PM — It’s all about inflation

Good afternoon, wonderful people. It’s a mostly good news kind of Wednesday, with the entry of Saudi sovereign wealth fund PIF getting the ball rolling on its pledged USD 10 bn of investments in Egypt, while inflation figures didn’t extend their brief cool-off last month.

THE BIG STORIES TODAY

KSA makes its grand entry into the state privatization program: The Saudi sovereign wealth fund acquired minority stakes in four EGX-listed companies for a total USD 1.3 bn, according to a Planning Ministry statement. The stake purchases are the first of some USD 10 bn-worth of investments that the Public Investment Fund pledged to Egypt earlier this year as part of KSA efforts to support Egypt’s external position, which has been under pressure from soaring commodity prices and capital outflows.

Inflation accelerates in July: Inflation picked up pace in July after a one-month cool-off in June, with the uptick triggered mostly by a recent hike in fuel prices. Consumer prices in urban areas rose 13.6% year-on-year in July, up from 13.2% in June, data from official statistics agency CAPMAS (pdf) showed. Overall, prices increased on a monthly basis by 1.3%, up from negative 0.1% a month earlier.

THE BIG STORY ABROAD

Inflation is also leading the conversation abroad, with the international business press focusing its attention on slightly lower-than-expected inflation figures coming out of the US. Inflation cooled slightly in the US in July to hit 8.5%, thanks to lower energy costs, according to Bureau of Labor Statistics figures (pdf). Although the cooling inflation is a welcome sign for the US economy, the US Federal Reserve has signaled that it needs several consecutive months of lower inflation figures before it dials back its aggressive interest rate hike plans. The story is on the front pages of the Financial Times, the Wall Street Journal, Reuters, and CNBC.

Meanwhile, China’s headline CPI in July also came in lower than expected, registering 2.7% (0.2 percentage points lower than analysts’ forecasts) despite pork prices recording their highest month-on-month increase, CNBC reports, citing data by Wind Information.

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

• Egypt will begin cutting back on electricity consumption nationwide from next week in a bid to redirect more natural gas towards exports, thus netting additional inflows of foreign currency.
• Another Gulf wealth fund wants a piece of Mopco: Saudi Arabia’s sovereign wealth fund will acquire a stake in the state-owned Misr Fertilizers Production Company (Mopco) through the EGX.
• Kuwaiti insurer wants AIG Egypt: A unit of Kuwait’s largest ins. group has submitted a takeover bid for AIG Egypt to acquire between 75% and 100% of the company at EGP 164.15 per share.

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???? CIRCLE YOUR CALENDAR-

Ghazl El Mahalla IPO: The retail portion of Ghazl El Mahalla’s mini-IPO will wrap next Sunday, 14 August.

MNHD shareholders have the final word on SODIC takeover bid: Madinet Nasr Housing and Development will hold a general assembly meeting on Tuesday, 16 August, to decide whether to allow SODIC to conduct due diligence ahead of a potential takeover.

Interest rates: The Central Bank of Egypt will meet to discuss interest rates next Thursday, 18 August.

National Dialogue: The board of trustees overseeing the National Dialogue will hold its next meeting on 27 August. On the agenda: Choosing the rapporteurs for all of the committees and subcommittees of the social, political and economic tracks, and preparing the agenda and topics of discussion for the dialogue.

☀️ TOMORROW’S WEATHER- Temperatures in Cairo will hit 38°C tomorrow during the day before falling to 24°C at night, our favorite weather app tells us.

Surprise, surprise, burning down trees in the world’s biggest rainforest is not great for the environment. Despite pledging to stop its deforestation drive by 2030, Brazil saw the number of fires recorded in June in its Amazon rainforest hit a 15-year high, before they even reach their annual peak, Reuters reports. Farmers start the fires by cutting down forests and burning the trees, with the burning season typically escalating in August and September when the dry season is at its height. Brazilian forests have gotten worse since 2019 when the country welcomed President Jair Bolsonaro into office, who came bearing weaker environmental protection. And all that comes worsening our climate crisis, with the rainforest destruction making up about 9% of human-caused CO2 emissions.

A (small) sigh of relief from supply chains: After the “perfect storm” of negative events, between covid-19 and the Suez Canal’s Evergreen saga, supply chains are finally recovering, economics reporter Valentina Romei writes for the Financial Times. Case in point: Shipping prices have almost halved, with the average cost of moving a 40-foot metal box dropping 45% from its peak last year. Supply chain issues have caused manufacturing delays, as well as significant increases in shipping costs, all of which have impacted the cost of production across various sectors. Now that supply chain bottlenecks are easing, “the system of international trade is dynamic and can recover.”

But don’t get too optimistic, just yet: With Christmas and the accompanying rush of orders fast approaching, there are worries that carriers will not be able to cope and we’ll go back to supply chain bottlenecks once again. “What we’ve seen so far is only a step in that direction, but [some] disruptions are likely to be with us, for months ahead, maybe years,” one economist said.

???? ON THE TUBE TONIGHT-
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Up for a visual treat? Historical drama Da Vinci’s Demons promises to deliver, following the story of Leondaro da Vinci (Tom Riley) during the Renaissance in Italy in 1477. Da Vinci is portrayed as a genius battling his own ideas and imagination in a dramatic kindling, interlaced with inventing and solving crimes. There’s a lot of politics in the show too, as Da Vinci becomes involved in a political scheme to seize Florence while working for the House of Medici as he tries to track a spy providing information to the Catholic Church and the Pazzi family. While highly fictionalized, the series takes a dramatic swing at the original Renaissance man. You can stream the show’s three seasons on Disney+ or watch the trailer here (watch, runtime: 2:01)

⚽ All eyes on UEFA Super League: UEFA Champions League title holder Real Madrid goes head to head against Europa League title holder and Germany’s Eintracht de Frankfurt at 9pm.

And because anything is possible in football: Al Ahly fans are hanging on by a thread when the Red Devils face Port Said’s Al Masry at 9pm. Rivals Zamalek victored yesterday against Misr Lel Makassa, bringing the point difference with Al Ahly to 13 points. The White Knights now must come out on top in two games to be crowned holder of the Egyptian Premier League for a second consecutive season.

In other football-related news, say hello to the CAF Africa Super League: As it looks to “change the face and competitiveness of CAF and African football,” the Confederation of African Football (CAF) announced the continent’s Super League kick-off in August 2023, according to a press release. The tournament will run for 10 months until May 2023 with 197 games, and includes 24 teams from over 16 African countries, according to a video announcement (watch, runtime: 3:52). The total prize money of the CAF Africa Super League will be USD 100 mn, with the title holder receiving USD 11.5 mn.

Good news for all: CAF plans to pay each member association USD 1 mn annually from the new tournament’s funds. They also intend to allocate USD 50 mn from the funds for youth and women’s football development and other competitions.

Also in EPL tonight: Smouha v Future and Arab Contractors v Gouna at 6:30pm.

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Zamalek’s Al Masar Gallery is hosting its annual Contemporary Views exhibition, showcasing the past and recent works by some of the gallery's most prominent artists including Mahmoud Said and Tahia Halim. The exhibition runs until 29 September.

SafarKhan Art Gallery is hosting its summer exhibition, Collage, bringing us the works of some of Egypt’s up and coming artists. The exhibition is running until 14 September.

It’s Karaoke Night at Room Art Space New Cairo: Grab a friend and sing the night away.

Calling all bookworms: The Azbakeya Wall Book Fair kicked off today and is set to run for 15 days. The annual open market sees books being sold for as little as EGP 2, with enough options to ensure there’s something for everyone.

???? UNDER THE LAMPLIGHT-

With bleak headlines seemingly becoming a fixture of our information consumption, an uplifting read is very much in order. Johan Norberg’s Progress: Ten Reasons to Look Forward to the Future, published in 2017, sheds light on how far humanity has come in tackling some of the greatest problems it has faced and argues that today, “we’re living in a golden age,” as we’ve reached the highest living standards in history. Each of Norberg’s ten reasons is outlined in chapter which include food, sanitation, life expectancy, poverty, and violence and are each backed up with research, facts and figures that back up his notion that people are wealthier and healthier than during any other time period in history.

The EGX30 was essentially flat at today’s close on turnover of EGP 1.01 bn (19.1% above the 90-day average). Regional investors were net buyers. The index is down 16.6% YTD.

In the green: Alexandria Container and Cargo Handling (+7.2%), CIRA (+4.7%) and Abu Qir Fertilizers (+1.4%).

In the red: e-Finance (-3.6%), Cleopatra Hospitals (-3.3%) and Palm Hills (-2.5%).

World hunger worsened in 2021 and we’re falling way behind on our goal to eliminate it by the end of the decade. The number of people affected by hunger globally rose to some 828 mn in 2021, clocking an increase of about 46 mn people since 2020 and 150 mn since the outbreak of covid-19, according to a report from the UN Food and Agriculture Organization (FAO) on the state of food security and nutrition. Worsening economic conditions around the globe and lost income resulting from the global disruptions caused by covid-19 and the war in Ukraine has made access to more nutritious food more difficult (and more expensive) than at any time in the previous seven years — for many middle and lower middle income countries around the world the situation is even worse.

Some 670 mn people will still be affected by hunger by 2030, the report predicts. By the end of the decade, some 8% of the global population will still be coping with some form of hunger, even if a global economic recovery gets underway, the report explains. “With eight years remaining to end hunger [before the UN Sustainable Development Goal deadline], food insecurity and all forms of malnutrition the world is moving in the wrong direction,” the report says.

The challenge of food security isn't equally shared and some countries will bear a much heavier burden than others: Despite a sharp rise in moderate to severe food insecurity globally in 2020, those same levels remained mostly stable throughout 2021. Severe food insecurity, however, grew 2.4 percentage points from 2019 to 2021 to 11.7% of the global population, indicating that those already struggling with food security face an increasingly worsening situation.

Much of that struggle is concentrated in Africa: The number of people affected by hunger in Africa is expected to substantially grow from almost 280 mn in 2021 to some 310.7 mn people by 2030, according to the report. In the year preceding the report’s publication last month, moderate or severe food insecurity increased most sharply in Africa, which was already the region home to the highest levels of moderate and severe food insecurity, reaching 34% in 2021 up from 30% in 2020. During this same period, the global average of moderate or severe food insecurity fell to 29.3% from 29.5%.

The pandemic and the war in Ukraine have had a particularly harsh effect on food security globally: The outbreak of covid-19 alone has already been estimated to be responsible for leaving 78 mn more people affected by hunger by 2030 than in a scenario where the pandemic hadn’t taken place, the report finds. The war in Ukraine, which hadn’t yet been accounted for in the FAO’s data for the 2022 edition of their report will likely “have multiple implications for global agricultural markets through the channels of trade, production and prices, casting a shadow over the state of food security and nutrition for many countries in the near future,” the report said.

But the bigger picture is that there are a bunch of reasons why we’re doing so terribly on eliminating hunger: The combination of extreme weather events stemming from climate change, armed conflict, economic crises and pre-existing inequalities are the main drivers of food insecurity globally, the report explains.

In low and middle income countries who rely on imports for a good chunk of their calories, the situation is tenuous: Net food importers like Egypt — which, for example, relied on Russia and Ukraine for over 80% of its imported wheat — have in the past several been feeling the bite of the war. The slowdown in grain shipments and skyrocketing prices have forced Egypt to find new import markets and rely more on local farming output to ensure our supplies of the staple commodity were not disrupted. The consequence of the disruption has been brutal for state budgets which saw an extra EGP 15 bn added to the country’s import bill in the last quarter of FY2021-2022 and could see an extra USD 10.2 bn in the next fiscal year. But still, despite the government’s attempts to shoulder a portion of these costs, people have been increasingly squeezed by the rising costs of food.

Even with a dip in food prices, inflation is still weighing on us: Although food prices fell for the fourth consecutive month in July as the costs of grains and vegetable oil dropped, food prices remain incredibly high by historical standards. July’s reading was the sixth highest since the FAO index began in 1990 and is 13% higher than a year earlier in July 2021.

There are still pathways to changing course on this trajectory: ”In low-income countries but also in some lower-middle-income countries where agriculture is key for the economy, jobs and livelihoods, governments need to increase and prioritize expenditure for the provision of services that support food and agriculture more collectively,” the report says. Part of that means adjusting fiscal subsidies so that they target consumers rather than producers, the report explains. Instituting border measures and market price controls as well as expanding public support for agriculture globally would also help make healthy diets more affordable worldwide.