State banks launch an EGP 1 bn fund of funds targeting SMEs

Good afternoon, friends, and happy almost-THURSDAY. It’s all about investment this afternoon, from a state-owned fund-of-funds (the first we remember hearing about) to startup accelerators and venture-backed companies looking to grow in Egypt. We have chapter and verse in this afternoon’s Speed Round, below.

THE BIG STORY ABROAD- Israel is back at it: Israel launched airstrikes against targets in Gaza after Hamas allegedly sent incendiary balloons into southern Israel, Bloomberg reports. The flaming balloons came prior to a nationalist march on Tuesday by thousands of Israeli far-right nationalists through Palestinian neighborhoods in East Jerusalem, an annual event which Palestinians see as an assertion of control by Israelis over territory claimed by Palestinians. This is the first eruption of hostilities since the Israel-Hamas ceasefire brokered by Egypt took hold in late May after an 11-day conflict.

HAPPENING NOW- Joe Biden and Vladimir Putin are sitting in a lakeside cottage in Geneva. The two began earlier this afternoon a meeting that handlers said could last as long as five hours. Aides to both presidents took great pains before the confab to downplay expectations that any concrete agreement would emerge. Look for the story to dominate the world’s front-pages tomorrow morning.

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

• Arab League calls for UN action on GERD: Arab foreign ministers called on the UN Security Council to hold an “urgent session” to discuss the dispute over the Grand Ethiopian Renaissance Dam during a meeting in Doha yesterday.
• Vivo plans to invest USD 30 mn in Egypt over the next two years: The Chinese smartphone maker plans to establish five new customer services centers by the end of 2021, two of which are currently under construction.
• CIRA will establish Egypt’s first applied tech university by September 2022: The university will be founded at CIRA’s Badr University and will initially offer diplomas and bachelor’s degrees in logistics, tourism, medical and industrial manufacturing.

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YOUR STATUTORILY REQUIRED COVID STORY- Egypt just got a boost for its plan to export surplus doses of Egypt-made Sinovac vaccines to Africa: Health Minister Hala Zayed pushed for World Health Organization approval of the locally manufactured jab in a meeting with the organization’s director-general, Tedros Adhanom, according to a cabinet statement. Vaccine manufacturer Vacsera could also potentially receive a WHO certification. The state-owned facility is expected to produce the first batch of the Chinese jab as early as this week. Zayed previously said that production will first need to cover local needs before exports begin to other African countries.

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The EFG Hermes and Saudi Exchange Virtual Investor Conference will wrap up tomorrow, according to a press release (pdf). The event will see execs from 61 companies meet with more than 450 international investors from over 190 institutions.

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Mediocre male managers are standing in the way of women in finance looking to advance their careers, according to a joint LSE and Women In Banking and Finance study. Drawing from 79 qualitative responses from women in London, researchers have found that it is “much more likely to be average men who ended up being the gatekeepers for the younger women who were coming through” because managers persistently tend to offer career support to those who more closely resemble them, the lead author told the Financial Times. Respondents indicated they needed to work harder than men — and that black women needed to work harder than white women — to secure the same kind of recognition at work.

Apple’s healthcare ambitions haven’t yet seen the light of day: Tech firms see the healthcare industry as a potential gold mine, and few have been as aggressive in moving into it as Apple, which has made health a centerpiece of both mobile and its push into wearables including Apple Watch. But its grander ambitions may have run into roadblocks: Apple has attempted to launch initiatives, including high-tech clinics, that have struggled to get off the ground, according to the Wall Street Journal. The clinics would use Apple health apps on users’ iPhones to help disrupt the “363” model that sees patients out of contact with their MDs for 363 days a year and only visit when something goes wrong. As much as CEO Tim Cook promises that Apple’s “ greatest contribution to mankind will be in health,” the company has often pushed its healthcare ambitions to the end of the to-do list to instead focus on what it does best: selling products, the Journal suggests.

The US is getting sharper elbowed when it comes to protecting Big (American) Tech: The US is calling on the European Union not to adopt what it claims are “protectionist” policies that target only the five biggest US firms, according to the Financial Times, citing an email from the National Security Council to staff at the EU’s delegation in the US. The exclusive targeting of FAANG companies (Facebook, Amazon, Apple, Netflix, Google), which was suggested by the European Parliament rapporteur for the Digital Markets Act, would “hinder our ability to work together to harmonize our regulatory systems” and make “co-operation between the US and Europe extremely difficult,” the email read.

China is sending a three-person crew into orbit tomorrow to help complete the country’s space station, according to Reuters. The high-stakes takeoff is the third of a series of eleven missions necessary for the development of China’s space station by the end of the year, with four more missions planned. The three astronauts will stay in space for three months, the longest for any Chinese astronaut. China is currently barred from the International Space Station and has sought to build its Tianhe space station as an alternative.

Is the world’s largest oil producer heading towards a net-zero emissions target by 2050? US climate envoy John Kerry thinks as much following a meeting with Saudi Energy Minister Prince Abdulaziz bin Salman, in which the minister expressed his “very real” clean energy ambitions, Bloomberg reports. The Biden administration has pledged USD 5.7 bn a year in climate finance for developing countries, including the kingdom, with a potential additional USD 1.2 bn injection to the UN’s Green Climate Fund. But OPEC+ have been scaling back supply cuts enacted during covid-19, as oil prices hit their highest level since October 2018, meaning a roadmap to net-zero emissions may be a while away.

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Season two of critically-acclaimed TV show Lupin is out on Netflix. Picking up where the first season left off, gentleman thief Assane Diop has the police hot on his heels. His arch-enemy has it out for him too, as the character continues to try to avenge his father’s death. The first season of the French-language TV show was a smashing success, and the new episodes manage to surpass their predecessors. The show also gives Diop more leeway for character development this time around as he struggles with the ripple effect that his chosen life of crime has condemned him to. Check out the trailer if you aren’t yet convinced: (watch, runtime: 02:29).

⚽ Today’s itinerary in the Euro 2020 already has Russia and Finland on the pitch in Group B. Russia needs to pull its weight in today’s match after losing to Belgium, especially since Finland already snagged three points after the dramatic match with Denmark. Meanwhile, Wales (which tied with Switzerland in its last match) is going up against Turkey, which had previously lost to Italy. Rounding out Group A, Italy and Switzerland will hit the field at 9pm in the most-anticipated match of the day.

Last night’s fixtures: Portugal came out on top against Hungary with a score of 3-0, while France beat Germany 1-0, after having two of the three goals it got past Germany’s keep disqualified.

???? OUT AND ABOUT-

Art d'Égypte is organizing EX, an art display by the sea taking place in Almaza Bay in North Coast from 18 June to 22 August, featuring dozens of local artists.

More drummers are taking the stage at venues across Cairo at 8pm today as part of the eighth edition of the International Festival for Drums and Traditional Arts. Today’s performances feature ensembles from South Sudan, Palestine, Yemen, Indonesia, and Sudan. The festival runs until Friday. You can check out the full schedule and locations for each show here.

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Bill Clinton is milking his political career for some fiction inspiration: The former US President has teamed up with James Patterson to write The President's Daughter, a thriller that follows character Matthew Keating, a one-term president and former Navy SEAL whose daughter is kidnapped. In a one-man special-ops mission, Keating must find his daughter and resolve the matter of national security — all while the world watches. This is Patterson and Clinton’s second collaboration, following 2018’s The President is Missing (are you seeing the pattern here?). The Independent calls the book “Clinton’s male fantasy”, while the Washington Post’s review of the book includes the word “ridiculous.” The New York Times is out with a somewhat less scathing take.

???? TOMORROW’S WEATHER- It’s getting hotter… Cairo will see daytime highs of 36°C and nighttime lows of 20°C before the mercury rises to 37°C and 38°C for the next few days according to our favorite weather app.

A consortium of the National Bank of Egypt , Banque Misr and Banque du Caire are planning to launch a fund of funds with an initial assets under management of EGP 1 bn, an unnamed source at BdC told Enterprise, confirming an earlier statement by Deputy Chairman Yehia Abou El-Fotouh during a webinar. The three state-owned banks are working to finalize Financial Regulatory Authority approvals to launch the fund, the source added. NBE did not return a request for comment by dispatch time.

Where will it invest? The fund plans to invest in SMEs in healthcare, education, fintech, agribusiness, renewables, fast-moving consumer goods as well as information and communications technology, the BdC source noted. The source declined to specify how many funds they were looking to back or the ticket size for each.

Still unclear to us: Who’s managing the fund of funds and whether it’s going to pursue equity or debt opportunities.

What’s a fund of funds? In basic terms, a fund of funds (FoF) is one that chooses to invest in other funds — whether equity or debt — rather than individually vetting specific companies or debt issuances it may want to back. The fund managers to whom the FoF hands AUM are then trusted to generate returns that pass back to the managers of the fund of funds.

NBE, Banque Misr and BdC contributed in April to the final close of a USD 28 mn Egypt-focused tech fund by VC firm Sawari Ventures. BdC also earlier announced in February plans to launch a number of investment funds for SMEs.

Cairo-headquartered startup accelerator Flat6Labs has reached a USD 7.4 mn first close on a USD 20 mn seed fund targeting companies in Jordan. The Jordan Seed Fund will invest in early-stage startups in ICT, software solutions, education, healthcare, digital content, manufacturing, renewable energy, agriculture, big data, and fintech, according to a press release (pdf). Limited partners in the first close include the International Finance Corporation, Jordan’s Innovative Startups and SMEs Fund, Beyond Capital, Bank Al-Etihad, and GMS Ventures and Investments.

The fund will make investments of JOD 50k (USD 70.5k) and could also do follow-on rounds worth as much as JOD 120k. It’s looking to make 12-16 investments per year for the next five years. Flat6Labs has assets under management of more than USD 85 mn and has made investments in more than 320 companies. You can apply for investment from the Jordan Seed Fund here.

IN OTHER STARTUP NEWS- Egyptian automotive tech startup Odiggo has expanded to Dubai as part of a push to enter the GCC and tap what it says is a USD 61 bn auto parts and accessories market in MENA, co-founders Ahmed Nasser and Ahmed Omar told Arabian Business. Saudi Arabia is “soon to follow,” they added. Odiggo — which launched in Egypt in 2019 — connects car owners with providers of automotive parts and services for a cheaper, less-timely, and contact-free alternative to traditional automotive care.

Amman-based fintech startup Liwwa plans to raise USD 3 mn in pre-series B funding to expand its SME lending in Egypt and Jordan, CEO Dennis Ardis told Arabian Business. Part of the funds will go towards obtaining an SME lending license in Egypt, expanding the business, and growing the tech team, Ardis said. Liwwa has so far raised USD 1.3 mn of its USD 3 mn equity target through backing from FMO, DASH Ventures, Bank al Etihad, Edgo and the Palestinain Al-Qattan family.

The company is gunning for a March 2022 start to its series B fundraising round. This comes in addition to the USD 6 mn in equity investment the startup secured last year during a round led by Dutch development bank FMO.

The company has also signed a USD 2.2 mn debt financing agreement with Triodos Fair Share Fund and Triodos Microfinance Fund to enhance lending capabilities to SMEs in Jordan.

Tycoon Holding has submitted a bid to launch a mandatory tender offer for 90% of brokerage house Alexandria National Company for Financial Investments (ANFI). The move comes shortly after Hong Kong’s Zeta Investments lodged a rival offer eyeing the same stake, the Financial Regulatory Authority said in a statement (pdf). The offer is targeting 4.7 mn shares at EGP 5.60 apiece, valuing 100% of ANFI at a little over EGP 29.2 mn and is higher than Zeta’s bid of EGP 5.48 per share. The FRA is currently reviewing Tycoon’s offer before deciding whether to allow it to proceed.

ANFI is currently at the center of a bidding war and has also garnered interest from Kayan Sustainable Development, Zaldi Capital, and a group of investors including Egyptian businessman Ahmed El Saba and Saudi Arabia’s Mostafa El Humeidan. Gulf lender ADIB is the seller in the transaction.

A new export support program got the green light from cabinet today and is due to come into play at the start of the state’s new fiscal year on 1 July, according to a statement following the ministers’ weekly meeting. The program will be similar to schemes Egypt has been implementing for nearly a decade to dole out cash payouts to exporters based on the volume of their sales, but will also:

• Aim to boost domestic manufacturing and bring added value to Egyptian products.
• Push for export growth from Upper Egypt, border regions, the Rubiki industrial zone, Damietta furniture city, and the Suez Canal Economic Zone.
• Drive sales to Africa and other target markets, including by helping companies cover freight costs.

The cabinet statement was scant on further detail on how exactly these plans would be realized.

The new program will replace an EGP 6 bn scheme that fell out of favor with the nation’s exporters shortly after the government started implementing it in FY2019-2020 — mainly due to a lack of clarity in its executive regulations and for what were seen as lackluster promises to reimburse exports via cash and non-cash incentives, rather than just cash.

ALSO APPROVED BY CABINET- Handing over some construction work at the planned electric rail line between Salam City and Tenth of Ramadan City to the Aviation Industry Corporation of China (Avic). Avic was awarded the construction contract for the first and second phases of the 90-km line as part of a consortium which also includes China Railway Group Limited, and which will work alongside Egyptian contractors including Orascom Construction.

EARNINGS WATCH- Ezz Steel reverses loss in 1Q2021: Ezz Steel reported a record consolidated profit of EGP 1.2 bn in the first quarter of the year, reversing an EGP 1.35 bn loss in the same quarter last year, according to financial statements (pdf) it released today. This came as revenues climbed 25% y-o-y to EGP 13.5 bn. Ezz Steel has been consistently in the red for the better part of the previous decade.

Impressive turnaround: The steel giant’s performance was substantially above market expectations, says Mohamed Magdi, a vice president at Beltone’s research arm, who says Ezz’s performance got a boost from the commodities boom that is now underway as the covid-19 pandemic starts to subside. The boom has taken iron ore and scrap raw material prices to record highs in a way that increased Ezz Steel’s commodity-product spread, he adds. Magdi expects a solid performance from the company this year, saying Ezz Steel already had a stock of raw materials purchased at lower prices, which suggests it managed to significantly raise its spread. But this might soften when the cycle normalizes and average input costs rise.

EG Bank posted consolidated net profits of EGP 157 mn in 1Q2021, up 4% from the same quarter last year, according to financial statements (pdf) released today. Interest income declined to EGP 1.8 bn in 1Q2021 from EGP 1.92 bn in 1Q2020.

State-owned Misr Fertilizers Production Company (Mopco) reported 48.5% y-o-y growth in its bottomline to EGP 792.67 mn in 1Q2021, according to the company’s quarterly financials (pdf). Revenues also rose to almost EGP 2 bn in 1Q2021, compared to EGP 1.8 bn in the same quarter of 2020.

Glaxo-Smith Kline saw its profits plunge to EGP 2.7 mn in 1Q2021, compared to EGP 33.15 mn in the same quarter of 2020, according to its quarterly financials (pdf). Revenues also dropped to EGP 319.92 mn during the quarter, compared to EGP 433.97 mn in 1Q2020.

MARKET NEWS-

Pioneers Holding’s plan to split into three separate companies was greenlit by its board of directors, the company said in a regulatory filing (pdf). The board agreed that the split will take the structure of a “vertical spin-off,” which involves keeping Pioneers Holding as the parent company and financial services arm and splitting its real estate and industrial investment businesses into subsidiaries — Pioneers Properties and Gadwa Industrial Developments. The split, announced in 2019, means Pioneers will soon be trading on the EGX under three separate tickers. The company previously said it aims to use this as a way to expand into new businesses while improving its focus on core activities.

The EGX30 fell 0.1% at today’s close on turnover of EGP 1.25 bn (2% below the 90-day average). Foreign investors were net sellers. The index is down 8.9% YTD.

In the green: Ezz Steel (+12.0%), Sidi Kerir Petrochemicals (+4.3%) and GB Auto (+2.2%).

In the red: TMG Holding (-2.9%), Qalaa Holdings (-2.5%) and Orascom Financial Holding (-1.6%).

If you’ve ever wondered how you lost an evening to surfing through cat videos, you can blame Distinguished Doctor Doug: What started out as a seemingly benign tool designed by a small group of computer scientists to reorganize email by priority has evolved to become the much larger force influencing our tastes, preferences and attention to an alarming extent. One of the foundational architects of recommendation engines and the inventor of the “like” button, a man called Distinguished Doctor Doug (yes, that what he actually goes by) explains how his idea went from a time saver to a time sucker on this episode of NPR’s Planet Money podcast (Listen, runtime 20:45)

A collaborative effort to take back precious time gone awry: Stuck ploughing through hours of email a day in the early nineties, Doug was looking for a way to better sort his inbox. He started by setting basic filters that would prioritize some emails over others based on sender and subject. Later, he added “like-it” and “hate-it” buttons that would better flag the kinds of email he wanted to avoid. Eventually his friends jumped aboard, rating their emails, which made him realize their inboxes could collectively become even better at figuring out what was important to them, cutting down daily time spent on email by half. The discovery marked the beginning of what was called “collaborative filtering” and paved the way for companies like Netflix and Youtube to become the internet giants they are today.

In 2006, Netflix offered USD 1 mn to anyone who could make a 10% improvement on their recommendation engine: An international coalition of machine learning experts and statisticians who called themselves BellKor’s Pragmatic Chaos ended up taking the prize by expanding Doug’s collaborative filtering model to rely on lesser known statistics about viewing habits like hidden themes in movies, and whether or not someone has rated anything in the past.

So what’s the problem with that, you ask? While there’s nothing inherently wrong with getting better recommendations for movies and music, a bias towards so-called recommended content can start to overrule our actual preferences. Some research suggests that people are sometimes even more likely to pay significantly higher prices to purchase songs that have received an artificially higher rating when they were told it was based on their personal preference.

Recommendation engines could threaten our ability to make independent choices: “Recommender systems can encroach on individual users’ autonomy, by providing recommendations that nudge users in a particular direction, by attempting to “addict” them to some types of contents, or by limiting the range of options to which they are exposed,” write the authors of this very recent study. Questions on privacy, the criteria based on which engines make recommendations, and the “fairness” of the entire process are also concerns.

Are we heading towards an AI standardized “taste”? People could also begin to veer away from their actual likes and dislikes and towards what comes up in the recommendations tab, which could ultimately become the same for everyone. Research on the ethical questions surrounding recommendation engines is still in its infancy, but some have raised concerns that they could lead to homogenized preferences among consumers, with everyone buying, watching, and listening to the same thing. Conversely, the “fragmentation effect” is also a concern, whereby ultra-specialized recommendations keep consumers trapped in their niche, and limit the scope of their exposure to new ideas and products.

Our take? Recommendation engines are definitely useful, but don’t let them keep you pigeonholed. Shake up your watch-list every once in a while by venturing beyond the recommended content and seek out things you may like through reviews, or recommendations from friends and family.

14-17 June (Monday-Thursday): The EFG Hermes and Saudi Exchange Virtual Investor Conference.

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

17-20 June (Thursday-Sunday): The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo), Cairo International Conference Center.

20 June (Sunday): Ismailia Economic Court to hold hearing on Ever Given compensation case.

20 June (Sunday): Deadline for Enpact + Tui + GIZ tourism recovery program (pdf).

22-27 June (Tuesday-Sunday): The CIB PSA World Tour Finals for 2020-2021 will take place in Cairo.

24 June (Thursday): End of the 2020-2021 academic year (public schools).

26-29 June (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center, Cairo, Egypt. The Big 5 Egypt Impact Awards will also be taking place at the event on 27 June.

30 June (Wednesday): The IMF will complete a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

30 June (Wednesday): 30 June Revolution Day.

30 June- 15 July: The Cairo International Book Fair, Egypt International Exhibition Center.

July + August: Thanaweya Amma exams take place.

1 July: (Thursday): National holiday in observance of 30 June Revolution.

1 July (Thursday): Large taxpayers that have not yet signed on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

1 July (Thursday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

15 June (Saturday): EGX-listed will have to complete filing their financial disclosures for the period ended 31 March.

19 July (Monday): Arafat Day (national holiday).

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday).

23 July (Friday): Revolution Day (national holiday).

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.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

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.

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.

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

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

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

29 November-2 December (Monday-Thursday): Egypt Defense Expo.

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.