More pledges of investment from UK companies.
Plus: Introducing Enterprise Hardhat

Introducing Hardhat — your weekly briefing of all things infrastructure in Egypt: We’re proud to launch our second Enterprise industry vertical — Hardhat, which will focus each Wednesday on infrastructure. The scope of the Hardhat is massive, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education. From the glossy and shiny to the smelly pipes.

To put it all into perspective, Egypt needs USD 230 bn in infrastructure investment: To get an idea of why we started with infrastructure, you need only look to the World Bank, which says Egypt faces a USD 230 bn investment gap in infrastructure over the coming 20 years — and the vast majority of that is in transportation. Some USD 180 bn of the projected gap is in transport, while water infrastructure needs USD 45 bn in investment above current baseline projections.

Look for Hardhat every Wednesday: With support of our friends at Orascom Construction, we’ll bring you a weekly hand-picked selection of stories, analysis pieces, explainers, interviews, and reports that will help you be informed on infrastructure developments every Wednesday.

Stuff you can go to this week and next:

• Renaissance Capital’s annual North Africa Investors Conference (pdf) kicks off in Marrakech today and wraps on Thursday.
• This year’s Cairo International Book Fair runs today through to Tuesday, 4 February at the New Cairo International Exhibition and Convention Center.
• AmCham will host US Ambassador Jonathan Cohen for its monthly luncheon on Tuesday, 28 January. Cohen will discuss prospects for commercial ties between Egypt and the US. Members can register for the event here.
• CI Capital’s annual three-day MENA Investors Conference gets underway on Tuesday, 28 January at the Four Seasons Nile Plaza.
• The British Embassy and IFC’s StartEgypt Forum 2020 will pit 45 startups against each other in a pitch competition on Wednesday, 29 January at the Greek Campus.

It’s day two of the World Economic Forum in Davos today, with the czars of global capitalism descending once again on the Swiss resort to talk, among other things, about the climate crisis and sustainable development. The irony of hundreds of pollutocrats flying private aviation to discuss ways to mitigate environmental destruction wasn’t lost on the forum this year: For the first time it will be providing special “green” jet fuel to participants, enabling them to reduce their Davos emission bill by 18%. Hey, it’s better than nothing.

Among those representing Egypt at this year’s summit: International Cooperation Minister Rania Al Mashat is attending as a co-chair of the WEF’s MENA arm and will participate in sessions on economic development, gender equality and technology. Oil Minister Tarek El Molla is also attending, announcing yesterday that the government had lowered its arrears bill to international oil companies to USD 200 mn.

Yesterday’s media coverage of Davos was dominated by what the press was building up to be a Trump vs Thunberg smackdown: President Trump denounced “prophets of doom” for their “predictions of apocalypse” in his summit address yesterday, a thinly-veiled attack on the 17 year-old Swedish climate activist who was sat in the audience. Thunberg then told the forum that its attendees had done “basically nothing” to limit carbon emissions, and that “our house is still on fire.”

There have been a deluge of climate-related reports released to coincide with the forum:

• Thirty-three major banks have poured a total of USD 1.9 tn into the fossil fuel industry since the Paris Accords in 2015, 24 of which are represented at Davos currently, a Greenpeace report (pdf) points out.
• Investment into climate finance stands at a comparatively-paltry USD 600 bn — less than a fifth of what is needed to decarbonize the world’s energy supply, according to a UBS report released on Monday, cited by the Financial Times. The investment bank says that quant funds will be among the casualties of climate change due to the inability of analysts to accurately predict climate smart investments.
• The next financial crisis could be triggered by climate-related risks, according to Bank of International Settlements research, which warns that so-called “green swan” event could cause the global economy to face-plant.

All that talk of recession and inverted yield curves seems like a long time ago: Global equities finished 2019 up 27%, with all major asset classes seeing gains and risk assets performing strongly, in spite of slowing global growth, geopolitical volatility and the US-China trade spat, according to Deloitte. Stocks were propelled by the Federal Reserve’s triple rate-cut, easing by the European Central Bank and stimulus in key EM countries, as well as the US-China ‘phase one’ trade agreement reached at the end of the year.

But irrational exuberance may be in the air: Ned Davis Research’s metric measuring sentiment among traders shows that there is currently “excessive optimism” in the equity markets, suggesting that short-term risks may be rising, CNBC reports. The S&P 500 has already gained 3% since the start of the year despite weak earnings expectations and continued uncertainty in the US-China trading relationship. This is fuelling greater euphoria among traders, setting the markets up for a nasty fall should a disruptive event occur or the fundamentals weaken.

Lebanon finally has a government: Caretaker prime minister Hassan Diab has nominated 20 ministers to form a new cabinet, the New York Times reports. This is the first time in almost three months that Lebanon will have a functioning government after former prime minister Saad Hariri resigned in November amid large anti-government protests.

The new cabinet has a few things it needs to sort out: The country is in the midst of a severe financial crisis, with a plunging currency, a teetering banking sector and a borderline insolvent state.

On the bright side, Lebanon will probably avoid defaulting for at least two more months, Oxford Economics said yesterday. Lebanon is likely to restructure its debt later this year after paying its USD 1.2 bn Eurobond when it matures on 9 March, it said.

Saudi Arabia will issue its first Eurobond of the year today: The USD 5 bn issuance is made up of three tranches: a 7-year tranche offering 0.85%, a 12-year yielding 1.1% and a 35-year for 3.84%. The government plans to issue some USD 32 bn in bonds denominated in local and international currencies this year in a bid to narrow its budget deficit. Bloomberg has more.

Turkey is seeking more EU funding as its EUR 6 bn agreement with Brussels to stem the “flow of illegal migrants to Europe in exchange for financial aid and the promise of visa-free travel” comes to an end this year, the Financial Times reports.

More proof the world is kind of a mean place this morning:

• Impeachment proceedings against The Donald have begun and were, predictably, acrimonious, the New York Times writes.
• The mysterious SARS-like coronavirus has claimed its ninth victim in China as Lunar new year holiday travel looks set to drive the bug’s spread further, Reuters reports. The virus has spread to the United States, the UAE claims to be prepared to deal with it at airports, and the World Health Organization is calling an emergency meeting.
• MbS allegedly hacked Amazon boss Jeff Bezos’ phone as the relationship between the two turned sour, the Financial Times and Bloomberg report. As if the spectacle of Jeff Bezos driving an electric delivery tuktuk wasn’t enough.
• The Trump administration could extend travel restrictions to seven more countries including potentially Belarus, Eritrea, Kyrgyzstan, Myanmar, Nigeria, Sudan, Tanzania, the Wall Street Journal reports.
• Russian spooks allegedly posed as plumbers to bug world leaders gathered in Davos for the World Economic Forum.

The UK-African Investment Summit retained the attention of the talking heads last night: Al Hayah Al Youm’s Lobna Assal noted President Abdel Fattah El Sisi’s meetings with Prince William and Prime Minister Boris Johnson in Downing Street (watch, runtime: 5:12). Masaa DMC (watch, runtime: 0:42) Yahduth Fi Misr (watch, runtime: 0:41) and Min Masr (watch, runtime: 0:59) also had coverage. We have more on the summit in this morning’s Speed Round below.

The UK is turning to Africa post-Brexit: Khaled Nosseir, head of Egyptian British Business Association, told Al Hayah Al Youm’s Hossam Hadad that Egypt is one of the largest exporters of food and crops to the UK and that this will only increase after the country leaves the European Union (watch, runtime: 7:04). Hadad also interviewed GAFI CEO’s adviser Amr Nour El Din, who said that the Africa summit was an indication of Britain's post-Brexit trade and investment strategy (watch, runtime: 7:35).

Some 23 car makers are offering discounts to customers: Masaa DMC’s Eman El Hosary phoned secretary-general of the Egyptian Automobile Manufacturers Association Khaled Saad, who said that car prices have fallen since customs on Turkish imports fell to zero at the beginning of the year, as well as the performance of the EGP which has gained 28 piasters against the USD since 8 January (watch, runtime: 6:31).

Why is the EGP appreciating? Yahduth Fi Misr's Sherif Amer phoned Banque Misr Deputy Chairman Akef El Maghraby, who attributed the change to the government’s reform program stabilizing the economy and driving growth in key sectors such as tourism (watch, runtime: 4:26).

INVESTMENT WATCH- Matalan, GSK agree to invest GBP 30 mn in Egypt at UK-Africa Investment Summit: UK fashion retailer Matalan will invest GBP 25 mn over the next five years building 20 outlets in Egypt, the British embassy in Cairo and a spokesperson for the UK government announced on social media yesterday. GlaxoSmithKline will also invest GBP 5 mn to develop two of its Egyptian production lines, the embassy said without providing further information. The two agreements came during the UK-Africa Investment Summit held in London on Monday, during which British companies signed GBP 6.5 bn in trade agreements with African countries.

The latest announcements come a day after UK-based PE outfit Actis signed an agreement with the Egyptian government that will see it invest alongside the Sovereign Fund of Egypt in energy and infrastructure projects. The pact could funnel some GBP 3 bn worth of investment in infrastructure, health and education over the next three years. The UK government’s development finance arm, CDC Group, also extended a USD 100 mn loan to CIB.

Other news from the summit: Planning Minister Hala El Said reiterated that a decision on whether to agree on a non-financial loan program with the IMF will be made “soon,” Bloomberg reports. “Now is the time for the private sector” she said on the sidelines of the summit. Finance Minister Mohamed Maait has suggested that the government could sign up to a new post-loan program with the fund in March.

El Sisi talks investment with Johnson: The UK prime minister told President Abdel Fattah El Sisi that he was counting on Egypt to be the “center of gravity” for stability in the region during talks at 10 Downing Street, according to an Ittihadiya statement. The two sides discussed Egypt’s infrastructure projects and the current investment climate, as well as tackling terrorism and illegal migration, and the crisis in Libya.

Russia to resume flights to Red Sea resorts in April-May? Russian airlines could resume charter flights to Egypt’s Red Sea resorts in late April or early May if security checks currently taking place in Hurghada Airport go well, aviation experts tell Russia’s Association of Tour Operators. Russian security officials inspecting the airport yesterday praised the government’s work to improve security in Terminal 2, raising hopes that Moscow will follow in the UK’s footsteps and allow the resumption of flights.

Timeline? Should this happen, it will take 2.5-3 months of preparations before flights can begin, one of the experts said. Russian flights to Red Sea destinations have been on hiatus since 2015 when a bomb brought down Metrojet Flight 9268 after taking off from Sharm El Sheikh. The UK lifted its ban on flights to Sharm in October.

M&A WATCH- Three banks interested in Bank Audi Egypt: First Abu Dhabi Bank (FAB), the National Bank of Kuwait, and Emirates NBD have expressed interest in acquiring Bank Audi’s Egypt unit but have yet to make official bids, banking sources told Masrawy. Audi said last week that it was in talks with several potential buyers after press reports claimed that it was looking to exit the country due to the ongoing financial crisis in Lebanon. Bank CFO Tamer Ghazaleh confirmed that the bank was considering pulling out of the country due to financial pressures emanating from Lebanon. S&P Global downgraded the bank’s credit rating further into junk status in November amid a liquidity squeeze in the Lebanese banking sector.

Bank Audi had been looking to acquire the National Bank of Greece’s Egypt unit before the Lebanese crisis erupted. Last week’s news came just days after local press reported that the banks were making progress in the acquisition in spite of NBG’s employee pay dispute preventing them from obtaining CBE approval.

M&A WATCH- Pioneers Holding gets 30-day MTO extension from FRA: The Financial Regulatory Authority (FRA) has approved a request by Pioneers Holding to extend its mandatory tender offer (MTO) submission deadline by 30 days to give it time to hire a new financial advisor, the regulator said in a bourse disclosure (pdf). The advisor would conduct the fair value assessment on the company’s MTO for five of its subsidiaries, replacing Fincorp, which the FRA suspended last week for three months.

STARTUP WATCH- Glovo leaves Egypt — again: Spanish on-demand delivery startup Glovo has decided to exit the Egyptian market for the second time in less than a year as it looks to become profitable next year, according to TechCrunch. A company spokesperson told the tech publisher that the Egyptian market was too “complex” and that “there is not a clear path to profitability” for the company. Egypt is one of four markets — the others being Turkey, Uruguay and Puerto Rico — that the company has decided to exit. Co-founder and CEO Oscar Pierre said it was a “tough decision to take” but that it was necessary for the company to hit its 2021 profitability targets.

Talk about déjà vu: The Glovo first said they would exit the Egyptian market in May after securing a EUR 150 mn series D funding round led by Lakestar. This prompted the Egyptian Competition Authority to accuse the company of anti-competitive practice when it began directing users to Otlob, the food delivery app owned and operated by Delivery Hero, which owns 16% of Glovo. The ECA demanded that Glovo resume operations in Egypt, which it did less than a month later. The latest decision comes a month after the company secured USD 166 mn in series E funding from UAE’s Mubadala, apparently at a valuation north of USD 1 bn.

The company talked big but couldn’t deliver: Less than three months ago the company was talking about its plans to acquire a 50% share in Egypt’s online delivery market within 18 months, saying it had earmarked EUR 5.1 mn to fund its expansion in Egypt in 2020.

Schools apply for exemptions from 20% foreign ownership cap: Cairo Investment and Real Estate Development (CIRA), the International School of Choueifat, Nermien Ismail School and GEMS are among several private sector schools that have applied for an exemption from the 20% cap on foreign ownership imposed by the Education Ministry last October, Al Mal reports, citing company sources. Investor backlash prompted the ministry to walk back slightly on the plans, announcing in November that it would grant exemptions on a case-by-case basis.

Education Ministry begins to review exemption requests: We reported on Monday that the Education Ministry had issued a directive on 1 January to set up a committee to review exemption requests made by private-sector K-12 schools. In addition, the directive makes it mandatory for all schools with foreign shareholders to provide the Education Ministry with their detailed shareholder structure.

Plunging gas prices are forcing Egypt to change its gas-selling strategy: Egypt will reduce the amount of liquefied natural gas (LNG) it sells via short-term contracts and negotiate long-term agreements in response to plunging gas prices, Bloomberg quoted Oil Minister Tarek El Molla as saying. The government is currently in talks with international customers to sell gas at USD 5 per mn British thermal units under renewable 12-18-month contracts, El Molla said in an interview yesterday during the World Economic Forum in Davos.

Spot contracts to fall this year: Egypt offered 80 spot LNG tenders last year and this is set to fall further this year. “They’re not giving us the value that we want,” El Molla said. “We canceled several LNG tenders last year because the prices that we received don’t even match the cost of production … This year will be even more challenging if we continue seeing the drop in prices.”

Global gas prices hit 45-month low: Gas prices plunged 5.4% yesterday to hit lows not seen since March 2016.

Damietta LNG plant could restart within weeks: El Molla said that the Damietta LNG facility will reopen “in the coming few weeks” ending a six-year hiatus. This could enable Egypt to double its gas exports from 1 bcf/d currently by the end of the year. The plant will output 500 mncf/day then gradually increase to 700 mncf/day, he said. The Damietta plant has been the subject of a long-running legal dispute between the government and plant operator Union Fenosa Gas. The plant was thought to be on the cusp of opening several times last year but the failure to reach a settlement in the dispute resulted in delays.

EGAS cuts Zohr production by 600 mcf/d: The Egyptian Natural Gas Holding Company (EGAS) has cut gas production from the Zohr field by 600 mcf/d to 2.4 bcf/d, the local press quoted unnamed sources as saying. The sources claimed the decision was motivated by a decline in local consumption and high pipeline pressure.

Egypt to cut gas prices for factories in coming fiscal year -sources: The government is studying several proposals that could cut gas prices for factories by another USD 1.5-2 per mn British thermal units, with the new prices expected to come into force at the beginning of the new fiscal year in July, two sources from the Federation of Egyptian Chambers of Commerce told Al Shorouk. One source who attended meetings between industry representatives and the government said that they seek to bring gas prices down to the USD 3.5/mmBtu global average, while another said that Finance Minister Mohamed Maait pledged to cut prices by USD 1-2/mmBtu. Factories in Egypt currently pay on average USD 5.5/mmBtu.

Background: The cabinet last year lowered gas prices for cement, metallurgy, and ceramics manufacturers, heeding the call of lobbyists who have been pushing for changes for years. The cement industry is now paying USD 6/mmBtu, while metallurgy and ceramics firms pay USD 5.5/mmBtu. The government also set up a committee to review the prices every six months. The cabinet then said it is also looking to lower gas prices for petrochemical factories below USD 7/mmBtu.

PHD signs EGP 505 mn refinancing agreement with Ahli United Bank: Palm Hills Developments (PHD) has signed a EGP 505 mn loan agreement with Ahli United Bank Egypt to refinance some its debt, the real estate developer announced in a statement (pdf). The credit facility will replace a medium-term loan previously granted to PHD by the Arab African International Bank. It will refinance outstanding debts linked to its Palm Parks project, as well as funding the project’s updated investment cost and remaining construction work. The agreement marks PHD’s second debt refinancing agreement in little over a month after it signed a EGP 1.1 bn loan agreement with CIB in December.

FRA to bring NBFS firms on board with CBE corporate debt forgiveness initiative: The Financial Regulatory Authority (FRA) is forming a committee to assess how non-banking financial services companies can be brought into the Central Bank of Egypt’s initiative to support financially-distressed companies, the regulator said in a statement. The committee will include representatives from the CBE, FRA, and financial leasing and factoring companies. The initiative, which was launched by the CBE (pdf) last month, requires banks to write-off bad corporate loans worth up to EGP 10 mn and will be in place until the end of the current fiscal year.

Egypt’s ‘Willy Wonka’ is our latest guest on Making It: Hani Berzi, the CEO of Edita, tells us all about the inner workings behind our favorite snack foods. And while there are no oompa loompas running around his factory, his story is one for the books.

You can listen to the episode (runtime: 36:11) on: Our website | Apple Podcast | Google Podcast

Foreign press coverage of the meeting between President Abdel Fattah El Sisi and UK Prime Minister Boris Johson was a mixed bag. The National focused on the partnership agreed at the UK-Africa Investment Summit to support Egypt’s economic growth, social development and drive for financial inclusion. The Guardian went with the human rights angle, reporting that Johnson was being urged by a rights group to confront the Egyptian president over his domestic record.

Other stories worth a moment of your time:

• Egypt’s soft power becomes a daily staple in New York: The Egyptian food ambassador in New York, Zooba, is no longer a weekend special, as many Americans can’t just stay away from all the calories, Grub Street says. New York head chef Omar Hegazi threw away that gluten-free corn pasta and is now using the conventional spaghetti and tubetti.
• King Tut continues his grand tour: A traveling exhibition with over 150 artifacts from Tutankhamun’s tomb ― billed as the largest such display ever to travel outside of Egypt ― is on its way to Boston, where it will remain from 13 June until January 2021, AP reports.
• Mit Al-Huran’s craft of turning old tires into baskets, landscaping materials, and alternative fuels is featured in AFP, which focuses on how the village’s residents turn the skill into profit.