Monday, 30 December 2019

Competition watchdog greenlights Uber-Careem merger


What We’re Tracking Today

End-of-year news slowdown? What end-of-year news slowdown? We have plenty of news for you this morning: The competition authority’s long-awaited ruling on the Uber-Careem merger is in, and it’s not going to send a chill through the market. Plus: Lots of M&A news, an end-of-year interview with EGX boss Mohamed Farid, and continued signs of borrowing by Egyptian corporations — the later promising signs that the long-predicted pickup in corporate borrowing could indeed be a theme in 2020.

Either way, bankers will get to sleep in on the first day of 2020: Banks will be closed on Wednesday, 1 January, in observance of New Year’s and will be back to work the following day, the CBE said yesterday, according to Masrawy. The EGX will follow suit, and so will Enterprise: We’re taking our annual publication holiday on 1 January and will be back the following Wednesday (8 January).

We’re weeks away from adding electricity to our East Med energy hub ambitions. The Sisi administration has for years now been positioning Egypt as the region’s premier energy hub, but with our focus on the import (and potential onward sale of) Israeli natural gas, it’s easy to lose sight that we’re also going to be exporting electricity. The first of multiple interconnections between our national grid and those of neighboring countries launches on 12 January with a 50 MW link to Sudan. We have more in this morning’s Speed Round, below.

Also coming next month: A health campaign focusing on pregnant women in Egypt. The campaign aims to detect and treat diseases in pregnant mothers prevent their transmission to unborn babies, according to an Ittihadiya statement.

enterpriseTake a step into our phenomenal world & celebrate 2020 with The Lemon Tree & Co. at Somabay. Family & Friends Reunion IV, Music Festival is happening on the 29th & 30th of December and the celebration extends to NYE, December 31st where GALERIE presents a full night of elegance, admiration & laughter. For reservations:

MUST-READ FOR FINANCE NERDS- 2019 was a bad year for IPOs, leading some to wonder whether public markets are shrinking: The number of new listings fell by a fifth globally to 1,237 or the lowest figure in three years, the Financial Times reports, even as global equity markets have surged. Together, the companies raised nearly USD 190 bn, a 10% drop from last year and also a three-year low. Across the pond, some 211 companies went public in the United States throughout 2019, but only managed to raise USD 62.33 bn — nowhere near optimistic projections that this year’s IPO bounty could outpace 1999’s record of USD 108 bn, according to the Wall Street Journal. Many of those companies are now trading below the valuations they held as private companies.

What’s keeping market watchers awake: “The drop in IPOs comes at a critical juncture for public markets, which have shrunk over the past two decades, while private markets — such as private equity and venture capital — have expanded,” the FT writes. Bonus: The piece quotes market sage and Enterprise favourite Mohamed El-Erian.

Across the pond, Aramco’s debut also fell short: The long-awaited IPO of the Saudi Aramco could not live up to Crown Prince Mohammed bin Salman USD 2 tn valuation despite the efforts of the kingdom. Once public, the Saudi stock has dipped though moving up slowly recently.

Egypt saw only two IPOs in 2019, with fintech player Fawry and pharmaco Rameda listing. Egyptian companies pulled back from raising capital after Sarwa Capital’s IPO went sideways in late 2018. A global slowdown in appetite for emerging market IPOs and fears the repeatedly-postponed Aramco would suck liquidity out of the market also played a role. Meanwhile, Eastern Tobacco’s 4.5% secondary sale in March was the only one of the many sales by state-owned companies to go to market.

MEANWHILE- Some of the best returns in 2019 were in “unexpected corners of the market,” Bloomberg writes in its rundown of what USD 10k allocated to asset classes including Russia, Greece, Beyond Meat and palladium would have fared this year.


*** It’s Blackboard day: Our every Monday look at the business of education in Egypt, from pre-K through the highest reaches of higher ed, focuses this week on how light-touch regulation attracted international branch campuses to Egypt.

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Move along, ladies and gents: Our daily wrapup of last night’s talk shows is on hiatus until we’re back from our publication break on Wednesday, 8 January.

Speed Round

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Uber-Careem merger gets green light from competition authority with a couple of minor caveats: The Egyptian Competition Authority (ECA) has granted regulatory approval for Uber’s USD 3.1 bn acquisition of Careem, imposing only a handful of conditions designed to “protect the rights of riders, drivers, and investors,” the competition watchdog said in a press release (pdf). The ECA says Uber and Careem have accepted the conditions, which are in effect for the first two years post-transaction. They include:

Customer protection: The ECA capped yearly price increases for UberX and Careem Go services at 10% nationwide, excluding hikes linked to cost-push inflation. The authority also imposed a ceiling on surge pricing at 2.5x the regular fare. No more than 30% of annual trips at either brand can be subject to surge pricing, which hikes the cost of a ride at times of peak demand.

Driver protection: Uber will be obliged to maintain a driver utilization rate in the range of 60-80% across both platforms. Uber has also agreed to cap its cut of UberX rides at 22.5% and of Careem Go rides at 25%.

Market entry, and “industry innovation”: Uber will have to terminate exclusivity agreements with third-party partners and intermediaries (including driver recruitment offices) to help reduce the already high barriers to entry in the ride-hailing market. The company will also need to modify Careem’s logo and marketing materials to explicitly show its link with Uber as a measure to increase transparency and lower “customer confusion.” Uber will also need to provide potential competitors and new market entrants with access to its mapping data and data aggregated from trips, as well as customer and driver data, provided they obtain the owners’ consent.

Third-party monitoring to keep Uber in check: To ensure adherence, a third-party monitoring trustee nominated by Uber and approved by the ECA will be deployed at Uber’s Cairo headquarters. Uber will be required to provide the trustee with random trip data samples to prove it’s upholding the conditions.

Adjacent markets: Neither brand will be permitted to price bus-hailing services below cost or engage in pure bundling, which is when customers are obliged to purchase more than one service or product at once.

Uber’s response: Reuters quoted an Uber spokesman as saying they welcome the decision and will be joining forces to “deliver exceptional outcomes for riders, drivers, and cities across Egypt.” Bloomberg, meanwhile, took note that the decision was taken after studying data on 270 mn trips and looking at similar Egyptian and international cases.

Swvl sees this as a positive move to keep the market competitive: The ECA's decision will help provide high-quality services to customers at competitive prices, the CEO of mass-transit app Swvl was quoted by the local press as saying.

Is this permanent? The regulations will be binding for the first two years following the merger. They can then be renewed for subsequent two-year periods, but for no more than a total of five years. The renewal will depend on the extent of Uber’s compliance (think: the relationship between good behaviour and parole). The authority could consider lifting the regulations if market circumstances change or if one or more new players grab a market share of at least 20% individually or 30% collectively

Why is the ECA doing this? The authority’s reasoning is that high barriers to entry and the length of time it takes ride-hailing companies to reach profitability means the Uber-Careem merger could be anti-competitive, resulting in more price control and declining service quality, among other factors.

Where the merger stands in other countries: Regulators in other countries in which Uber operates have taken stances in line with the ECA’s, with Qatar having recently reported to have blocked the combination of the two businesses altogether. Uber has received the greenlight to proceed in the UAE and Jordan.

Look for more from other jurisdictions as the transaction closes as early as January: The ride-hailing giant stands to lose up to USD 470 mn on the USD 3.1 bn price tag if it doesn’t obtain all the necessary passes. It has, however, previously signalled its readiness to divest from any market that doesn’t play along.

Background: Upon receiving a formal notification of the acquisition agreement, the ECA — a long-time critic of the merger — launched an investigation and went as far as to design an internet poll to assess the merger’s effect on the ground. The authority said at the time that the agreement could be a “significant” impediment to competition. Under the acquisition agreement that was reached in March, Uber and Careem will maintain operational autonomy even as Careem becomes a wholly-owned subsidiary of Uber.

IN RELATED NEWS- The competition authority still wants to expand its powers under the Antitrust Act, ECA Chairman Amir Nabil said at a presser following the announcement of the Uber-Careem agreement, according to Masrawy. The amendments, which have been in the works since the authority was led by Mona El Garf, would give the ECA teeth and scope comparable to global antitrust agencies, an ECA official previously told Enterprise. El Garf had said that the amendments would also require ECA approval for any merger or acquisition worth more than EGP 100 mn. Nabil did not specify a timeline for the amendments, which would requires signoff by the House of Representatives.


*** Tell us what you think will happen in 2020 and maybe we’ll send you an Enterprise mug and our very own coffee, sourced from our friends at 30 North. Every year we ask you, our readers, to weigh in on what you expect for the year ahead: Are you investing? Do you plan to hire new staff in 2020? How do you think the EGP will perform? What’s your take on interest rates? Tell us, and we’ll share the results with the entire community in early January to help you shape your view of the year. The survey is quick, we promise.

You can take the Enterprise Reader Poll here.

Saudi Aramco’s IPO has had no direct impact on the EGX, exchange boss Mohamed Farid said at a symposium organized by Youm7 to discuss raising listings on the bourse. Aramco had only an indirect impact by changing companies’ relative weight in global market indices such as the MSCI Emerging Markets Index. The remarks downplayed the impact of Aramco’s on-again, off-again, on-again IPO in a year that saw the EGX attract just two new listings. Public Enterprise Minister Hisham Tawfik directly pointed to Aramco, which pulled significant liquidity from regional markets in the run-up to its listing, as one reason Egypt was postponing some transactions under its privatization program. A program to sell stakes in already-listed companies has been dormant since March, when Eastern Tobacco sold a 4.5% stake on the EGX. Meanwhile, state-owned Banque du Caire and ENPPI, long expected to IPO, each delayed their offerings this year, with BdC now scheduled to kick off a roadshow in early 2020.

Background: Farid’s comments come as Egyptian equities are struggling to attract interest, as reflected in low trading volumes and a dearth of IPOs, analysts told Reuters’ Arabic service earlier this month.

Why are volumes so low? Shares worth just EGP 268 mn changed hands on the bourse yesterday, 61% below the trailing 90-day average and well off the EGP 1 bn or so that was considered an “acceptable’ figure last year. Meanwhile, the EGX30 is up just 6% for the year. Farid says it has a lot to do with the relatively few names on offer on the EGX, pointing out, too, that the exchange has seen a number of delistings this year as a result of both acquisitions and listing regulations.

The EGX is headhunting new listings: According to Farid, the EGX is actively looking to bring new listings to the bourse by directly contacting 235 companies to look into potentially listing on the EGX. Out of those, 14 companies have begun to study the feasibility of listing on the EGX. However, 67 companies said that they would consider listing but that now isn’t the right time to pull the trigger. Another 81 outright said they were not interested, while the rest were on the fence about listing.

IPO WATCH- Three sports clubs looking to debut on the bourse? The EGX is currently working with three clubs, Misr El Makasa, FC Masr, and Wadi Degla SC, to prepare for potential listings. The EGX is trying to attract sporting clubs to IPO in light of the Sports Act being amended to allow clubs to be put on the stock exchange.

Farid is encouraged by plans to bring military-owned companies to the EGX: President Abdel Fattah El Sisi has twice mentioned the possibility of listing military-owned companies on the bourse, most recently saying last week that the move would ensure the participation of all sectors in the economy. Farid lauded the prospect of having military companies on the EGX, which he said would send a strong message on their willingness to be fully transparent and adhere to global corporate governance laws. The EGX boss was otherwise mum on the plans, but hinted that things are moving along.

M&A WATCH- EFG, GEMS JV acquires majority stake in Egypt’s Option Travel: GEMS Egypt for Education Services, a joint fund between EFG Hermes’ Egypt Education Fund and Gems Education, has completed the acquisition of a majority stake in leading transportation provider Option Travel, EFG said in a press release (pdf). There was no mention of the transaction’s value or the exact size of the stake. The proceeds raised the company’s capital to finance its core activities, and will be used to launch at a later stage a transport service provider specialized in catering to students, primarily those enrolled in the fund’s schools. GEMS Egypt, which was established in 2018, is focused on K-12 education in Egypt. Its investments in Egypt’s education sector are expected to reach USD 300 mn by 2023.

M&A WATCH- FRA grants Pioneers Holding 10-day extension for MTO: The Financial Regulatory Authority (FRA) has extended by 10 business days Pioneers Holding’s deadline to present its mandatory tender offer (MTO) to raise its share in five of its EGX-listed subsidiaries to 90%, the FRA said in a statement (pdf). The extension was granted because Fincorp, is still working on the fair value assessment, the statement added.

Background: Pioneers Holdings’ board of directors had agreed to make non-cash mandatory tender offers in early October. The company hired UHY United as a financial advisor and Baker McKenzie as legal advisor for the potential transaction. The company plans to restructure into three companies: Pne in financial services, the other in real estate, and another in the industrial sector after completing transactions. CEO Walid Zaki had said earlier that the company intends to complete the process by the end of this year.

M&A WATCH- Regional PE firm AfricInvest set to acquire small stake in Masria Cards: Private equity firm AfricInvest is reportedly close to acquiring a minority stake in smart card supplier Masria Cards, Al Mal reports, citing sources close to the matter. The newspaper didn’t specify the size of the stake eyed by the Tunisia-based investment outfit and suggested that EFG Hermes is acting as sell-side financial advisor. According to Al Mal, this will be AfricInvest’s second investment in the country after recently acquiring a stake in Carbon Holdings. Masria Cards, meanwhile, was a Nilex-listed company until it decided to voluntarily delist its shares in 2015. When it last made a bourse filing in that year, it had EGP 10.8 mn in capital and c.EGP 10.5 mn in half-yearly earnings.

DEBT WATCH- Sodic subsidiary signs EGP 1 bn medium term facility with CIB: Sodic subsidiary Soreal for Real Estate Development signed a EGP 1 bn medium term facility with CIB to partially finance Sodic’s first non-residential offering in East Cairo EDNC, the company said in a press release (pdf). EDNC is a commercial and retail complex built on a total area of 90k sqm in New Cairo and has been designed in a way that reduces the carbon footprint. “We are very happy to collaborate with CIB again and especially for financing EDNC. The signing is a testament to the strength of the relationship with CIB and the banks trust in the company and its vision for this unique project,” Sodic’s Managing Director Magued Sherif said.

This comes as Sodic has recently signed an escrow contract for its 500-feddan development in New Zayed with the New Urban Communities Authority (NUCA). The first phase of the project is Vye which saw the company sell EGP 1 bn-worth of homes in the neighborhood two days after the sale was launched.

DEBT WATCH- AIH’s Rawaj closes EGP 295 mn securitized bond sale: Arabia Investments Holding (AIH) auto loan-focused subsidiary Rawaj Finance has closed a EGP 295 mn securitized bond issuance through AIH’s securitization SPV, AIH said in a press release (pdf). The proceeds will be used for onlending. CIB and the Arab African International Bank acted as lead managers, co-underwriters, and financial advisors. Dreny & Partners Law Firm was tapped as legal counsel.

Oil Ministry announces Red Sea bid round results: The Oil Ministry has awarded oil and gas exploration concessions to each of Chevron, Shell, and the UAE’s Mubadala in a bid round for blocks off the Red Sea coast, the ministry said in a statement (pdf). One block went to Chevron, another to Shell, and a third jointly to Mudabala and Shell. The total exploration area is close to 10k sqm, and will require a minimum investment of USD 327 mn that could increase to several bns in the development phase if discoveries are made. Reuters also took note of the story.

Background: The South Valley Egyptian Petroleum Holding Company (Ganope) launched last March a tender for 10 oil and gas exploration blocks off the Red Sea coast. This was the first time oil and gas majors get the chance to tap the area, which earlier seismic scans have revealed has a high probability of seeing natural gas discoveries — particularly since its seafloor resembles the gas-rich terrain of neighboring Saudi Arabia. The tender was expected back in December but was delayed just long enough to take place under new production sharing contracts that took effect earlier this year.

Shell Egypt looking to liquefy Cypriot gas domestically: Shell Egypt is looking into potentially importing natural gas from Cyprus and liquefying it at one of Egypt’s liquefaction facilities, Deputy Chairman Moataz Darwish tells Al Mal. Darwish was otherwise tight-lipped on the details of the plan, including the expected investment value and timeline, but reminded the newspaper that Shell holds 35% of Cyprus’ Aphrodite gas field. Egypt and Cyprus had signed in September last year a USD 1 bn agreement to build a natural gas pipeline that will allow gas from Aphrodite to be transported to Egypt’s liquefaction facilities at Idku and Damietta, and re-exported as liquefied natural gas.

On a related note, it now costs less to use the national gas grid: The Gas Regulatory Authority cut the fees for using the National Gas Network by about USD 0.09 cents, to USD 0.29 per mmbtu, down from USD 0.38, according to Al Shorouk.

Egypt and Sudan will finish linking up their electricity grids on 12 January, sharing an initial 50 MW worth of capacity, Reuters cites state news agency MENA as having said yesterday. The project reportedly cost EGP 509 mn and spans 1,000 km. The grid interconnection project has been in the pipeline for years, but was reportedly delayed by political upheaval in Sudan earlier this year and complications from discussions over the Grand Ethiopian Renaissance Dam (GERD).

It will be the first of many interconnections as Egypt looks to become a power hub: Egypt is finalizing a similar agreement with Saudi Arabia, which is due to be signed in May 2020. The project was initially planned to cost USD 1.6 bn, of which Egypt would pay USD 600 mn, and was originally expected to span 16 km, but plans to extend the grid’s length to 25 km have upped costs by 30%, we reported previously. It is expected to be operational by 2022. Meanwhile, a USD 4 bn EuroAfrica project to connect the electricity grids of Egypt, Cyprus, and Greece is scheduled for completion by December 2022, we reported in February. Whether Electricity Ministry concerns over implementation costs, expressed in late 2018, have delayed the Cyprus project remains to be seen.

The government expects to add 170k Takaful and Karama beneficiaries in the coming period, Nivine Kabbag said at her first press conference as social solidarity minister, according to Masrawy. This will bring the number of beneficiaries of the cash subsidy programs to 3.4 mn families, or approximately 14 mn individuals. The ministry still needs to flush out those ineligible for subsidies (whom we here at Enterprise fondly refer to as ‘Kramers’) for this to move forward, Kabbag added.

As far as we know, purging the Kramers can only happen after passing the Cash Subsidies Act, an in-the-works legislation that Kabbag separately mentioned during the presser. The minister didn’t provide an update on the status of the law, which is essentially an ongoing bid to legislate a new system for all of Egypt’s cash subsidy programs, including adding new conditions to be eligible for social welfare. The bill would require authorities review the subsidy rolls every three years and scratch off those found ineligible. Last we heard, the ministry had finalized drawing it up, but it is yet to receive a nod from cabinet, and subsequently from the House of Representatives. It was first announced last summer.

Several Egyptian political parties took part in a second round of public consultations focused on election laws yesterday, as the countdown to parliamentary elections at the end of 2020 begins, Ahram Online reports. The talks, which follow a first round of talks held in early December, are being spearheaded by the Mostakbal Watan party, which since May 2018 has held the largest number of seats of any party in the House of Representatives. The conversations were expected to focus on laws regulating the parliamentary elections, the performance of the House of Representatives and the Senate, the exercise of political rights and redrawing of electoral districts. The hope is that a consensus on the electoral system will be reached, and then applied in the coming elections, said leader of the Support Egypt majority coalition Abdel Hadi El Qasabi.

What are the sticking points so far? In the first round of conversations, several opposition parties said they wanted to see the adoption of a proportional list system, rather than the closed list system, in electing the House of Representatives and the Senate; that they did not want the security services to take part in supervising the election; and that all political bodies should have fair and equal coverage by national media, Mostakbal Watan party head Ashraf Rashad told Ahram Online. These first discussions saw representation from high-profile political parties, including the Reform and Development party and the Egyptian Democratic Socialist party.

MOVES- Prime Minister Mostafa Madbouly appointed former administrative development minister Hani Mohamed Mahmoud as an advisor to the prime minister on administrative reform, according to Al Shorouk. Mahmoud would assume supervision of government restructuring and digitization in preparation for the move to the new administrative capital. Mahmoud was previously head of Egypt Post and of Cabinet’s Information and Decision Support Center, and was also previously CIT minister.

Making It is on hiatus until January 9, but you can catch up on season one. Previous guests on our show about how to build a great business right here in Egypt have included:

The episodes are available on our website | Apple Podcast | Google Podcast.


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Egypt in the News

Still generating coverage in the foreign press: The two bus crashes that took place on Saturday near Port Said and Ain Sohkna, with plenty of stories out in the local Indian and Malaysian media in particular. A total of 28 people were killed in the two crashes, Deutsche Welle reports, including several Indian and Malaysian tourists.

Expect this to shift the conversation today: French investigators have reportedly found EgyptAir guilty of “maintenance and safety lapses” that led to the 2016 crash of a flight en route from Paris to Cairo, confidential documents show, according to the Wall Street Journal. The plane reportedly had “serious mechanical errors” on the five flights prior to the crash, but these errors were allegedly not addressed by maintenance staff. According to the documents, there was an oxygen leak in the plane’s cockpit and a fire “likely disabled the plane.” The journal notes that Egyptian authorities had said the crash was a result of a terrorist act.

Worth Reading

Is global meat consumption set to peak, amid health and environmental concerns and sustainability issues? Meat consumption may have peaked globally, as increased strain on resources — including land and water — and growing health and environmental concerns will increasingly prompt consumers to eat less meat and seek alternative sources of protein, whether through choice or necessity, the Financial Times reports. Both the US and Europe are expected to hit a high point of meat consumption in 2020, which will then plateau over the next decade, OECD data suggests. Meanwhile, a report by consultants AT Kearney predicts a low global growth rate of around 3% per year in the coming decades, with meat from livestock becoming a niche product. This is likely to spur the growth of companies producing meat substitutes, including those made from plant proteins. The USD 1.2 tn livestock meat market is likely to change substantially, with investors increasingly aware of the business risks in the high carbon animal agriculture industry.

The impact on emerging markets, including Egypt, is likely to be felt more slowly than elsewhere, but some may embrace the new trend: Nutrition professor Barry Popkin predicts that it will take time before these changes are felt in EMs, where there is less of a narrative linking meat, health concerns, and climate change than in the US and Europe, and where eating meat is often seen as an indicator of affluence. Egypt’s beef consumption in 2020 is expected to reach 720k tonnes, up by 3.5% from the previous year, according to the US Embassy’s Foreign Agricultural Service (FAS) annual report on livestock and products (pdf). This is being driven by population growth, the continued influx of refugees, and an increase in tourism. However, other EMs seem to be warming up to reduced meat intake, with products from alternative meat producer Beyond Meat now available at several restaurants in Dubai and Abu Dhabi. And while China, which accounts for almost a third of the total meat eaten globally, is still seeing a rising demand for meat, this growth is expected to slow before 2030, due to health concerns (including high obesity levels) and increased awareness of the link between diet and health, a 2018 OECD/FAO report says.

black board

How light-touch regulation attracted international branch campuses to Egypt: In July 2018, Egypt ratified the International Branch Campus Act (pdf), which has allowed international universities to set up branches in Egypt by building their own campus or partnering with an Egyptian company. Despite criticism in the foreign press levied at the universities which have bought into the move, the program has largely been a success, with agreements with universities from the UK, Germany, Canada, and Italy all having been signed under the program. The success of the program has been tied to the freehand schools have been given to operate their branches and minimal red tape. These advantages, however, have earned the ire of some local private sector operators, who complain that while the program has been beneficial to the education sector as a whole, they feel that they’re being left out.

An overview of the international branch campuses program: The program hopes to see established universities abroad opening branches in Egypt and offering both undergrad and graduate degrees from their home countries, while ensuring “a path to equivalence” with Egyptian university degrees. Egyptians must make up at least 50% of the student body at the campus. The program is very STEM (science, technology, engineering, and math) oriented, with the law requiring that the university be “scientifically distinguished.” The law, however, does permit schools to offer non-science courses. All branch campuses currently operating in Egypt provide some form of computer science and engineering degrees along with business or entrepreneurship courses and degrees. Universities are also required to provide scholarships and grants to Egyptian students with Thanaweya Amma diplomas.

Campuses are required to pay 2% of their annual tuition income to the government. The government also requires that 5% of the campus’ projected financing be secured before receiving a license. While no restrictions have been placed on the location of the project, sources tell Blackboard that the government has been actively promoting the new administrative capital’s Knowledge Hub district as the location for the branches.

First wave of schools brought in over EGP 2 bn in new greenfield investments: Following the ratification of the International Branch Campus Act, three international schools signed on last year to build new branch campuses at the new administrative capital’s Knowledge Hub, with total investments exceeding EGP 2 bn, Assistant Higher Education Minister Mohamed El Tayeb, who also heads the ministry’s commission that licenses the campuses, tells Blackboard. All three schools have formed consortiums with local Egyptian partners. All three universities have completed phase 1 development, which will see their main campus buildings developed and classes being taught.

The three international branch campuses are:

The University of Prince Edward Island: In April 2018, the Universities of Canada in Egypt — an umbrella organization formed to host degree programs from select Canadian universities in partnership with Canwell Education Consultancy — opened the branch campus of the University of Prince Edward Island, becoming the first foreign university to operate in the new capital under the program. The university offers degrees in computer science, business & entrepreneurship, and engineering & design. While it is unclear how much was invested in opening the branch campus, the New Administrative Capital Company for Urban Development — the holding company in charge of the new capital — had said that Universities of Canada plans to invest EGP 1.7 bn in new capital branch campuses.

Coventry University: September 2019 saw the launch the Coventry University’s branch campus at the Knowledge Hub, in partnership with Elsewedy Education. The 27,000 sqm school, which as of now offers 4-year undergraduate degrees in engineering, computing, design, and media, hopes to accommodate some 15,000 students at its final phase of development, according to a press release from Elsewedy Education. The university is a flagship project for Elsewedy Education, which has earmarked some EGP 6-7 bn for the development of the university. Sources tell us that the first phase development of the university cost some EGP 1.2 bn.

The University of Hertfordshire: The University of Hertfordshire, in partnership with Egyptian education outfit Global Academic Foundation, inaugurated its branch campus just this month. The school offers undergraduate and graduate degrees in business, engineering, and computer science.

Three more universities are expected to open their doors by the end of 2020, says El Tayeb. Among these is an alliance of 10 German universities, who will collectively open the German International University of Applied Sciences at the Knowledge Hub, including the Munich University of Applied Sciences and the Technical University of Cologne. The university, which received apresidential sign off last month, will provide degrees in engineering, architecture, computer science and IT, economy, business and management, public administration, production technology, agricultural science, biotech, food processing technology, and tourism. El Tayeb tells that an American university and a British university have also signed on to the program, but would not reveal further details.

And bids continue to roll in: Some 22 other universities have made bids to open branch campuses in Egypt, El Tayeb said, without mentioning details. He tells us there is no final target number of branch campuses that the government is looking to achieve for the program.

Laissez faire education (or smart education policy): Perhaps the most surprising (and most attractive) element of the program is just how much freehand the schools are given once they receive approvals from the government. By law, the “branch shall operate within a framework of academic and institutional autonomy and freedom.” Furthermore, the schools are able to set whatever tuition they like, as the government recognizes that some of these are private businesses that need to make a profit, El Tayeb says. This is also the first time foreigners will be allowed to own 100% of the schools, he noted. This is a stark contrast to Egypt’s school system, where the Education Ministry has set a cap on tuition hikes of 15-17%, and more recently, restricted foreign ownership in private sector schools to 20%.

Foreign ownership limits has been a particularly sticking point for private equity. In an interview with Enterprise earlier this year, Sherif El Kholy, partner and head of Middle East & North Africa at private equity giant Actis, cited foreign ownership restrictions as one of the main barriers to entry for the education sector. “Until today, a foreign investor cannot own 50% or more of a private university unless they open an international branch campus.” Actis was looking into setting up an international branch campus for one of its universities, Regent’s business school, El Kholy said at the time.

Private local universities say they are being left behind: Some of the advantages being offered to international universities opening branches in Egypt has left some private local universities with the feeling that the scale is tipping to favor international schools. These advantages primarily have to do with red tape, said a top executive at a local university, who spoke with us on condition of anonymity. Local universities have to wait longer to receive land and licensing, they said. Local universities also face difficulties when getting approvals to expand a campus, or when deciding to add a faculty or a postgraduate degree, an executive at another university tells us. This puts local universities looking to expand at a weaker footing compared to international branch campuses.

Still, a plus for Egypt’s education sector overall: That said, all whom we’ve spoken with say that the international branch campus program will raise the bar on university-level education in Egypt, which is the intended purpose. From an economics standpoint, allowing international branch campuses to set up shop here and set their prices will make the education sector more competitive and more attractive to investment, says Ramadan Aboulella, President of Pharos University in Alexandria. The program will provide the advantages of a foreign education here at home without families and students having to expend much needed FX, he added.

ِApart from the EFG Hermes-GEMS joint venture acquiring a majority stake in Option Travel, your top education news stories in Egypt this week:

  • Prime Minister Moustafa Madbouly attacked those who he claims “are hindering progress on education reform for their own vested interest,” at a meeting with the press following last week’s cabinet shuffle.
  • The Education Ministry has issued mock exams for the new Thanaweya Amma, which will be taken electronically, according to Al Masry Al Youm.
  • The Higher Education Ministry is also looking to increase the number of exams taken electronically across Egypt’s universities, Minister Khaled Abdel Ghaffar said, according to Masrawy.
  • El Watan is running a best and worst of 2019 in teaching in Egypt.
  • President Abdel Fattah El Sisi said last week that the “respect” subject will be taught at schools without providing further details.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.99 | Sell 16.09
EGP / USD at CIB: Buy 15.99 | Sell 16.09
EGP / USD at NBE: Buy 15.99 | Sell 16.09

EGX30 (Sunday): 13,813 (-0.5%)
Turnover: EGP 268 mn (61% below the 90-day average)
EGX 30 year-to-date: +6.0%

THE MARKET ON SUNDAY: The EGX30 ended Sunday’s session down 0.5%. CIB, the index’s heaviest constituent, ended down 1.1%. EGX30’s top performing constituents were Qalaa Holdings up 4.3%, KIMA up 2.5%, and Orascom Development Egypt up 1.5%. Yesterday’s worst performing stocks were Egyptian Resorts down 1.6%, Cleopatra Hospitals down 1.4% and SODIC down 1.3%. The market turnover was EGP 268 mn, and domestic investors were the sole net sellers.

Foreigners: Net Long | EGP +15.1 mn
Regional: Net Long | EGP +18.0 mn
Domestic: Net Short | EGP -33.1 mn

Retail: 65.4% of total trades | 69.4% of buyers | 61.4% of sellers
Institutions: 34.6% of total trades | 30.6% of buyers | 38.6% of sellers

WTI: USD 61.75 (+0.05%)
Brent: USD 68.28 (+0.18%)

Natural Gas (Nymex, futures prices) USD 2.24 MMBtu (+0.40%, January 2020 contract)
Gold: USD 1,518.80 / troy ounce (+0.05%)

TASI: 8,411.94 (+0.70%) (YTD: +7.48%)
ADX: 5,072.50 (+0.44%) (YTD: +3.20%)
DFM: 2,776.56 (+0.42%) (YTD: +9.76%)
KSE Premier Market: 6,932.09 (+0.08%)
QE: 10,418.67 (-0.07%) (YTD: +1.16%)
MSM: 3,890.55 (+0.62%) (YTD: -10.20%)
BB: 1,607.01 (+0.19%) (YTD: +20.17%)

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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: Indian automotive delegation to visit Egypt.

January 2020: 1,000 artifacts to be displayed when Hurghada Museum opens.

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.

7 January 2020 (Tuesday): Coptic Christmas, national holiday.

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

9-10 January 2020 (Thursday-Friday): Egypt, Ethiopia and Sudan will hold talks in Addis Ababa on GERD.

13 January 2020 (Monday): Egypt, Sudan, and Ethiopia move to Washington, DC, for a fourth (and final?) round of negotiations on GERD.

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.

3-5 February 2020: The Arab-African International Forum, Jeddah, Saudi Arabia

4 February (Tuesday): Court hearing for PTT Energy Resources’ USD 1 bn lawsuit against Egyptian government

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.

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.

12 April 2020 (Sunday): Easter Sunday

20 April 2020 (Monday): Sham El Nessim, national holiday.

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

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

25 April 2020 (Saturday): Sinai Liberation Day, national holiday.

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

17-20 June 2020 (Wednesday-Saturday): 2019 Automech Formula car expo, Egypt International Exhibition Center, Cairo.

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.

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

6 October 2020 (Tuesday): Armed Forces Day, national holiday.

29 October 2020 (Thursday): Prophet Mohamed’s birthday (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. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.