ TOMORROW’S WEATHER- Expect the mercury to hold steady at 22°C during the day before falling to 13°C at night, according to our favorite weather app.

Your mochaccino-latte is about to get more expensive: Global supply constraints coupled with trouble brewing in major exporting regions has brought coffee prices to a 10-year high, with analysts forecasting that tightness could last well until 2023, reports CNBC. Coffee futures are now at USD 2.34 per pound after rising to USD 2.46 per pound last week — the highest level since 2011, when prices hit USD 3 per pound. The price uptick comes as turbulent weather conditions in Brazil, including frost and drought, the almost full-blown civil war in Ethiopia and spiking covid cases in Vietnam, are being compounded with freight disruptions.

Even as cars embrace EVs, Hyundai goes long on hydrogen: Korea’s largest automaker is bucking the EV trend, throwing its weight behind zero-emission hydrogen with a pledge to run all of its new commercial vehicles on batteries or hydrogen fuel cells by 2028, reports Bloomberg. Hyundai has ambitions to introduce a range of hydrogen-powered mobility solutions by 2040, even as it is also investing heavily in EVs and robotics, but analysts are divided on whether the company’s gamble on hydrogen-based technology will bear fruit. Although hydrogen cars are quiet and charge faster than EVs, their market remains small, even in South Korea, where the government offers almost 50% subsidies, making it home to the largest number of hydrogen cars in the world. Still, limited refueling stations and high maintenance costs continue to make them a less attractive option for buyers, with hydrogen-powered vehicles making up less than 0.1% of sales in Korea.

The automaker seems to be moving in tandem with South Korea’s hydrogen ambitions: South Korea’s 2040 hydrogen strategy includes building a hydrogen economy and an H2 Pilot City in Ulsan, a coastal hub 300 km south of Seoul that is also home to Hyundai’s largest plant. The government aims to use hydrogen to fuel apartments and hospitals and power Hyundai’s manufacturing plant. Critics of South Korea’s hydrogen goals note the government’s focus on gray hydrogen, which is a non-renewable source, versus green hydrogen, a promising renewable energy source.

The world’s steel industry could be able to entirely eliminate its greenhouse gas emissions by 2050, but it’s not going to be cheap, according to Bloomberg. Switching to zero-carbon production methods will cost between USD 215 bn and USD 278 bn, but would ultimately result in a cheaper production system. Steel production is responsible for around 7% of global greenhouse gas emissions. The sustainable production system would require recycling, using hydrogen for fuel, and capturing carbon from older plants, and perhaps most importantly, would necessitate government support for the industry’s transition.

You won’t be able to post that group selfie on Twitter without everyone’s consent: Twitter altered its privacy and security policy yesterday to prevent users from sharing private media, such as photos and videos, of another person without their permission, the company said in a blog post. The changes come as the social media company aims to align its policies with human rights standards as “the misuse of private media can affect everyone, but can have a disproportionate effect on women, activists, dissidents, and members of minority communities.” Twitter will need either a first-person report or one from an authorized representative to remove the content from the platform, but will first notify the publisher of the media and give them the chance to dispute the claim.

???? ON THE TUBE TONIGHT-

(all times CLT)

The newest Netflix original standup features Palestinian-American Mo Amer: Titled Mo Amer: Mohammed in Texas, the standup sees the comedian tackle a wide array of topics such as the pandemic, the stock market, and divorce. We’ve been a fan of Mo Amer for years now and we’ve always loved how he captures the Arab experience in the West. In the special he also touches upon the very relatable subjects of different toilet cultures, hummus appropriation, and how Arabic curse words are way more intense than their English counterparts. Amer’s brand of dark humor will leave you with a new ability to laugh while your jaw is dropping. Nonetheless, he delivers his jokes with a grace that fails to insult anyone and instead makes sense in the grand scheme of things, even with the Rated R vocabulary weaved throughout — so keep the kids out of earshot before tuning in (watch, runtime: 07:39).

⚽ Egypt is currently on the field against Lebanon in our Arab Cup debut. As of dispatch, the score still stands at 0-0. Later today, Morocco will face Palestine at 6pm in Group C, while Saudi Arabia competes against Jordan at 9pm in the same group.

The top three of the English Premier League face varying tests outside their homebase today: Chelsea goes out to face Watford at 9:30pm, Manchester City travels south to play against Aston Villa at 10:15pm, while Liverpool heads a few blocks away from Anfield towards Goodison Park Stadium to play the derby match against Everton at 10:15pm. The rest of the day's matches are as follows: Southampton vs. Leicester City, West Ham vs. Brighton, and Wolves vs. Burnley, all at 9:30 pm.

La Liga: Real Madrid will play an important match against Athletic Bilbao tonight at 10pm in gameweek 15 of the Spanish League.

Serie A: Inter Milan, currently the third in the league, will host Spezia at 7:30pm in an attempt to narrow the point difference with Milan who is playing against Genoa at 9:45pm. Napoli, the league leader, will play against Sassuolo at 9:45pm as well.

In the French League, Paris Saint-Germain hosts Nice at 10pm.

???? OUT AND ABOUT-

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Dance the workweek away tomorrow at Cairo Jazz Club 610 which has a lineup of Impulse ft. Sebastien Leger, Echonomist, and Sebzz & Ouzo.

A tour of where the biggest films in Egyptian history were filmed in Downtown is what Qahraweya promises tomorrow from 12pm-7pm. The tour will explore different archives, cinemas, studios, and shooting locations of films such as Yacoubian Building, Downtown Girls, Immobilia Crime Story and many more.

TAM Gallery is back with the biggest art event of the year: Cairo Art Fair VII will kick off on Friday, featuring works by 150 prominent and emerging artists with a myriad of styles at different price ranges for anyone who would like to purchase a new piece of art. The art fair will take place at Abu Rawash and is open to the public until 31 January.

We talked to TAM Gallery’s cofounder Lina Mowafy on our podcast Making It (listen, runtime: 29:19). Mowafy told us about how she’s been working to democratize the art scene through ventures such as the annual art fair which gives a chance to newbie artists to get recognition.

???? UNDER THE LAMPLIGHT-

How to get machine learning to the point where AI can contribute to innovation: A Thousand Brains: A New Theory of Intelligence is written by Jeff Hawkins — one of the pioneers of mobile computing and the co-inventor of the 1990s’ PalmPilot. Today, Hawkins is at the head of Silicon Valley–based firm Numenta, which focuses on neuroscience research. In his book, Hawkins uses his research findings to pose ideas on how to make AI more intelligent by mirroring the brain’s neocortex region, which is known for being responsible for higher-order brain functions. If we’re able to do that, we can create machines that take on the benefits of the logical, rational neocortex without being wired for fear, greed, or jealousy, he says. Through theories like this, his book also argues against the common depiction that future robots will take over the human race. While this may seem too complex for the average reader, Hawkins makes sure to explain everything deftly in terms understandable by everyone.

A Thousand Brains was one of Bill Gates’ five book recommendations for winter and the Microsoft co-founder wrote a review about the book himself.

The EGX30 rose 0.2% at today’s close on turnover of EGP 1.05 bn (26.9% below the 90-day average). Foreign investors were net buyers. The index is up 5.3% YTD.

In the green: Qalaa Holdings (+3.7%), Rameda (+3.5%) and Egyptian Resorts Company (+3.3%).

In the red: CIRA (-2.4%), Fawry (-2.2%) and EFG Hermes (-1.3%).

Corporate break-ups are in vogue these days. Here’s why: Over the course of less than two weeks in November, General Electric (GE), Johnson & Johnson, and Toshiba each announced that they were splitting up into smaller, more focused firms that would allow them to streamline their operations. In early November, GE announced that it was breaking up into three separate businesses by 2024, covering healthcare, power and aviation. A week later, the world's largest health care company, Johnson & Johnson, announced that it would split into two companies, with one focusing on consumer health producing over-the-counter products like Tylenol, Listerine and Band-Aid, and the other on pharma (medical products, including the highly lucrative vaccine manufacturing). That same week, Toshiba announced plans to split into three companies, one focused on energy and infrastructure, one focused on hard disk drives and semiconductors, and the third focused on flash memory chips.

Breaking up conglomerates is hardly new. The breakup of Bell System into eight separate companies (one of which became AT&T) in 1984 in response to an antitrust lawsuit was the first in a wave of conglomerate breakups during that decade. In the aftermath of the 2008 financial crisis, industrial conglomerates like Citigroup and Motorola broke up, while others came under pressure from activist investors to do so. Last year, AIG separated its life ins. arm from its property and casualty arm. Companies like Siemens, Honeywell International and United Technologies Corporation (UTC) have also been splitting up or slimming down to optimize their operations over the past few years.

So, why do these breakups happen? While the reasons for streamlining their operations differ — with some, like Johnson & Johnson, looking to offload liability weight while others, like GE, attempting to fix missteps of the past — the fact remains that companies often have to shed deadweight to continue pleasing their shareholders. The rationale for consolidating companies is almost always increased efficiency. But once a conglomerate reaches critical mass and the system stops working, and people realize that businesses rise and fall together, breakups become more attractive, says the Wall Street Journal’s Jason Zweig explains (watch, runtime: 5:52). In the long run, the break ups promise to create more value for investors. Additionally, companies move more slowly and get bogged down by bureaucracy as they grow, making it difficult for them to remain nimble market players.

Conglomerate breakups are perceived differently in the US than in Europe or Asia. In the US, it is widely accepted that oversized, underperforming companies may be broken up to provide more value. The recent breakups of Toshiba in Japan and Siemens in Germany, for instance, were met with more resistance due to the perception that the breakups were a result of the failure of those companies' management.

This isn’t only happening abroad: Orascom Investment Holding (OIH) announced last year its plans for a “horizontal demerger” to allow the company to delineate between its investments in financial services and other industries. The split saw OIH spin off its assets including investment bank Beltone and non-bank financial services player Sarwa Capital into Orascom Financial Holding. OIH retained the rest of its holdings and investments in nine subsidiaries and sister companies, including ​​its Pyramids plateau venture as well as legacy assets including a mobile network in North Korea.

Industrial conglomerates may be losing favor — but tech conglomerates are on the rise. While large industrial conglomerates may be scaling down, tech companies like Alphabet, Amazon, Microsoft and Tesla are consolidating — not to mention diversifying — their business lines, with one Forbes contributor referring to the tech companies as the third wave of conglomerates. Their ability to consolidate and diversify comes not from the consolidation of capital, which was a feature of early industrial-era conglomerates, or management, which facilitated the rise of behemoths like GE, but rather from the systems that they use to compile, manage and utilize data.