Sunday, 19 June 2022

PM — It’s a busy week for the House

SECTIONS

TL;DR

???? WHAT WE’RE TRACKING TONIGHT

Good afternoon, ladies and gentlemen. It’s a rather slow start to the week on the home front today as we shake off the weekend cobwebs.

It’s also Father’s Day today. Although it’s not as widely recognized or celebrated here in Omm El Donia, we hope all the Dads out there get some love and recognition today.

THE BIG STORY TODAY

BUDGET DEBATE- MPs are now discussing the draft FY 2022-2023 budget and the development plan in a plenary session at the House of Representatives. Representatives will likely put the budget to a final vote likely on Tuesday, House Budget and Planning Committee Chairman Fakhri El Fiqi said last week.

REFRESHER- The proposed budget, which Finance Minister Mohamed Maait and Planning Minister Hala El Said presented to parliament last month, is a crisis spending plan the government revised as the global price of key commodities including oil and wheat started rising even faster than before thanks to Russia’s invasion of Ukraine.

THE BIG STORY ABROAD

It’s a thoroughly mixed bag of nuts in the international press this afternoon. Whispers of a potential recession in the US are beginning to be heard, with economists now forecasting a 44% chance of recession in the next year, according to the Wall Street Journal. Recession fears are leading companies to pull the brakes on stock market debuts, while consumers are shifting their spending habits amid soaring inflation, piling pressure onto some industries such as real estate, CNBC reports.

HAPPENING NOW-

The House Economic Committee will begin discussing proposed amendments to the Competition Act. The proposed amendments, which have been in limbo since last year, would require companies to notify the Egyptian Competition Authority (ECA) of mergers and acquisitions they plan to undertake, and grant the ECA the power to reject these transactions before they go through.

A tripartite summit between Egypt, Jordan, and Bahrain is ongoing in Sharm El Sheikh, with President Abdel Fattah El Sisi meeting with Jordan’s King Abdullah and Bahrain’s King Hamad bin Isa Al Khalifa, according to an Ittihadiya statement. Bahrain’s leader arrived in Sharm yesterday where he held talks with El Sisi.

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

  • The Central Bank of Egypt is likely to leave interest rates unchanged this week despite rising inflation and accelerating global monetary tightening, according to our regular analyst poll.
  • Egypt’s imports of Russian wheat climbed 84% y-o-y in the three months from March to May despite disruption caused by the war in Ukraine.
  • Has the down round boogeyman come to Egypt? A number of startups in Egypt are facing the prospect of down round financing — when a company sells shares at a lower price than its previous funding round — but will not be as dramatic as they are in the West.

enterprise

*** It’s Inside Industry day — your weekly briefing of all things industrial in Egypt. Inside Industry focuses each Sunday on what it takes to turn Egypt into a manufacturing and export powerhouse, ranging from initial investment and planning to product distribution, through to land allocation to industrial processes, supply chain management, labor, automation and technology, inputs and exports, regulation and policy.

In today’s issue: In a push to increase local manufacturing, the government has introduced reduced customs duties on several components and parts for everything from EVs to renewable energy. It has also provided customs reductions based on the percentage of local components used in the manufacturing process, in a bid to further encourage local industry. Enterprise has sifted through the numbers to outline where the new incentives reflect some of Egypt’s current priorities and explains how to make sense of the accounting side of the new incentives.

HAPPENING THIS WEEK-

The Central Bank of Egypt’s (CBE) Monetary Policy Committee meets this Thursday, 23 June to review interest rates. Our regular poll of analysts and economists suggests the CBE will keep rates on hold, as it looks to adopt a wait-and-see approach on inflation and allow itself space to maneuver if inflation rates continue to rise.

???? CIRCLE YOUR CALENDAR-

The government’s fuel pricing committee will meet in the first week of July, before Eid, to decide on prices at the pump, Oil Minister Tarek El Molla confirmed to Kelma Akhira (watch, runtime: 2:13). The committee’s last quarterly meeting saw it raise fuel prices by around 3% amid a rise in global prices triggered by the war in Ukraine.

Amcham AGM this week: Our friends over at Amcham will hold their annual general meeting on Monday 27 June at the St. Regis Cairo Hotel. Finance Minister Mohamed Maait will address the gathering.

Conferences coming up this week and next:

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 a daytime high of 38°C tomorrow in the capital city and a nighttime low of 21°C, our favorite weather app tells us.

enterprise

???? FOR YOUR COMMUTE

A bad omen for COP27? The Bonn Climate Change Conference, during which the international community was supposed to prepare the agenda and decisions for adoption at COP27 later this year, ended last week with plenty of tension and little consensus, observers told the Financial Times. Financing was again at the heart of the disagreements: Accusations of betrayal were flung about as richer countries refused to cough up the funding poor nations say they need to mitigate the damage caused by climate change. Meanwhile, the US and EU once again pushed back against requests for a new loss and damage financing facility, reflecting their inability to “recognize their responsibility to have a frank discussion about what needs to be fixed to truly tackle loss and damage,” one climate expert told the FT.

This cranks up the pressure on Egypt to ensure COP27 addresses the issue of loss and damage financing. “Major political decisions, notably on finance for loss and damage, need to be taken at COP27 … We now need to ensure that Sharm el Sheikh will truly be the place where important promises of the Paris Agreement are turned into reality,” UNFCCC Executive Secretary Patricia Espinosa said. The good news is that financing — particularly innovative financing tools, such as concessional lending — will be a core theme at COP27, International Cooperation Minister Rania Al Mashat has said.

Meta has found a new way to gather data from all over the internet… and with none of the accountability: After the Facebook parent company faced what seemed like a never-ending line of privacy-related litigations, Meta still found a way to gather user data from the broader corners of the internet, according to the Markup. Meta has made its Pixel tracker available without charge to developers worldwide to embed into their business websites and gain valuable information such as user behavior on the site and their Facebook or Instagram pages. However, Pixel also gathers information and sends it back to Meta, with the blame now falling on the businesses who have failed to do enough research to protect their users.

The Markup has created a series of studies that show just how much access to sensitive information Meta has obtained through Pixel, with everything from hospitals to student aid offices having unwittingly provided Meta with much of their data. In their hospital investigation, for example, the Markup found that a third of the top 100 hospitals in the US were using Pixel, supplying Meta with data such as the patient’s name, the time and date of their appointment, which doctor they were seeing, and even what medication they were prescribed. This violation of user privacy is often caused by a lack of technological understanding or reading the fine print before deploying Pixel on business websites.

As crypto faces a global sell-off, questions are arising on whether the sector needs to adopt a failsafe for its investors: One of the main dark spots in crypto’s short-lived legacy is the lack of regulation in the industry which could theoretically lead to users losing access to their crypto in the case of bankruptcy. In the wake of a number of crypto exchanges crashing, Vox poses the potential of crypto ins., which is slowly emerging in the startup world to protect crypto investors’ assets. However, crypto ins. is still nascent and the majority of activity remains uninsured. There’s also a lack of transparency as to what is covered and even if a crypto platform is insured, there’s no certainty that individual crypto holders are fully protected. Nonetheless, in light of the current market turmoil, if crypto is to survive, there could soon be more failsafes in place to protect part of users’ investments.

???? ENTERPRISE RECOMMENDS

???? ON THE TUBE TONIGHT-
(all times CLT)

Marvel’s first Muslim superhero makes her debut in Ms Marvel: The highly-anticipated Ms Marvel show has dropped on Disney+. The show follows Kamala Khan (played by a charismatic Iman Vellani), a teenage Pakistani-American girl from New Jersey who doesn't exactly fit in with her high school peers. Kamala’s life takes a turn when she gets the ability to channel cosmic energy from a magical bangle. The superhero is Marvel’s first Muslim headliner, Ms Marvel, whose comic book series came to life in 2014. The miniseries deviates a bit from the source material, and somehow manages to exceed fans and critics’ expectations. The show doesn’t shy away from Khan’s religion, and it manages a spectacular, refreshing feat: It defies Hollywood’s typical representation of Muslims by treating them as an ordinary family. In the first episode, we meet Kamala's bearded brother as he prays, but it’s not in advance of a sinister or terrorism-related offence; he was just praying in anticipation of his sister's driving exam — just like many siblings or parents do. Only two episodes are available to stream right now, and they are fun, full of witty, smart dialogue, and has us looking forward to the rest of the episodes, which drop every Wednesday.

⚽ Are you ready for the Cairo derby? It’s Ahly v Zamalek day: The two teams will face off in the Egyptian Premier League at 8pm. The Whites are currently at the top of the league, 4 points ahead of the Reds — although Al Ahly has played three fewer games.

???? EAT THIS TONIGHT-

Shawlaki brings a modern-chic twist to oriental desserts and Levantine dishes and desserts to West Cairo: The cafe offers delicious oriental dessert boxes that you can pick up any time at Capital Promenade, as well as an all-day dining menu, a healthy menu range, and signature coffee. There’s an elegantly-designed, spacious indoor dining space as well as an outdoor seating area, which is lovely if the weather is cooperative. We particularly enjoyed their innovative breakfast dishes: If you head there in the morning, the Shakshuka Feteer is a must-try, and the Ta’miyah Benedict is a fresh twist on the classical poached eggs dish, topped with pastrami slices and queso tahini sauce.

???? OUT AND ABOUT-
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Head to Rawabet Theater for a magical, uplifting performance of Every Brilliant Thing: Duncan Macmillan’s masterpiece has been translated into Arabic and adapted by director and producer Ahmed El Attar. The interactive play is originally a story of a young boy whose mom attempts suicide. To cope with this difficult experience, the son begins writing a list of every brilliant thing that makes life worth living. Actress Nanda Mohamed stars in this superb monodrama — you can catch her today and tomorrow at Rawabet Theater at 8pm.

Also today: B’naire Naguib Sawiris’ kicks off his DJ career: The Egyptian business tycoon is adding a new skill to his roster and taking the stage as a DJ at Zamalek’s The Museum tonight at Bibo’s Music Night.

???? UNDER THE LAMPLIGHT-

Take a hard look at the planet we’re creating in Under a White Sky: The Nature of the Future. In her most recent book, Pulitzer laureate Elizabeth Kolbert explores the human attempts to control nature with technology and concludes that even the best-intentioned technological fixes risk making our environment worse off. “Solving one set of problems introduces new ones,” Kolbert warns, because instead of reconsidering our behavior, humans prefer to look for workarounds for the ill consequences of that behavior. Through skillful writing and reporting, Kolbert examines challenges that different regions in the world are facing. She takes us with her to these local ecosystems, as we listen to the thoughts of the people tasked with addressing them. Kolbert’s strength lies in simply explaining the issues real people are facing, rather than giving us a preachy, apocalyptic warning. A word of caution: Don’t take this book to the beach, this is a very serious read on climate intervention.

???? GO WITH THE FLOW

EARNINGS WATCH-

Orascom Investment Holding turned to the black in 1Q2022 to report EGP 86.5 mn after reporting a loss of EGP 31 mn in the same quarter last year, the company’s financials (pdf) for the quarter showed. Operating revenues rose 51% to EGP 8 mn in the first quarter, compared to EGP 5.3 mn in the corresponding period last year.

MARKET ROUNDUP-

The EGX30 fell 1.4% at today’s close on turnover of EGP 431 mn (48.7% below the 90-day average). Foreign investors were net sellers. The index is down 18.6% YTD.

In the green: Abu Dhabi Islamic Bank Egypt (+3.5%), Cleopatra Hospitals (+2.3%) and Housing and Development Bank (+0.5%).

In the red: Qalaa Holdings (-4.7%), GB Auto (-4.5%) and MM Group (-4.2%).

industry

By the numbers — The new customs breaks coming to your industry: Egypt has been undertaking several measures to tip the trade balance in our favor by putting incentives that encourage producing complete products or components within the country. The shift in focus has seen the country study an import substitution strategy as well as introduce the Egyptian Automotive Industry Development Program that aims to help automakers locally manufacture EVs and other vehicles. On the other side of the equation, Egypt is aiming to increase exports to USD 60 bn a year by 2025 as part of the government’s new structural reform program which would also require increasing products coming out of the country.

There are two pillars being simultaneously implemented — reducing customs + encouraging local component usage: The House of Representatives gave its final approval to a presidential decree amending customs duties (pdf) on hundreds of imports in early June as the country changes policies in efforts to make local manufacturing more viable. The Madbouly cabinet also introduced additional customs reductions for manufacturers based on their percentage of local components.

The reductions in customs seem to reflect the government’s targets in the coming period. Priority areas that the government has been working on are getting a leg up with the custom reductions. These include:

Auto: Before the amendments, tariffs on automotives and their components ranged from 5-40% based on the component type. However, now the sector will pay a unified 2% import tariff on necessary components and equipment such as those to operate electric vehicle charging stations and natural gas-powered vehicle fueling stations, as well as on electric motors, batteries, control units, and ventilation systems used in electric buses. Meanwhile, natgas-powered cars will see 2% in tariffs compared to a previous 30%.

Renewables: Solar and wind components will be subject to a 2% import tariff as opposed to the previous 10% duty that was imposed before the amendments.

Transportation: A wider range of transportation industries will also need to pay the 2% rate on equipment and parts for railways, tractors, ships, aircrafts.

Metals: Raw materials such as iron, manganese, copper, aluminum, and lead ores will now see a 5% custom tariff compared to 10% previously.

Cement and coal: Meanwhile, production inputs for the cement industry are now subject to 0-5% in customs instead of 10%. Coal, an all important energy source for the sector, will see tariffs falling to 2% from 5% currently.

Agricultural inputs: A 2% import tariff will be imposed on fertilizers and seeds, compared to 5% previously.

And if you use local components, you’ll get an additional reduction on customs: The government outlined a tiered system based on the percentage of local components used to manufacture the complete product. The discounts will be available for all sectors of the economy, from electronics to automotives, Finance Ministry Advisor Magdy Abdelaziz told Enterprise.

The formula: The government has set a reduction rate for every tier of the amount of local components used. Multiplying the local component percentage and the reduction rate would give you the overall custom break percentage. For example, if your local component percentage is 50%, and your reduction rate is 120% of the local component percentage. You’d then multiply (0.5 x 1.2) to get 60%. That 60% is then taken off the overall customs you need to pay for a component imported from abroad. So if your import tariffs are EGP 5 on a component, you’d only end up paying EGP 2.

The breakdown for the local component-based customs breaks:

  • If the percentage of local components used is between 10-20%, the reduction rate will be 105%. Total customs for imported components would be reduced 10.5-21%.
  • If the local component percentage is between 20-30%, the reduction rate will be 110%. Total customs for imported components would be reduced 22-33%.
  • If the percentage is between 30-40%, the reduction rate will be 115%. Total customs for imported components would be reduced 34.5-46%.
  • If the percentage is between 40-60%, the reduction rate will be 120%. Total customs for imported components would be reduced 48-72%.
  • If the percentage of local components used is more than 60%, the reduction rate is 130%. The discounts would start from 78% with a maximum ceiling of 90%.

The amendments have garnered a thumbs up from the people we talked to: The new customs tariffs will reduce prices by lowering costs for manufacturers on their inputs and machinery, said Matta Bishai, the head of the Internal Trade Committee of the Importers Division of the Federation of Chambers of Commerce. This will also support their ability to export abroad as pricing will be more competitive, he added.

And could also support more investment: The customs amendments could also pave the way for increased local and foreign investment in Egypt, Ahmed Abdel Wahed, head of the Customs Division at the Federation of Egyptian Chambers of Commerce. Foreign companies may be more incentivized to set up factories in Egypt considering the reduced cost of production, Abdel Wahed added.

Your top industrial development stories for the week:

  • A new car assembly factory: Egyptian International Motors, the Suez Canal Economic Zone, the Sovereign Fund of Egypt and the East Port Said Development Company signed an MoU to explore building a factory capable of producing 75k cars a year.
  • Investment roadshow continues: Finance Minister Mohamed Maait has invited South Korean companies to invest in our agriculture, industry, transportation, energy, and water sectors.
  • Pfizer will provide Egypt with the technology to produce vaccines that prevent pneumococcal infections.
  • Gamea talks RIZ: Trade and Industry Minister Nevine Gamea discussed updates on the planned Russian Industrial Zone (RIZ) with Russian counterpart Denis Manturov during her participation in SPIEF.

???? CALENDAR

OUR CALENDAR APPEARS in two sections:

  • Events with specific dates or months are right here up top
  • Events happening in a quarter or other range of time with no specific date / month appear at the bottom of the calendar.

JUNE

20 June (Monday): Egyptian Builders Forum, JW Marriott Hotel Cairo.

21-22 June (Tuesday-Wednesday): Aswan Forum for Sustainable Peace and Development, Cairo.

21-23 June (Tuesday-Thursday): Commonwealth Business Forum, Kigali, Rwanda.

23 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

25-27 June (Saturday-Monday): Big 5 Construct, Egypt International Exhibition Center.

26 June (Sunday): The deadline for private companies to pre-register ahead of bidding for the second phase of the PPP national project to establish and operate 1k language schools.

27 June (Monday): Amcham annual general meeting, St. Regis Cairo Hotel.

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

30 June (Thursday): June 30 Revolution Day, national holiday.

30 June (Thursday): Deadline for bids for National Democratic Party HQ redevelopment contract.

June: Egypt will launch a unified ticketing system for all means of transport at the Adly Mansour Interchange Station.

June: Egypt and Israel will sign an agreement with the EU to increase LNG exports.

JULY

July: A law governing ins. for seasonal contractors will come into effect.

July: Actis’ expected sale of its majority stake in Lekela to Infinity and Masdar’s Infinity Power.

First week of July: Fuel pricing committee meets to decide quarterly fuel prices.

First week of July: The national dialogue called for by President Abdel Fattah El Sisi kicks off.

1 July (Friday): FY 2022-2023 begins.

1 July (Friday): Official rollout of e-receipt system begins.

8 July (Friday): Arafat Day.

9-13 July (Saturday-Wednesday): Eid Al Adha, national holiday.

21 July (Thursday): European Central Bank monetary policy meeting.

26-27 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

30 July (Saturday): Islamic New Year.

Late July – 14 August: 2Q2022 earnings season.

AUGUST

August: Work to extend the capacity of the Egypt-Sudan electricity interconnection to 600 MW to be completed.

August: Sharm El Sheikh will host the African Sumo Championship

18 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

SEPTEMBER

September: Egypt will display its first naval exhibition with the title Naval Power.

September: Estate Waves Egypt will launch its first real estate exhibition through metaverse technology in September.

September: Central Bank of Egypt’s Innovation and Financial Technology Center to launch incubator for 25 fintech startups.

6-9 September (Tuesday-Friday): Gate Travel Expo 2022, El Kobba Palace, Cairo.

8 September (Thursday): European Central Bank monetary policy meeting.

18 September (Sunday): Deadline for brokerage firms, asset managers and financial advisors to register with the Egyptian Securities Federation.

20-21 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26–27 September (Monday-Tuesday): The Africa Women Innovation and Entrepreneurship Forum (AWIEF) at the Cairo Marriott Hotel.

OCTOBER

October: Fuel pricing committee meets to decide quarterly fuel prices.

1 October (Saturday): Use of Nafeza becomes compulsory for air freight.

6 October (Thursday): Armed Forces Day, national holiday.

8 October (Saturday): Prophet Muhammad’s birthday, national holiday.

10-16 October (Monday-Sunday): World Bank and IMF annual meetings chaired by CBE Governor Tarek Amer, Washington, DC.

18-20 October(Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

27 October (Thursday): European Central Bank monetary policy meeting.

Late October – 14 November: 3Q2022 earnings season.

NOVEMBER

November: Cairo Water Week 2022.

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

3-5 November (Thursday-Saturday): Egypt Fashion Week.

4-6 November (Friday-Sunday): The Autotech auto exhibition kicks off at the Cairo International Exhibition and Convention Center.

7-18 November (Monday-Friday): Egypt will host COP27 in Sharm El Sheikh.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15 December (Thursday): European Central Bank monetary policy meeting.

DECEMBER

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

JANUARY 2023

January EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

January: Fuel pricing committee meets to decide quarterly fuel prices.

MAY 2023

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

EVENTS WITH NO SET DATE

2Q2022: The Sovereign Fund of Egypt will invest in two companies in the financial inclusion and non-banking financial services sectors.

End of 2Q2022: The Financial Regulatory Authority’s new Ins. Act should be approved.

End of 2Q2022: Door for bidding for the contract to redevelop the site of the former National Democratic Party HQ to close.

1H2022: Target date for IDH to close its acquisition of 50% of Islamabad Diagnostic Center.

1H2022: e-Finance’s digital healthcare service platform, eHealth, will launch its services.

1H2022: The government will respond to private companies’ bids to build desalination plants.

1H2022: Egypt’s second corporate green bond issuance expected to be announced.

End of 1H2022: Emirati industrial company M Glory Holding and the Military Production Ministry will begin the mass production of dual fuel pickup trucks that can run on natural gas.

2H2022: The inauguration of the Grand Egyptian Museum.

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

2H2022: The government will have vaccinated 70% of the population.

3Q2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release its first financing product.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

**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 above 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. © 2022 Enterprise Ventures LLC.

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