Monday, 2 December 2019

Short selling goes live on the EGX

TL;DR

What We’re Tracking Today

It’s a big day for … shorts. No, not the kind you wear (though at a balmy 24°C, you can get away with those, too), but rather for would-be short sellers, who can now short stocks on the EGX. We have chapter and verse in this morning’s Speed Round, below.

GERD talks resume in Cairo today: Irrigation ministers from Egypt, Ethiopia, and Sudan will meet today for the second round of technical talks on the Grand Ethiopian Renaissance Dam (GERD). The first meeting in a new round of US- and World Bank-sponsored talks seems to have produced results, with Sudanese and Ethiopian media reporting last month that the sides agreed on a loose timetable for filling the dam’s reservoir. Two further meetings will be held in Washington on 9 December and 13 January.

The three-day African Economic Conference gets underway in Sharm El Sheikh today. Organized by the African Development Bank, the UN Economic Commission for Africa, and the UN Development Programme, the event will bring together more than 500 African youth leaders, business representatives, policymakers, and media professionals to discuss jobs and entrepreneurship in Africa.

New incentives package for industry on the way? The government and the Central Bank of Egypt (CBE) are planning to announce soon details of “an initiative to support the manufacturing sector,” Cabinet said in a statement following a meeting between CBE Governor Tarek Amer, Prime Minister Moustafa Madbouly, Trade Minister Amr Nassar, and SMEs Development Authority head Nevine Gamea. We’ll be watching this space.

Stuff you can go to this week:

Cairo ICT kicked off yesterday and is set to run until 4 December at the Egypt International Exhibition Center, . The first day saw five MoUs and cooperation agreements signed between several tech companies, the Smart Villages Development and Management Company, and Nasser Social Bank, reports Hapi Journal.

News triggers to keep your eye on in the coming days:

  • The purchasing managers’ index for Egypt, Saudi Arabia and the UAE is due out tomorrow at 6:15am CLT.
  • Foreign reserves figures for November will be released on Wednesday, 4 December.
  • Inflation figures for November are out next Tuesday, 10 December.

enterpriseEnjoy unforgettable experiences in our golf course that looks over the sea, the first of its kind in the Middle East. The award-winning Cascades Championship Golf Course is the first championship course in the Middle East, designed by international legend, Gary Player.

Global assets held by exchange-traded funds have soared to USD 6 tn, doubling in size in under four years and standing to reach as much as USD 12 tn by the end of 2023, the Financial Times reports. ETFs, which offer a low-cost way of investing in multiple assets, have become increasingly popular since the global financial crisis, regularly making up a third of the trading on the US stock market.

This has regulators worried: A recent Goldman Sachs report found that ETF trades are helping drive market volatility, while some economists think that passive flows are interrupting the market’s price discovery mechanism. This has regulators questioning whether a large scale sell-off by ETFs could exacerbate market corrections and cause larger losses for investors.

And it could get really, really bad when that sell-off comes: JPMorgan estimated late last year that as much as USD 7.4 tn in assets “could be subject to forced selling by passive funds during the next downturn.” Deutsche Bank said at the same time that it saw an algo-led selloff as the biggest risk of 2019. As it is, the Wall Street Journal estimates that roughly 85% of all trading is on autopilot — controlled by machines, models or passive investing approaches.


Can finance save the world from climate change? Bank of England Governor Mark Carney is going to give it a shot as the Canadian, set to leave the bank at the end of January 2020, becomes the UN’s special envoy on “climate action and climate finance” in the new year. Carney has been talking about the risk of climate change to finance since 2015, the Globe and Mail reports. The former Goldman staffer and ex Bank of Canada boss “has spoken of “stranded assets” — deposits of coal, oil and gas that might lose their value if the world shifts away from carbon — and decried a lack of transparency about the effect on global warming of tns of USD of potential investments.” See more in Reuters | the Guardian | the Financial Times.

Continuing with the doom and gloom: Don’t expect a brilliant end to the year in emerging markets, Bloomberg warns. With stalling trade agreements, popular unrest in Latin America dragging currencies, and slowing growth in India, positive manufacturing figures from China just aren’t enough to help emerging markets rebound from a less-than-stellar November.


Investors still can’t come to terms with women board members: Companies with women board members and strong diversity policies are more likely to see a drop in market value, suggesting anti-women sentiment among investors, new research has found. Based on 14 years’ worth of data from more than 1.6k US public companies, the study finds that companies that placed women on the board experienced a two-year fall in market value, while those that introduced pro-diversity measures saw a near 6% plunge. The findings suggest that it has to do with the perception of a company’s priorities: Investors are likely to assume that companies with male-dominated boards are focused squarely on maximizing shareholder value, while those with female board members prioritize social justice. The Financial Times has more.

Another record-breaking Black Friday shows the US consumer market is alive and well: This year’s Black Friday saw a record USD 7.4 bn generated in online sales in the US, Bloomberg reports, marking the second biggest US online sales day of all time.

Impeachment hearing update: US President Donald Trump has been given one week by a Democrat-led congressional panel to decide whether to present evidence and call witnesses to upcoming impeachment hearings, which could lead to formal charges being brought against him, Reuters reports.

enterprise

*** It’s Blackboard day: Blackboard is the first of our ‘verticals’ — specialized editions that focus on individual industries. For Blackboard, that focus is the business of education in Egypt, from pre-K through the highest reaches of higher ed. Each edition of Blackboard will mix news, deep dives, analysis, raw data (plus context) and a touch of humor with the goal of making industry players think — and of getting non-experts up to speed. Our goal: To give you the inside track, whether you’re an investor or operator in the field or just passingly interested in the topic. Blackboard appears every Monday in Enterprise right after Egypt in the News in the place of our traditional industry news roundups.

In today’s issue: Blackboard sits down with the head of the Education Ministry’s PPP unit, Amany El Far, to discuss where things stand with the ministry’s public private partnership (PPP) program and where does it go from here.

Enterprise+: Last Night’s Talk Shows

The airwaves were awash with coverage of the Cairo ICT fair, a three-day event that President Abdel Fattah El Sisi inaugurated yesterday. Diplomatic and political issues, including the new round of talks between Egypt, Sudan, and Ethiopia over GERD, also came up on the talking heads’ agendas.

Talking point #1: The president is personally invested in Egypt’s digitization drive. Al Hayah Al Youm’s Lobna Assal took note of El Sisi saying his administration is “persistent” in efforts to “rush” Egypt toward digitization, as the 100 mn-strong population stands to benefit greatly from a digital transformation (watch, runtime: 4:44). Each of Masaa DMC’s Eman El Hosary (watch, runtime: 1:00), Hona Al Asema’s Reham Ibrahim (watch, runtime: 3:17), and El Hekaya’s Amr Adib (watch, runtime: 5:00) also recapped the opening ceremony.

Talaat talks “building a digital Egypt”: El Hekaya’s Adib phoned CIT Minister Amr Talaat to shed light on Cairo ICT’s main theme: Development through digital transformation and a government strategy to “build a digital Egypt” (watch, runtime: 5:32). Talaat cited as an example a project that recently piloted in Port Said to allow car owners to check up on the status of and renew licenses online using their national ID numbers. The government is also running trials in Port Said to digitize or otherwise facilitate (whether through the internet, phone, or post) government services, and are expecting to roll them out nationwide in the near future, El Watan separately quoted Talaat as saying.

We’re starting where it matters: Faster, uninterrupted internet. The average internet speed at homes could hopefully reach 20 mbps by the end of the year as the government moves forward with a plan to overhaul digital infrastructure across the country, the minister tells Adib. The caveat: We should be throwing out ADSL routers and installing those that support very high speed digital subscriber line (VDSL) technology, which the government is working on making the norm in governorates beyond Greater Cairo and Alexandria, he said (watch, runtime: 5:30).

Talking point #2: Turkey is escalating tensions in the region. Al Kahera Alaan’s Lamees El Hadidi delved into the two MoUs Turkish President Recep Erdoğan signed with Libya’s Tripoli-based PM Fayez Al Serraj last week to look at the implications and repercussions of the move (watch, runtime: 5:50).

Tensions may also escalate within Libya: Among the things El Hadidi noted is that Libya’s parliament denounced the agreement and hinted that the Libyan National Army, which is led by General Khalifa Haftar — currently in a feud with Al Serraj for control over Tripoli, may react. We have more on the story in Diplomacy + Foreign Trade, below.

Talking point #3: Grand Ethiopian Renaissance Dam (GERD). El Hadidi held tight to her political analyst hat for a take on the second round of technical talks between irrigation ministers from Egypt, Sudan, and Ethiopia that are set to kick off today in our fair town. Cairo is expected to be doing more talking during the two-day meetings to present a “policy [or a more specific framework] on filling and operating the dam” after we reportedly accepted an Ethiopian-drafted proposal following last month’s first round in Addis Ababa, former Irrigation Minister Mohamed Nasr Allam tells El Hadidi (watch, runtime: 6:08).

Talking point #4: The lack of “consultation” between parliament and cabinet ministers — a theme that has been a fixture on the airwaves ever since murmurs first began of a cabinet shuffle on the horizon. Despite a number of our elected representatives apparently expressing their dissatisfaction with government performance, they seldom move to enact changes, Rep. Haitham El Hariri tells Adib (watch, runtime: 2:12).

Speed Round

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EXCLUSIVE: HHD 10% stake + management contract to be awarded at the end of January -Tawfik: NI Capital will choose by the end of January the strategic investor to take over management of Heliopolis Housing & Development (HHD) along with a 10% stake in the company, Public Enterprises Minister Hisham Tawfik told Enterprise. HHD Chairman Hany El Deeb said last week that the final contracts would be signed at the end of 1Q2020.

NI Capital invites investment banks to bid: NI Capital, the state-owned investment bank overseeing the government’s privatization program, has invited a number of investment banks to bid for the contract, banking sources told the local press. The banks are expected to submit offers individually or as part of a consortium within the next two weeks, the sources said, without disclosing the names of the banks.

Who do we already know is in the running? Eight companies were initially reported to have been interested in HHD, including SODIC, EFG Hermes, BPE Partners, Emaar Misr, and Orascom Development. Sources said that as of Thursday, only SODIC and BPE Partners had purchased the prospectus, which went on sale last Monday.

Bidders have until 1pm on 14 January to throw their hats into the ring and must submit any enquiries by 18 December.

The latest on the state privatization program: The Public Enterprises Ministry is choosing from a list of eight companies to IPO on the EGX, including e-Finance, Banque du Caire, and El Nasr Mining company, Tawfik told us. One of these companies might be offered before the end of the government’s current fiscal year in June 2020, he said, adding that the government plans to list several companies in 2020. Alexandria Container & Cargo Handling Company and Abu Qir Fertilizers are also ready to take secondary offerings to the market and are waiting on the investment banks quarterbacking the transactions, Tawfik said at a conference last week.

Some analysts are skeptical that the program can meet its targets: Reuters reports that analysts have raised doubts the Madbouly government can keep to its current timetable for the privatization program, citing constant delays for “flimsy” reasons. The government announced plans to privatize 23 companies back in March 2018, but until now Eastern Tobacco’s 4.5% secondary offering in March is only the one to go to market. “The successive postponement of the IPO weakens the government's position significantly and loses confidence in the program,” said Wael Enaba, chairman of Royal Brokerage, who notes the successful private sector offerings that have taken place this year.

The government has cited procedural delays and market uncertainty as reasons for postponing the sales. Radwa El Swaify, head of research at Pharos, says that the government should take a more proactive approach. “We need to energize the market through government offerings, rather than waiting for market activity,” she said.

The continued delays could hit investor sentiment, said Amr Ghallab, an MP who sits on the House Economic Committee. The government “should announce a clear timetable and a new timetable for the IPO program … When dealing with the capital market, transparency and clarity must be the master of the situation,” he said.

Still, we wonder: Have we not lost the plot with this constant hand-wringing about when the government will do an IPO or a secondary? First, nobody goes to market in adverse conditions — like when the EM Zombie Apocalypse bites or Aramco threatens to suck all the liquidity out of EM. Second, any policymaker (to say nothing of investment banker) who greenlights a transaction on a state asset that ultimately falls short of price expectations will be excoriated in the court of public opinion. And third, the only question that matters isn’t “when” the government pulls the trigger on the sales, but whether the companies themselves are serious about what it means to continue life reporting not to a holding company and “their” minister, but to public market shareholders.

Short selling comes to the EGX: The EGX and Misr for Central Clearing, Depository & Registry (MCDR) yesterday launched short selling on the bourse following approval by the Financial Regulatory Authority (FRA), sources told Al Mal. Beltone and HC Securities were the first brokerages to complete a short selling transaction yesterday, according to the newspaper, after the EGX and MCDR finalized preparations to begin receiving trading orders, including linking custodians with brokerage firms.

So, uh, what’s short selling? Let’s say you’re not a fan of Company X — and you’re convinced its share price will fall. Shorting its stock is how you make (or lose…) money on that belief. You borrow shares from your broker (for a fee, of course) for a set period of time, then you sell the shares immediately. If your hunch is correct and the stock price falls while you’re shorting the shares, you can then buy the shares back from the market (or “close out” your position) and return them to the person or institution from whom you had bought them. If you borrowed the shares at EGP 100, sold them into the market at the same price and then bought them back at EGP 70, then you made EGP 30 on the transaction (setting aside your broker’s fees and commission).

But wait … the downside is effectively unlimited: What if you borrow the same shares at EGP 100 — and then they go up to EGP 170 by the end of the period you specified on, say, news of a new CEO or some other great trigger? You now owe your broker EGP 70. You can learn more from the folks at Investopedia.

So, how does it work in Egypt? At the outset, there’s a list of about 30 securities you can short, and the EGX will review the list of eligible securities every six months. To qualify, shares need to be frequently traded and at least 10% of registered brokerage firms need to be trading the shares in question. Short sellers won’t be able to (easily) pick on the little guy under an anti-bullying provision: You can’t short a stock unless its shares in freefloat account for a minimum of 0.005% of the market cap made up of the market’s total freefloating shares, and any stock that’s going to be shorted has to have at least 300 mn issued shares.

And you had better have the money to put where your mouth is: Folks looking to open a short position will need to put down 50% of the value of the securities borrowed, and brokerages will be required to park 20% of that in fixed-income instruments while the position is open.

EGX negotiates lower software prices for smaller brokers: The EGX has negotiated with providers of the software used to trade shorts to reduce the prices to between USD 2,000-3,600 (EGP 32k-58k) from USD 9,500 (EGP 153k) after brokerages last month complained to the FRA that the high cost could place short selling out of their reach. The bourse has proposed that the 10 large brokerages that already have the software set up a joint company to provide smaller brokers with the software at lower prices, sources say.

Shorting on the EGX has been a long time coming: The EGX and MCDR moved in August 2017 to upgrade the bourse’s trading systems to handle short selling, which was theoretically allowable at the time. Fast forward to May 2018 and the FRA had approved the necessary amendments to the Capital Markets Act’s executive regulations, raising expectations that short selling could be introduced in September. More than a year and several regulatory approvals (see here and here) later short selling has finally made its way to the Egyptian market. The FRA has so far granted 51 brokerages licenses to facilitate short selling.

IPO WATCH- Rameda retail offering 1.6x oversubscribed on second day of subscription: Rameda Pharma’s retail offering was 1.6x oversubscribed at the end of the second day of subscription yesterday, according to the local press. Retail investors bid for 29.96 mn shares from a total 18.83 mn shares on offer. The offering was launched on Thursday for EGP 4.66 per share, and will close on Wednesday.

New products, export growth on the horizon: Rameda’s IPO comes as the company is planning to launch 21 new products on the market in the medium-term, and plans to double its manufacturing output in 2020, said Yasmine Negm, Rameda’s director of investor relations, according to Al Mal. The company is looking to more than double its exports to 15% of its total output over the next few years, CFO Mahmoud Fayek tells the newspaper. New export markets could include Uzbekistan, Palestine, Sudan, Niger, and Tanzania, while strengthening its foothold in Yemen, Iraq, and Libya, according to Fayek.

Background: Rameda priced its offering, which is heavily skewed toward institutional investors, last week. You can check out its intention to float (pdf) for more. Shares are expected to begin trading on 11 December under the ticker RMDA. Rameda’s IPO will be the second on the EGX this year, after e-payments company Fawry floated in August.

Advisors: HSBC and Investec are joint global coordinators and bookrunners for the international offering, while CI Capital is joint bookrunner. Compass Capital is the IPO advisor, and Inktank is investor relations advisor.

New export subsidies program exec regs finally see the light of day, but exporters have mixed feelings: Prime Minister Moustafa Madbouly ratified yesterday the highly anticipated executive regulations of the new export subsidy framework that the government had announced and approved earlier this year, according to a document seen by the local press. The regulations state that exports from the beginning of July 2019 will be eligible for subsidies from the EGP 6 bn that will be disbursed in FY2019-2020 under a framework to incentivize exporters.

Textiles and furniture makers not too excited: Both heads of the textiles and furniture industries export councils were quoted as saying authorities seem to have failed to carry through with promises made in meetings with the country’s export councils over the past months. They claimed the regs specified too many prerequisites for subsidy disbursals and that the bulk of the disbursals would be in the form of tax breaks, rather than direct cash transfers.

Those who make export-bound engineering products and printed materials, meanwhile, found the program’s application largely satisfactory, citing positive elements that will encourage SMEs activity and sector-specific factors they see as attractive.

Background: The new program is meant to be a start of an annual allocation from the state budget. When details were first unveiled, the government said that, of the EGP 6 bn allocated this fiscal year, some EGP 2.4 bn (or 40%) will be doled out as cash payments, EGP 1.8 bn (30%) as tax breaks and cuts to arrears owed to the Finance Ministry, and the remaining EGP 1.8 bn (30%) will be spent by the state-run Export Subsidy Fund in order to build up Egypt’s export capacity. The program also promised to make good on bns of overdue payments that have racked up under an older program that was also run through the fund since 2012. Settlements of the overdue payments have reportedly been moving forward since last September.

INVESTMENT WATCH- Tech investment fund A15 plans to invest EGP 250 mn over the coming period in fintech, e-commerce, digital advertising technology, and digital development projects, CEO Fadi Antaki tells Hapi Journal. The investments will be distributed between A15 and other investment partners, and the fund will announce the new projects successively in 1H2020, Antaki says. The new investments include entering two distinct areas related to e-commerce, he said, noting that A15 has invested an undisclosed sum in courier service provider R2S Logistics as part of its investment plans for the sector.

Ebtikar to invest EGP 35 mn in non-bank financing, e-payment apps: B Investments’ Ebtikar for Financial Investment has earmarked EGP 35 mn to invest in non-bank financing and e-payment startups as part of the company’s ambitious expansion plans, Chairman Aladdin Saba tells Hapi Journal. Saba did not disclose a timeline for the investments. The total sum could yield around 10 separate investments, the chairman says, noting that each investment usually lands in the USD 100k range. Ebtikar has been eyeing seven potential investment targets, and has agreed to invest in two of them in exchange for a stake of no more than 5% in each company, Ebtikar CEO Ayman El Dessouky tells the local press.

The company also plans to begin offering consumer finance services and is in the final stages of setting up two separate consumer finance arms, El Dessouky says. The new companies will be partially owned by TCV1 and Acquire for Investment, alongside individual investors. They should officially launch operations in 2020, according to Ebtikar’s CEO.

EFG Hermes topped the EGX’s brokerage league table for November with a market share of 45.3%, according to figures released by the EGX (pdf). Pharos Securities came in second with a 7.0% market share, followed by CI Capital (5.4%), Beltone (3.3%), HC Brokerage (2.8%), and Arqaam (2.7%).

EARNINGS WATCH- Orascom Investment reports EGP 61.2 mn profit in 3Q2019: Orascom Investment Holding (OIH) posted a EGP 61.2 mn net profit in 3Q2019, down from EGP 1.21 bn a year earlier, according to the company’s financial statement (pdf). Revenue for the period came in at EGP 344.3 mn, down from EGP 384.6 mn in 3Q2018. The company recorded a net loss of EGP 92.4 mn over the first nine months of 2019, compared to EGP 1.1 bn profit in 2018. The latest quarterly earnings statement see the company returning to profit after posting net losses of EGP 153.4 mn during the first half of the year.

MOVES- The Central Bank of Egypt has approved the appointment of Mohamed Abbas Fayed as CEO of First Abu Dhabi Bank, according to the local press. Fayed resigned from his position as CEO and managing director of Bank Audi Egypt in April, after holding the title since May 2016. He previously served as Banque Misr’s vice chairman between June 2010 and September 2014.

If you’re anything like us, your ever-expanding to-do list makes you wish you had a couple of robots to get things done. Enter Elves: In the latest episode of our podcast, Making It, we talk to the brains behind Elves — Karim El Sahy and Abeer El Sisi — about the challenges of being a married couple while trying to build the best AI-based digital concierge service provider there is. Listen here on our website or try Apple Podcast or Google Podcast.

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Image of the Day

Naguib Mahfouz’s legacy can be seen in the streets of the city he loved: The memory of Naguib Mahfouz — considered the father of the Arabic novel — lives on in Cairo, where images of the prolific writer can be found all over the city, including the mosaic pictured above in Islamic Cairo, AFP writes. Despite touching on huge topics, including ancient Egypt, Sufism, politics and multiple topics considered taboo, it was Cairo that was his great and abiding interest. "He wrote about Cairo with true love. He described it in granular detail. Even if he criticised it, it was still full of love," said his daughter.

Egypt in the News

We have been blessed with a quiet morning for Egypt in the foreign press. Let’s enjoy it while it lasts, folks.

Diplomacy + Foreign Trade

Turkey’s interference in Libya is counterproductive for political settlement, say Egyptian, Greek FMs: Foreign Minister Sameh Shoukry and his Greek counterpart Nikos Dendias agreed in a meeting in Cairo yesterday that the “negative” Turkish intervention in Libya goes against ongoing international efforts to reach a political settlement in the civil war-torn North African country, Shoukry’s ministry said in a statement. The two ministers also agreed to speed up the process of creating exclusive economic zones (EEZs) in sea water near their borders, the Associated Press quoted Dendias as saying following the meeting. Greek Prime Minister Kyriakos Mitsotakis, meanwhile, says he will ask other NATO members for support in countering Turkey’s attempt to encroach on his country’s sovereignty, according to the newswire.

What exactly did Turkey do? Turkish President Recep Tayyip Erdogan and Libya’s Tripoli-based Prime Minister Fayez Al Serraj signed two MoUs on security and maritime cooperation that have drawn sharp criticism from Egypt, Greece, and Cyprus for their potential to pave the way for sea border demarcation agreements that may disregard the rights of other Mediterranean countries. The MoUs were seen as violating international law conventions. Egypt’s cabinet said in a statement last Thursday that the MoUs are lacking in legal bearing since the 2015 Skhirat peace agreement made it clear that Al Serraj cannot enter into legally-binding international agreements without the remainder of Libya’s cabinet on board.

black board

Where things stand with the PPP schools program: One of the Education Ministry’s platform policies has been to drive private sector development of schools through a public-private partnership (PPP) framework. Under the framework, the government will provide private sector operators with land and licenses, while the operators will build and operate the schools. While the project was announced back in 2016, the first contracts weren’t signed until January 2019. As it stands, the government hopes to build 1,000 schools under this framework by 2030. So far, only phase one of the program has been put to a bid.

Program gets underway after long slumber: Despite the project being a key policy point, there has been little clarity on a number of key elements of the program, namely: The structure of the agreement, the distribution of schools, the players involved, the timeline of the project, and any indication on how the schools will be run. This has largely been the result of the program having been amended since its initial announcement. The government had previously announced that 200 schools will fall under the program. Following the long and drawn-out process of getting the first phase underway, it appears that the ministry is setting down the framework which will govern the program until 2030. We sat down with Amany El Far, the head of the Education Ministry’s PPP unit, who helped us fill in the blanks on the program.

Key highlights:

  • 24 schools in six governorates offered in phase one and 60 schools to be offered in phase two.
  • “Mistakes” during the tendering process led to delays in launching phase one.
  • Five Saudi and Egyptian-led consortiums win bids in phase one.
  • Phase two will see foreign curricula being taught, including IB and IGCSE.
  • Tender for advisers on phase two will launch this week, while tender for schools will launch at the end of the month.

Phase one — 24 schools to be run by five operators: The government signed public-private partnership pacts with five consortiums to build and operate 24 schools with a total of 910 classrooms as part of the first phase of the program, El Far said. These schools, which will be developed in six governorates, are expected to be built at an estimated total cost of EGP 650 mn, she added. Construction on the schools has already begun, with the schools expected to begin teaching in the 2020-2021 academic year.

“Mistakes” in tendering phase one led to a drop in schools offered from 50 to 24: Phase one of the program had initially targeted the construction of 50 schools. Due to delays in launching phase one, which came on the back of a changing macroeconomic climate, changing terms, and closer examination of initial bidders, the ministry had settled for around 24 schools, government sources tell Enterprise. Mistakes were made during the tendering of the first phase of the PPP schools program, Education Minister Tarek Shawky reportedly told the local press on the sidelines of the 2019 Invest for Africa Summit. “It is our hope to amend the tendering process to avoid these mistakes for upcoming stages of the program,” he added without discussing the mistakes.

The EGP float in 2016 had changed the calculus for some of the companies that had initially bid on the program, sources told us. This was followed by an expansion of the program from a total of 200 to 1,000 schools back in 2018, which was accompanied by changes to the schools being offered. Furthermore, construction timelines on the schools were then shortened by the government to one year from two. These changes led to some investors backing out, and a subsequent re-evaluation of the tenders led to seven finalists being selected before awarding contracts to five bidders in January 2019.

New framework for how the schools will be operated coming: The Education Ministry is currently holding discussions that will determine how the schools under the PPP program in subsequent phases will be run, El Far said. These decisions will determine everything from which curriculum will be taught, to tuition fees, and how many foreign teachers will be allowed to teach. While these have been established for the first phase, they will change for subsequent phases, says El Far.

Terms and conditions for the tender and program: Under the terms and conditions of the tender, any number of companies can form a consortium and bid on the PPP schools on offer, as long as one of the partners currently operates a school in Egypt, says El Far. This partner must also hold at minimum a 20% stake in the school that the consortium is bidding on. The winning consortium will be provided with land on 30-year usage terms, with consortiums effectively paying EGP 10 per sqm. So far, these appear to be the terms that will remain consistent throughout the phases of the program.

Phase one — The five winning bids: The 24 schools are spread out across Cairo, Giza, Damietta, El Sharqiya, Menoufia and El Gharbeya governorates. These were awarded to five consortiums made up of Egyptian and Saudi companies. Some of the names may be unrecognizable, as some of the companies had been formed for the purposes of bidding, with officials seeming reluctant or unable to provide us with further details of these opaque partnerships. These are:

  • Mansour Al Qahtany (six schools): Little is known about this consortium save that it is made up of a company owned by Saudi businessman Mansour Al Qahtany and an Egyptian company known to ministry officials solely by the acronym UGS. The consortium will build and operate four schools in Cairo and two schools in Giza.
  • El Gezeera (six schools): A consortium led by El Gezeera, which operates language schools across Cairo, will develop and run three schools in Damietta and three schools in El Gharbeya.
  • Al Ratiq Group (six schools): A consortium led by the Saudi Arabian Al Ratiq Group will operate three schools in Sharqiya and three schools in Giza. It is unclear who is its Egyptian education partner.
  • Middle East Education Services Group (three schools): A consortium led by Middle East Education Services Group — which runs the Eastern Mediterranean University — won the rights to build and operate three schools in Cairo.
  • Nasr Abdel Ghaffour (three schools): A consortium led by Nasr Abdel Ghaffour, which operates girls’ high schools in Menoufia of the same name, will build and operate three schools in Menoufia.

Phase one — Teaching and curriculum: As per the conditions of the tender, all 24 schools of the first phase will teach the national language school curriculum — the state’s education curriculum with the majority of subjects being taught in English. The ministry had also put a cap on hiring foreign teachers at 10% of the total faculty.

Phase one — Tuition: Tuition fees at phase one schools will cost between EGP 4,000 and EGP 12,000 depending on the governorate of the school and the grade, says El Far. The pricing of the schools was determined by studies conducted by the ministry’s advisors on the program, which included NI Capital (financial advisor), Sarie El Din and Partners (legal advisor), and Alexandria University’s Engineering Center (technical advisor).

Ministry to launch phase two tender of 60 schools this month: The Education Ministry plans to launch a tender for 60 schools as part of the second phase of the PPP schools program in late December, said El Far. The ministry is hoping to complete tallying the plots of land that will be offered by then, she added.

The ministry also plans to launch a tender this week for advisors for this stage of the program, she noted. The advisors will help select the winning bids and set tuition fees. Consortiums looking to bid on phase two schools will be given a window of 3-6 months to submit their bids. The winning bids will be announced by November 2020, with an eye to signing contracts by January 2021, she noted.

Phase two schools will teach foreign curriculums, including IB and IGCSE: Schools tendered under the second phase of the program will offer students foreign curriculums including US high school diplomas, IGSCEs, and International Baccalaureate (IB), says El Far. The ministry has yet to decide whether to maintain the 10% cap on hiring foreign teachers in this stage of the program, but El Far implied that they’re exploring raising or possibly lifting the cap, in light of the programs being offered in phase two. This would mean that tuition in those schools will be more expensive than phase one schools, she noted.

Your top education news stories in Egypt this week:

  • Education Ministry softens stance on foreign ownership limits in private schools, setting up a committee that will consider investor requests for exemptions from the 20% cap.
  • Education investors hope to see education among the lineup of new sectors that will be added to the EGX in its new classification system.
  • The Higher Education Ministry plans to launch a number of programs as part of the “Study in Egypt” campaign to bring in foreign university students, Youm7 reports.
  • Egypt was ranked 82nd in the Global Knowledge Index (GKI) 2019, rising 17 spots from 99 in last year’s edition, making it the most-improved country on the index this year.
  • Classroom sizes, rote memorization, poor investment in vocational training are among the leading factors that have weakened the competitiveness of the education sector in Egypt, writes Ahmed Gamal El Din Moussa in an oped piece for Al Masry Al Youm.

The Market Yesterday

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EGP / USD CBE market average: Buy 16.06 | Sell 16.18
EGP / USD at CIB: Buy 16.06 | Sell 16.16
EGP / USD at NBE: Buy 16.05 | Sell 16.15

EGX30 (Sunday): 13,781 (-0.5%)
Turnover: EGP 281 mn (61% below the 90-day average)
EGX 30 year-to-date: +5.7%

THE MARKET ON SUNDAY: The EGX30 ended Sunday’s session down 0.5%. CIB, the index’s heaviest constituent, ended up 0.01%. EGX30’s top performing constituents were Cleopatra Hospital up 1.9%, Heliopolis Housing up 1.6%, and Sidi Kerir Petrochemicals up 0.6%. Yesterday’s worst performing stocks were Qalaa Holdings down 4.4%, Emaar Misr down 3.4% and Palm Hills down 3.0%. The market turnover was EGP 281 mn, and domestic investors were the sole net sellers.

Foreigners: Net Long | EGP +34.9 mn
Regional: Net Long | EGP +3.9 mn
Domestic: Net Short | EGP -38.8 mn

Retail: 66.5% of total trades | 65.4% of buyers | 67.6% of sellers
Institutions: 33.5% of total trades | 34.6% of buyers | 32.4% of sellers

WTI: USD 56.05 (+1.60%)
Brent: USD 61.24 (+1.24%)

Natural Gas (Nymex, futures prices) USD 2.35 MMBtu, (+3.03%, January 2020 contract)
Gold: USD 1,466.20 / troy ounce (-0.44%)

TASI: 7,901.93 (+0.55%) (YTD: +0.96%)
ADX: 5,030.76 (-0.25%) (YTD: +2.35%)
DFM: 2,678.70 (-1.22%) (YTD: +5.89%)
KSE Premier Market: 6,633.38 (+1.75%)
QE: 10,192.05 (+0.44%) (YTD: -1.04%)
MSM: 4,074.11 (+0.25%) (YTD: -5.77%)
BB: 1,532.74 (+0.38%) (YTD: +14.62%)

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Calendar

December: Belarus Industry Minister Pavel Utiupin will visit Egypt to discuss means of cooperation in the SCZone and plan for the seventh Egypt-Belarus Trade Meeting.

December: A Chinese automotive company delegation will visit Egypt to sign an agreement with El Nasr Automotive Manufacturing Company.

December: Indian automotive delegation to visit Egypt.

1-6 December (Sunday-Friday): Vietnamese trade delegation visits Egypt.

1-4 December (Sunday-Wednesday): E-payment and Innovative Financial Inclusion Expo and Forum (PAFIX), Egypt International Exhibition Center, Nasr City, Cairo.

1-4 December (Sunday-Wednesday): Cairo ICT 2019, Egypt International Exhibition Center, Nasr City, Cairo.

2-3 December (Monday-Tuesday): The irrigation ministers of Egypt, Sudan, and Ethiopia the second round of Grand Ethiopian Renaissance Dam negotiations in Washington, DC.

2-4 December (Monday-Wednesday): African Economic Conference, Sharm El Sheikh.

2-13 December (Monday- Friday) The COP25 Climate Change Conference, Madrid

3 December (Tuesday): Emirates NBD / Markit PMI for Egypt released.

3-6 December (Tuesday-Friday): Cairo WoodShow, Egypt International Exhibition Center, Nasr City, Cairo.

4 December (Wednesday): Subscription to the Aramco IPO will begin (expected).

5-7 December (Thursday-Saturday): RiseUp Summit, American University in Cairo, New Cairo Campus.

8 December (Sunday): Pitch by the Pyramids, Giza Pyramids.

8-9 December (Sunday-Monday): The 6 th CEOs THOUGHTS 2019.

9-11 December (Monday-Wednesday): Pacprocess Middle East Africa, Egypt International Exhibition Center, Nasr City, Cairo.

9-11 December (Monday-Wednesday): Food Africa 2019 Expo, Egypt International Exhibition Center, Nasr City, Cairo.

10 December (Tuesday): Egypt Automotive summit, Nile Ritz Carlton, Cairo.

10-11 December (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

11 December (Wednesday): First day of trading on the Aramco IPO (expected).

11-12 December (Wednesday-Thursday): “Forum on peace and sustainability in Africa,” venue TBD, Aswan.

12-14 December (Thursday-Saturday): 16 Egyptian real estate development companies will showcase their products at IPS Riyadh, Riyadh, Saudi Arabia.

14-17 December (Saturday-Tuesday): World Youth Forum 2019, Sharm El Sheikh.

17-21 December (Tuesday-Saturday): 2019 Automech Formula car expo, Egypt International Exhibition Center, Cairo.

26 December (Thursday): Central Bank of Egypt’s monetary policy committee will meet to review interest rates.

January 2020: 2019 Confederation of African Football (CAF) Awards, Albatros Citadel Resort, Hurghada, Egypt.

January 2020: UK-Africa Investment summit, London, United Kingdom.

5 January (Sunday): Postponed lawsuit hearing against Peugeot Automobile filed by Cairo for Development and Cars Manufacturing.

9-12 January 2020 (Tuesday-Sunday): PLASTEX, Egypt International Exhibition Center, Nasr City, Cairo.

25 January 2020 (Saturday): 25 January revolution anniversary / Police Day, national holiday.

25 January 2020 (Saturday): Midterm break for public schools and universities. Also known as: Two weeks of good commute.

February 2020: An Italian business delegation will visit Egypt to discuss investments in the Port Said industrial zone.

February 2020: A delegation of Swiss businesses will visit Egypt to discuss investment.

February 2020: Higher Education Minister Khaled Abdel-Ghaffar will visit Minsk, Belarus.

1 February 2020 (Saturday): The administrative court will look into an appeal by Adeptio AD Investments against a Financial Regulatory Authority to submit a mandatory tender offer (MTO) for Americana Egypt.

8 February 2020 (Saturday): Midterm break ends. Traffic in Cairo stinks once more.

11-13 February 2020 (Tuesday-Thursday): Egypt Petroleum Show, Egypt International Exhibition Center, Nasr City, Cairo.

March 2020: The Middle East and North Africa Financial Action Task Force (MENAFATF) will visit Egypt to assess the progress of actions taken to combat money laundering and terrorist sponsoring activities.

1 March 2020: A conference on “logistics and its impact on the movement of goods and industry,” venue TBD, Alexandria.

4-5 March 2020 (Wednesday-Thursday): Women Economic Forum, Cairo.

25-26 March 2020 (Wednesday-Thursday): Mega Projects Conference, Egypt International Exhibition Center, Nasr City, Cairo.

23 April 2020 (Thursday): First day of Ramadan (TBC).

23-26 May 2020 (Saturday-Tuesday): Eid El Fitr (TBC).

5-7 May 2020 (Tuesday-Thursday): AFSIC – Investing in Africa, London, United Kingdom.

30 June 2020 (Sunday): June 2013 protests anniversary, national holiday.

November 2020: Egypt will host simultaneously the International Capital Market Association’s emerging market, and Africa and Middle East meetings.

30 July 2020-3 August 2020 (Thursday-Monday): Eid El Adha (TBC), national holiday.

19-20 August 2020 (Wednesday-Thursday): Islamic New Year (TBC), national holiday.

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. © 2018 Enterprise Ventures LLC.