The government is mulling a local green bond issuance

The Federation of Egyptian Industries is kicking off an African tour series this week that will see a delegation head to Zambia and South Africa. It’s the first of what the federation says will be six to eight visits to other African countries this year to stump for business. The federation’s website has more, as does Al Shorouk.

It’s otherwise a relatively quiet news morning in Egypt — and abroad, frankly.

The biggest news is out of the UK, where Prime Minister Theresa May’s EU withdrawal pact has been rejected by the Commons for the second time as the country hurtles toward a 29 March Brexit Day of Judgement. The government lost a vote late yesterday 391 to 242; some 75 MPs from her ruling Conservative Party voted against the pact, the BBC reports.

What comes next? MPs will today vote on whether the UK should leave the EU without an agreement. Conservative MPs not be forced to vote along party lines.. Should parliament vote against a no-deal Brexit, a vote on extending Article 50 will take place on Thursday. The BBC takes a detailed look at what may happen next.

Perhaps the most interesting international business news: Africa-focused online retailer Jumia has filed for an IPO on the NYSE, the Wall Street Journal says. The continent’s largest online marketplace, a challenger to Amazon’s Souq brand in Egypt, has raised c. USD 770 mn from investors and was valued at about USD 1.2 bn when Goldman Sachs bought a stake in 2016.

Celebrities from the business and entertainment worlds have been charged with buying their kids’ way into top US universities: Some 50 people including brand-name actors and business leaders were arrested yesterday on charges they paid huge sums to a cheating ring to guarantee their kid a place top US universities. The story is front-page news this morning, from the Wall Street Journal to the New York Times, the Financial Times and Reuters. Among those charged are top TPG private equity executive Bill McGlashan, Desperate Housewives actor Felicity Huffman and Full House and Fuller House star Lori Loughlin. The full list of people charged is here.

In miscellany this morning:

• The UAE and Oman just landed on the European Union’s black list of tax havens, Bloomberg reports. Italy and Estonia reportedly pushed until the last minute to keep the UAE off the list.
• About two-thirds of all Boeing 737 Max 8 in the world have been grounded after a crash earlier this week in Ethiopia, but the United States and Canada are holding out. The 737 Max 8 is not part of national flag carrier EgyptAir’s fleet.
• Demonstrations continued against Algerian President Abdelaziz Bouteflika yesterday despite his announcement on Monday that he would no longer seek a fifth term in office, the FT reports.

PSA #1- Nobody wants a tube poked up their nether region, but going for a colonoscopy could save your life as colorectal cancer becomes more prevalent among younger adults, writes Jane Brody, who with Anahad O’Connor is one of the best health writers in the business.

PSA #2- Expect cooler weather heading into the weekend. The mercury in Cairo and the Delta will drop about 7°C today through Friday with an average daytime of about 21°C, according to the national meteorological authority. Look for overnight lows of 12-15°C.

A visiting Japanese business delegation made the airwaves last night. Al Hayah Al Youm’s Khaled Abu Bakr said the delegation proposed to Egyptian officials, led by Prime Minister Moustafa Madbouly, potential moves to improve the country’s attractiveness as an investment destination (watch, runtime: 02:03). The delegation also highlighted obstacles that could potentially face Japanese investors in Egypt. Abu Bakr noted that Japanese and Egyptian business leaders will meet over the coming days.

Egypt’s recorded a primary budget surplus of EGP 4 bn last fiscal year, Abu Bakr quoted Finance Minister Mohamed Maait as saying (watch, runtime: 03:06). Maait also reportedly said the country will pay EGP 541 bn in interest on debt this year.

An Egyptian delegation is in France attending the MIPIM 2019 real estate exhibition in Cannes, which comes to an end Friday. Al Hayah Al Youm’s Lobna Assal said it is the first time for Egypt to attend the expo (watch, runtime: 02:37) and (watch, runtime: 05:04).

Meanwhile, Hona Al Asema’s Lama Gebril discussed a New York Times report published earlier this week on how new gas discoveries could help Egypt strengthen its geopolitical position (watch, runtime: 09:04).

Egypt needs to build around 500k housing units every year at varying prices to meet growing demand, Mortgage Finance Fund head Mai Abdel Hamid told Gebril in a segment that featured an in-depth report on the issue (watch, runtime: 33:53).

EXCLUSIVE- Egypt considers local green bond issuance: The Madbouly government is studying the possibility of moving ahead with a local issuance of green bonds in tandem with a planned international issuance in 4Q2018-19 or 1Q2019-20, a senior government official told Enterprise. The issuance of green bonds comes as part of the government’s new comprehensive debt strategy that aims to diversify the treasury’s sources of financing. The government is also mulling whether to float local-currency bonds internationally.

What’s a green bond? Effectively, a lower-yield form of bond that finances “climate-smart” projects including renewable energy and energy-efficiency projects in emerging markets. The International Finance Corporation and the Financial Regulatory Authority have been discussing since June what guidelines for Egyptian green bonds might look like. You can read more about green bonds here courtesy the IFC, which notes that more than USD 155 bn has been raised via green bonds globally.

Background: The Finance Ministry is looking to deploy new debt instruments as it tweaks the mix and tenor of funding instruments it uses. Vice Minister of Finance Ahmed Kouchouk said last month that Egypt aims to see long-term domestic bonds rise to account for about 70% of annual offerings by 2020. His remarks came after Egypt sold USD 4 bn worth of USD-denominated eurobonds. Egypt is planning to offer up to USD 7 bn in foreign-currency-denominated bonds in 1Q2019, and more USD- and EUR-denominated bonds by the end of 2Q2019, Finance Minister Mohamed Maait had said in January.

Ignore February’s inflation data: The CBE could still cut rates this month, Capital Economics suggests: February’s unexpectedly high inflation rates are unlikely to deter the Central Bank of Egypt (CBE) from pushing ahead with rate cuts — and it may even opt to ease further this month, Capital Economics has said in a report. Data this week showed that headline inflation rose to 14.4% in February from 12.7% in January, driven by rising food, utilities and transportation costs. Still, strong capital inflows and “subdued pressure” on core prices mean that the central bank could cut during the next MPC meeting on 28 March. “The latest inflation reading has clearly made the outcome of the next MPC meeting more uncertain. But we still think that a further rate cut is more likely than not,” the report says.

Are core price pressures actually subdued? Core inflation increased to 9.2% last month from 8.6% in January. Capital Economics argues though it remains “relatively subdued” as it does not stray too far from the mid-point of the CBE’s target range and is still one of the lowest rates seen over the past three years.

Upcoming subsidy cuts also make easing more likely: Capital Economics suggests that the CBE may want to get a rate cut in before the government trims subsidies in July. Why? Cutting subsidies will cause higher short-term inflation, making it harder for the central bank to ease in the summer months.

What are other analysts saying? As we noted earlier this week, there is no consensus among analysts on what to expect heading into this month’s MPC meeting. Both EFG Hermes’ Mohamed Abu Basha and Naeem Brokerage’s Allen Sandeep predicted that the CBE will hold off on easing for the time being, while Radwa El Swaify at Pharos is calling another cut.

INVESTMENT WATCH- Our friends at Algebra Ventures and Ezdehar Management have invested in loyalty solutions provider Dsquares, according to an emailed statement (pdf). The investment comes as Dsquares gears up to launch a new B2C consumer-tech product. With the launch of the app an a “strategic partnership with Algebra Ventures, we are very optimistic about the future of Dsquares. Such a tactical investment will pave the way for Dsquares to maximize exposure and leverage innovation and technology to continue serving brands and consumers all over Africa and the Middle East,” a Dsquares spokesperson said. Ezdehar had taken a stake in Dsquares last year. Sources close to the transaction told us at the time the investment gave Ezdehar “a significant minority stake.”

M&A WATCH- Agri exporter Green Hope says it is weighing three acquisition offers from Egyptian, UK and Emirati investment funds. In play is a 40-60% stake in the company at an estimated cost of EGP 180-230 mn, Al Mal reports. The transaction would entail a capital increase and partial exit by the current shareholders. The transaction is expected to close in 3Q2019. Paradigm Invest is advising Green Hope.

Amer Group minority shareholders allege stock manipulation ahead of delisting vote: Minority shareholders of Amer Group have filed a complaint against the company’s management ahead of a vote to delist the group from the Egyptian Exchange, according to a report in the domestic press. The complaint to the Financial Regulatory Authority (FRA) asks the regulator to take action against company founder and chairman Mansour Amer and lead shareholder Mohamed El Amin, alleging they engaged in stock manipulation as they sold some 73 mn shares over the last six months, tanking the share price as they did so, Al Mal reports. The complainants want the FRA to unwind the trades and to order an independent fair value study to set the price at which the company will buy out their shares during a planned delisting process.

Background: The company’s board called earlier this month for shareholders to vote on March 27 to delist the company's shares from the stock exchange. The FRA decided that only minority shareholders will be able to vote at the meeting.

IPO WATCH- Sky Light mulls offers from three lead managers for 2Q19 IPO: Sky Light for Touristic Development is mulling offers from three underwriters for its plans to sell 25% of its shares on the EGX, Adel Mourad, investor relations manager at El Wadi for Touristic Investment, which owns c. 45.1% of Sky Light, tells Al Mal. The company has already listed on the exchange and is hoping to get the IPO off the ground before the end of the quarter. Shuaa Securities, Prime Investment Banking and Watheeqa Securities Brokerage are said to be bidding to lead the offering. The IPO has been in the works since 2017, but was held back due to a now-resolved dispute with the FRA over legal issues involving the company’s CEO.

Speaking of IPOs, the second phase of the state’s share-sale program will include 6-7 companies, including some that have yet to be listed, and will take place in 4Q2019, Public Enterprises Minister Hisham Tawfik said yesterday on the sidelines of a meeting with the Egyptian Businessmen’s Association. No decision has yet been made on the companies that will offer shares, the minister said.

Banque du Caire has opened a rep office in the UAE as part of its regional expansion drive, according to a statement picked up by Zawya. Chairman and CEO Tarek Fayed said that the UAE office will help spur trade between Egypt and the GCC, attract investment to Egypt and capture remittance flows from Egyptian expats. The bank is looking at Africa and the Gulf as it expands. The UAE office will be led by Ashraf Khalil, a 15 year veteran of regional markets.

House to hold two-week ‘national dialogue’ on constitutional amendments next week: A two-week period of public consultations on proposed constitutional amendments will begin next week, the Legislative and Constitutional Affairs Committee has announced, according to Ahram Online. The national dialogue include three weekly sessions on Monday, Tuesday and Thursday of the coming two weeks. The House approved in principle the constitutional changes last month. The amendments would extend presidential terms from four to six years, establish a Supreme Judicial Council, restore the upper house of parliament, and give the presidency more power to appoint and dismiss the prosecutor general.

LEGISLATION WATCH- House approves temporary law to settle building code violations: The House of Representatives’ general assembly approved yesterday a temporary bill that outlines mechanisms for settling building code violations, Al Masry Al Youm reports. The legislation would permit authorities to negotiate settlements on structures that meet structural integrity requirements and that are not built on state-owned or agricultural land. Buildings on land covered by the Antiquities Protection Law are also ineligible for settlement. The law, which will sunset after three months, is expected to be passed alongside the Unified Building Code, as the two bills are closely intertwined. The current status of the Unified Building Code is unclear.

15 new ambassadors to Egypt presented their credentials yesterday to President Abdel Fattah El Sisi. They include:

• Armenia: Karen Levon Grigorian
• Australia: Glenn Andrew Miles
• Cambodia: Khuon Phon Rattanak
• Chad: Al-Amine Al-Doudou Abdallah
• Chile: Pablo Arriarán Ahumada
• Colombia: Ana Milena Muñoz de Gaviria
• Cuba: Tania Aguiar Fernández
• Czech Republic: Jan Fulík
• Ethiopia: Dina Mufti Sid
• Iraq: Ahmed Nayef Rasheed Al-Dulaimi
• New Zealand: Greg David Lewis
• Philippines: Sulpicio M. Confiado
• Spain: Ramón Gil-Casares Satrustegui
• Venezuela: Wilmer Omar Barrientos Fernández
• Vietnam: Tran Thanh Cong

Women-led companies in EM are boxed out of the market for private equity and venture capital investment: Nine times out of 10, private equity and VC money in emerging markets is going to a company led by a guy. That’s the key takeaway from an International Finance Corporation study (pdf) that found that only one in ten companies to which private equity and venture capital commit capital are women-led — this as global assets under management by PE and VC outfits hits a record high of USD 3 tn.

And of those women-led companies that get funding, fewer will make it big: Women-led businesses get only 65% of the funding directed to male-led ones, indicating deep-rooted “subconscious biases” on the investor side of the table, the survey suggests. The authors write that “men believe external factors, such as difficulty finding qualified female talents and a lack of female interest in private equity” are to blame for the imbalance — this despite research indicating the opposite.

Developing countries could be in for a 21st century debt crisis, senior executives from policy advisory firm Dalberg write for the Financial Times’ BeyondBrics blog. More than 100 emerging markets witnessed government debt-to-GDP ratio hikes between 2013-17, and debt-servicing burdens have risen enough to draw parallels with the lead-up to the 1980’s debt crisis. At the time, Zambia, Cameroon and Malawi had to spend some 40% of state revenue to service debt, diverting much-needed funds away from social development and healthcare.

The bulk of new debt comes from the external loan agreements of 16 low and lower-middle-income countries. China — the single largest bilateral, country-to-country, creditor — loaned out 44% of the funds, while the World Bank, and other large multilateral lenders including the IMF, accounted for 35%. China has previously come under fire for its Belt and Road Initiative, which some countries have criticized as the “new version of colonialism” that has lured countries into debt traps. Loans to lower-income nations caused the IMF to rate in 2017 public debt as “unsustainable” or “at high risk of unsustainability” in 32 countries, as opposed to only 15 in 2013.

Egypt was the only country to improve its public debt risk rating between 2013 and 2017, according to IMF ratings cited by the otherwise gloom-ridden piece. The authors provided no explanation for Egypt standing out, despite government debt increasing in virtually every other developing economy (and our own debt-to-GDP ratio reaching 98%). This could have been a base effect from the aftermath of the 2011 revolution, and maybe because we were the only Arab Spring country to apply for a loan as large as USD 12 bn from the very institution doing the risk rating. While borrowing for development is an effort toward the UN’s Sustainable Development Goals, the FT piece says, equal efforts should be made to improve the sustainability of the financing itself.

It is a quiet morning for Egypt in the international press, with no story being picked up en masse. Among the few pieces worth noting:

• The Israeli press is out with several stories on the benefits of the Camp David Accords, which Israeli President Reuven Rivlin noted in a speech include cross-border energy, water, and tourism cooperation.
• Egypt’s energy sector growth is a success story that should be emulated in South Africa, particularly through diversification, the creation of a gas economy and partnerships within government and the public and private sectors, argues South African publication Engineering News.
• As the campaign to boycott new car purchases continues, Reuters is out with a piece looking at the current state of Egypt’s car market.

Egypt reaffirmed its support for Sudan’s stability during talks between President Abdel Fattah El Sisi and Sudanese Vice President Awad bin Ouf yesterday, state-run newspapers Al Ahram and Al Gomhuria highlighted this morning. Talks between the two sides also covered electricity and railway interconnection plans between the two countries, Al Ahram reported. Meanwhile, the arrival of 15 new ambassadors to Egypt and the state’s commitment to a two-state solution for the Israel-Palestine conflict were the top stories on Al Akhbar.

Economics is suffering a crisis of credibility: Since the failure to anticipate the 2007-08 economic crisis, economists have been struggling to regain the confidence of the societies they are supposed to enrich. In some surveys economists have the pleasure of sharing company with politicians as one of the least-trusted professions. The result: Economics is failing to deliver on its potential to play a meaningful role in predicting global trends, influencing monetary policy and contributing to discussions about trade conflict, rising inequality, and productivity developments, writes Mohamed El-Erian, chief economic adviser at Allianz, in the Guardian.

The stakes of dropping the ball are high: Adhering rigidly to “mathematical techniques that prize elegance over real-world applicability” has consequences. It has led to the economic fundamentals being badly misread and global sentiment being misdirected. The truth is that current theoretical frameworks used by economists do not give them access to the crystal balls, and any claims to mathematical precision should be greeted with a healthy dose of skepticism.

How can the discipline claw back trust? Changing realities require greater openness within the profession, and the understanding that any productive contributions to the big debates of our time (ranging from the US-China trade war and the issue of tariffs to tech innovation and climate change) must be nuanced. El-Erian argues that much can be incorporated from other disciplines such as behavioral science and game theory. This could spur a structural shift away from theoretical assumptions and the equilibrium condition towards analysis that is grounded in reality: human interactions, distributional effects, financial-economic feedback mechanisms, and technological change, with multiple-equilibria scenarios.

In an age of rapid population growth and increased fears about food security, much can be learned from the Netherlands, this Bloomberg video suggests (watch, runtime: 05:16). Concerted efforts after the Second World War saw the Netherlands transform into one of the world’s top agricultural exporters. With limited space, the tiny country learned to produce vast quantities of food on small land plots. A policy of land consolidation implemented by the government was designed to maximize production, and was complemented by state funding into research and technology. This spurred a proliferation of specialist greenhouses that could cover the area of Manhattan if put beside one another. This only increased after the discovery of the Groningen gas field in 1959, which offered a further boost to greenhouse horticulture.

Fun fact: So effective has the Dutch strategy of water reduction in farming been that some farmers can grow a kilo of tomatoes using just four liters of water, while the global average is 214.

El Sisi, cabinet hold talks with Japanese delegation: President Abdel Fattah El Sisi discussed trade and economic relations, Japanese investments in Egypt, and his administration’s efforts toward reform in a meeting with chairman and CEO of the Japan External Trade Organization Hiroyuki Ishige, according to an Ittihadiya statement. El Sisi was also invited to attend this year’s G20 Summit in June in Osaka, Japan, according to Egypt Today. The visiting Japanese business delegation also attended the meeting and held a further round of talks with Prime Minister Moustafa Madbouly and the investment, trade, and finance ministers, according to a separate cabinet statement.

Sudanese Vice President Awad bin Ouf arrived in Cairo yesterday for discussions with Egyptian officials with a view to increasing cooperation between the two countries, according to an Ittihadiya statement. During his meeting with the Sudanese minister, President Abdel Fattah El Sisi reaffirmed Egypt’s keenness to enhance relations between the two countries on all fronts.

Oil Minister Tarek El Molla discussed Egypt’s strategy to emerge into a regional energy hub and cooperation avenues in a meeting with inaugural US Assistant Secretary of State for Energy Resources Francis Fannon, according to a cabinet statement. Their meeting came on the sidelines of the ongoing CERAWeek meeting of senior energy officials in Houston.

The Housing Ministry will compile a “blacklist” of contractors with a history of failure or delays in executing state-commissioned housing projects, according to a ministry statement. Contractors on the list will not be considered for future projects, the ministry added.

ABC Construction Company subsidiary Castle Development has launched its EGP 800 mn East Side, a commercial, residential, and medical complex in the new administrative capital, CEO Ahmed Mansour said, according to Zawya. The new project will be delivered in 2021, Mansour added.

Technology giant IBM will provide data storage and processing services for e-payment platform Fawry, which carries out 2 mn financial transactions per day, the company said, according to Al Mal. Fawry provides payment services to individuals and companies in Egypt via over 90k websites.

Ebtikar for Financial Investment, a 50-50 joint venture between BPE Partners and MTI, is planning to invest EGP “tens of mns” in TBE Egypt and Payment Solutions (Bee) over the coming period, Ebtikar Chairman Ayman El Dessouky tells Al Mal. Ebtikar acquired 60% of Bee in October 2017 and invested EGP 50 mn in the company last year.

CI Capital shareholders will vote on 20 March on the investment bank’s rebranding as CI Capital Holding for Financial Investments, it said in a bourse filing (pdf).

The House of Representatives’ general assembly agreed yesterday to government-proposed amendments to the Financial Regulatory Authority (FRA)'s regulations of non-banking financial markets and instruments, Ahram Gate reported. The amendments include scrapping the FRA's right to deposit fine proceeds in a separate account, a move hoped to increase inflows into the state budget.

The Egyptian Commission for Rights and Freedoms issued yesterday a statement calling for the release of transgender woman Malak El-Kashef, who was arrested last week after calling for protests in the wake of the Ramses train crash. The Cairo-based rights group alleged that El Kashef was subjected to a forced examination that constitutes torture and harassment.

The Court of Cassation has upheld a seven-year prison sentence handed down to nine police officers for involuntary manslaughter, Ahram Online reports. The officers were sentenced in 2017 by a criminal court after killing four civilians during a 2015 shootout in Tanta during their arrest of an alleged criminal. They will not be able to appeal the decision.

The World Wide Web turned 30 yesterday, and its inventor isn’t too happy with its current state. Invented by British scientist Tim Berners-Lee in 1989 while working at the European Organization for Nuclear Research (CERN), the web was originally intended “to meet the demand for automated information-sharing between scientists in universities and institutes around the world,” CERN says. However, Berners-Lee is concerned with how it is being misused now, saying in an open letter that “it’s understandable that many people feel afraid and unsure if the web is really a force for good.”