Wednesday, 9 September 2020

Bank ABC is bidding for Blom’s Egypt arm.
Plus: Meet Alfredo Abad, EIB’s Cairo boss

TL;DR

What We’re Tracking Today

Even if you’re not an infrastructure geek, you’ll want to read this morning’s Hardhat interview with the European Investment Bank’s Alfredo Abad, who covers everything from where the EIB is allocating funds (transportation, wastewater) to why it’s not yet on board with what we think is one of the most critical programs the Madbouly government has yet announced: The push to improve water security through desalination.

The EIB was an early pioneer in putting “everything green” at the center of its investment decisions, and the twin imperatives of climate change and ESG are only going to accelerate that trend across asset classes and sectors going forward.

Hardhat is one of two weekly deep dives we take into the industries that are shaping our economy — and our future. It’s presented each Wednesday in association with our friends at Orascom Construction, and we’re proud to have CIRA as our partner for Blackboard, our weekly look at the business of education, which appears every Monday.

What industry should we dive into next? Our plans for this fall and winter include starting research on two more industry verticals (among other products) and we’d love to hear from readers — what do you want to learn about next? Let us know on editorial@enterprise.press.


The sell-off resumed on the EGX yesterday as the benchmark index slumped 1.7% by the closing bell. Every sector finished the session in the red, led by NBFS, real estate, and tech. Clothing company Dice saw the biggest losses, closing 7.7% in the red, while Telecom Egypt fell 7% a day after a report suggested that Saudi Telecom may be looking to reduce its offer for Vodafone’s 55% stake in Vodafone Egypt. Index heavyweight CIB remained comparatively unscathed, falling only 0.4%. Trading was moderate, with EGP 1.2 bn-worth of shares changing hands — 8% above the trailing 90-day average. The EGX30 has now fallen 4.5% since shares began their slide on 30 August, and is down 21.6% year-to-date.

The downbeat performance here at home mirrored developments in the global markets, which saw last week’s US tech sell-off gather pace. Benchmark Wall Street indices fell for the third consecutive session as investors continued to bail on tech stocks following an unprecedented five-month boom that saw valuations reach dot-com-esque levels. Tesla’s James Bond villain-in-waiting saw his stock record its worst ever single-day performance as the tech-dominated Nasdaq lost 4.4%, leaving it 11% off its peak last Wednesday. The S&P 500 lost almost 3% and the Dow closed 2.3% in the red.

After shrugging off events on Wall Street on Monday, European stocks sold-off yesterday, with indices across the continent losing 1-2% by the close of play.

EM stocks, meanwhile, have an entirely different problem: The escalating covid case rate in major emerging markets since late July is starting to put pressure on equities, with the MSCI EM Index falling almost 3% during the period, Bloomberg reports.

Oil prices also took another tumble yesterday, with Brent crude falling more than 5% to USD 39.93/bbl — the first time it has dropped below the USD 40 since June — and US crude plunging 7.2% to USD 36.89/bbl. Unyielding covid infection rates in countries like India, the US, UK and Spain have dampened the demand outlook for the rest of the year, and Saudi Arabia’s state oil company Aramco on Sunday cut its October selling prices, Reuters reports.

Asian shares are down this morning in early trading this morning and both European and US futures are in the red.


Today is the last day to vote in the Senate run-off elections, which will see the remaining 26 elected members nominated to sit in the upper chamber. The first-round of voting last month saw 174 representatives elected to the 300-seat Senate. The president will appoint the remaining 100 members after the results of the run-off are announced on Wednesday, 16 September.


The Health Ministry reported 187 new covid-19 infections yesterday, up from 178 the day before. Egypt has now disclosed a total of 100,228 confirmed cases of covid-19. The ministry also reported 19 new deaths, bringing the country’s total death toll to 5,560. We now have a total of 79,886 confirmed cases that have fully recovered.

Russian airliner, Aeroflot, will relaunch flights between Cairo and Moscow today, operating three trips a week, according to an AeroFlot statement. Today’s Aeroflot flight is already fully booked, said Egypt’s ambassador in Moscow Ehab Nasr in an interview with Sada El Balad’s Azza Moustafa (watch, runtime: 7:38).

Dutch flag carrier KLM also makes its return to Egypt today following a three-year hiatus. The airline will operate two weekly flights between Cairo and Amsterdam from 9 September to 25 October.

EgyptAir will begin operating three flights a week between Cairo and Moscow starting Thursday 17 September. Flights will run Saturdays, Tuesdays and Thursdays. Passengers will be required to present a negative PCR test result issued 72 hours before arrival in Moscow, as per Russia’s anti-covid precautions.

Globally: “AstraZeneca stopped giving shots of its experimental coronavirus vaccine after a person participating in one of the company’s studies got sick, a potential adverse reaction that could delay or derail efforts to speed an immunization against covid-19 for the world,” Bloomberg reports. CNBC also has the story.

enterprise

Military talks between Turkey and Greece at NATO headquarters in Brussels have been postponed until Thursday, Reuters reports, citing unnamed informed sources. With tensions flaring between the two countries in recent weeks over Turkey’s energy exploration in the eastern Mediterranean, the “military de-confliction” talks will not attempt to resolve the territorial dispute, but try to establish a hotline between the two militaries and consistent use of naval call signs, to avoid incidents like the collision last month between Greek and Turkish warships.

The Donald will host a signing ceremony on 15 September between Israel and the UAE to formalize last month’s historic agreement to establish diplomatic ties, Reuters reports, citing a senior White House official.

Never trust the Brits: The UK is threatening to break international law to force through its version of a post-Brexit trade accord with the EU by the 31 January deadline with an air of nonchalance that has stakeholders concerned, the Associated Press reports. The UK had agreed to maintain an open border between Northern Ireland (part of the UK) and EU member Ireland as part of the withdrawal agreement signed earlier this year, but is now trying to bypass that commitment to the understandable chagrin of the EU.

This has raised fears that the UK is about to commit ritual seppuku by crashing out of the EU during the worst global recession of our lifetimes. The GBP-USD rate hit two-week lows yesterday as traders priced in the growing risk of a hard Brexit.


US ELECTION WATCH- King Cheeto could be left searching for pennies as campaigning enters decisive phase: The Donald’s re-election campaign is running short on cash after blowing more than three-quarters of its USD 1.1 bn war chest with 60 days still to go until election day, the New York Times reports. With Trump having splurged USD 800 mn on fund-raising, staff, legal costs and a pre-convention ad-buy, the once-cash-strapped Biden campaign is raking in the donor money and now enjoys a huge financial advantage as campaigning enters the crucial final phase. The situation is so dire that Trump is reportedly now considering pumping in USD 100 mn of his own money to see him through to election day.

Attention all iSheep: Put 15 September in your diaries, as Apple hosts a “special event” to unveil the latest generation of (some of?) its flagship products, Reuters reports. But don’t expect a new iPhone just yet — Bloomberg says the online-only event will focus almost exclusively on the Apple Watch, while the Apple blogosphere suggests it could also feature a new iPad.

enterprise

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and as well as social infrastructure such as health and education.

In today’s issue: We talk to Alfredo Abad, head of the European Investment Bank’s Cairo office, about the bank’s funding plans, obstacles to infrastructure development in Egypt, and how the economic downturn caused by the pandemic is likely to affect investment going forward.

Enterprise+: Last Night’s Talk Shows

Education Minister Tarek Shawki stole the limelight on the airwaves last night, with much of the coverage dedicated to poring over the ministry’s newly-announced plans for the coming school year.

Plans for new academic year: Shawki called in to Yahduth Fi Misr’s Sherif Amer to explain that the restrictions are allowing the ministry to roll-out plans it has been mulling for as long as two years. Each school will still have its own system, deciding at its own discretion how many of the ministry’s recommendations it will follow, and will inform parents of the exact schedules once the academic year starts, he added (watch, runtime: 24:41). Al Hayah Al Youm’s Khaled Abu Bakr also spoke with Shawky to cover the topic watch, runtime: 35:03). We have a complete rundown of the ministry’s recommendations in today’s Speed Round below.

Other key takeaways from the Shawki interview:

  • Measures to prevent leaks: Computer software will generate four different final high school (thanaweya amma) exams to prevent questions from being leaked.
  • The digital divide: There will be digital resources made available to help students prepare for the examinations, which will necessitate setting up digital libraries in poor villages lacking adequate internet.

Covid-19 precautions in schools: Ala Mas’ouleety’s Ahmed Moussa spoke with former health minister Ashraf Hatem who discussed the various precautions students can take to stay vigilant amid the covid-19 pandemic. He didn’t have much to say beyond the standard issue “wear face masks” and “maintain social distancing,” but he notably raised the possibility of a second wave rearing its head in November during the onset of flu season, emphasizing the importance that precautionary measures are enforced in all schools (watch, runtime: 9:03).

New commodities exchange: On Monday night, Al Hayah Al Youm’s Lobna Assal spoke with Ibrahim Ashmawy, the newly-appointed chairman of the forthcoming commodity exchange, who said that the new exchange would contribute to increasing the supply of key goods, thus reducing their prices. Ashmawy added that the first supply outlet has been opened in partnership with the private sector, selling commodities from 30k producers. He noted that the exchange has already held organizational and administrative meetings, but could not confirm when it would go live with trading or which commodities will be made available for trading (watch, runtime: 8:35).

Speed Round

M&A WATCH- Bahrain’s Bank ABC confirms early talks to acquire Blom Bank Egypt: Bahrain’s Arab Banking Corporation (Bank ABC) has confirmed that it’s engaged in talks to acquire the Egyptian business of Blom Bank, saying in a statement that the negotiations are still at early stages. “Such discussions are at a preliminary stage, but there is no certainty that any transaction will be completed,” the bank said.

Background: News that Bank ABC is interested in Blom’s assets was first reported late last month. It then emerged that Bank ABC has asked the CBE for a green light to start the due diligence process. The Bahraini bank is competing with fellow GCC lender Emirates NBD, which is now doing DD and could reportedly value Blom’s Egypt arm at USD 250-300 mn. Blom confirmed earlier this month it is looking to sell its Egypt assets as its home country suffers its worst economic crisis in decades. Both Reuters and local media report that Blom has hired CI Capital to advise on the sale. Another Lebanese bank, Bank Audi, is also eyeing an exit from Egypt, and could soon revive talks with First Abu Dhabi Bank, a frontrunner in its potential takeover.

Bloomberg wonders whether Fawry shares are overvalued, asking whether there’s still gas in the tank after a 300% appreciation that has left the stock looking expensive when you consider “the Egyptian firm’s trailing 12-month price-to-sales ratio is 20, about the same as credit-card giant Mastercard, whose revenue is significantly greater and recent profit margin four times higher.” Fawry’s rally has taken its share price to over EGP 27 a share, nearly four times its EGP 7 price in mid-March, leading it to become the first Egyptian tech company to exceed a market cap of USD 1 bn.

Can you put a price on the future? The pandemic has been a boon for the wide-ranging e-payments firm, with profits surging 166% to EGP 70.5 mn and revenues up 47% to EGP 549.3 mn in 1H2020 compared to the year before. But Bloomberg says some analysts don’t see that as enough to justify its EGP 20 bn market value (c.USD 1.3 bn), which places it among Egypt’s 10 largest companies in terms of market cap. Telecom Egypt and Elsewedy Electric, two of the country’s most valuable businesses, have reported far larger quarterly profits and revenues this year than the EGP 70.5 mn generated by Fawry in 1H2020. Other figures, including a high 14-day relative strength index (RSI) that remained well above 70 for the past two weeks, suggest Fawry’s stock price “may have risen too far, too fast,” the business news information service says. A stock is usually considered overbought if its RSI crosses the 70 threshold.

Fawry is poised to benefit as Egypt’s banking penetration rate rises from the sub-sub-basement. World Bank data in 2017 showed that only a third of Egyptians aged 15 and older have bank accounts, with nearly all utility and bill payments made in cash, notes Bloomberg. This comes as the CBE is getting banks to focus their strategies on driving financial inclusion and launching new fintech services. Fawry’s wide presence and first-move advantage will be challenging for newcomers to beat,

What’s more, Fawry’s performance may encourage more investment in the e-payments sector, Azimut Egypt Asset Management managing director Ahmed Abou El Saad says. Already, the National Bank of Egypt is in the process of purchasing a 20-25% stake in Raya e-payments arm Aman and consumer electronics distributor MM Group could soon be the first company to launch a post-pandemic IPO in Egypt when it sells shares in its fintech investment arm as early as 1Q2021. Investor demand for exposure to the sector will increase the valuations of e-payments firms in the pipeline to IPO, Abou El Saad said.

INVESTMENT WATCH- PE giant Actis is looking to expand its USD 1 bn investment portfolio in energy projects in Africa, but hasn’t yet made any commitments, partner and head of Actis’ Investor Development Group Neil Brown said, according to Bloomberg. The leading emerging-market firm is planning to take part in two upcoming tenders by the South African government, one tender that will add 2 GW of electricity capacity from independent power producers and another to build new wind and solar power plants. The firm is expected to close a new investment in Egypt’s renewables sector by the end of the year, head of Middle East & North Africa business Sherif El Kholy told Enterprise in July. Actis has energy investments in 25 countries across the continent including Egypt, Nigeria, South Africa, Senegal, and Kenya.

REGULATION WATCH- Changes to MTO rules, how real estate funds operate and guidance on sukuk are highlights of sweeping changes to CMA regs: Regulations governing real estate funds and mandatory tender offers are set to change after the Madbouly Cabinet yesterday approved legislative amendments to the Capital Markets Act, head of the Financial Regulatory Authority Mohamed Omran said in a statement. The changes allow the funds, which invest up to 80% of their capital in real estate properties, to allocate capital “more flexibility,” Omran said. Among the most important changes for real estate funds:

  • The changes allow a real estate fund to invest in properties owned separately by an investor in that same fund, with approval of the other subscribers in the fund.
  • Simplifies real estate appraisal: Funds will only need to use one FRA-certified consultant when conducting real estate appraisals.
  • Allow real estate funds to invest in any properties except those that are legally contested, subject to court orders or land allocated by the state to another party. It is unclear where the limits were before the amendments.

Clear guidance on acceptable forms of sukuk: The amendments also specify five types of Sharia-compliant sukuk through which funds can transact. Those include sukuk specifically for industrial and infrastructure projects (sukuk al istisna), and sukuk to fund agriculture and irrigation (sukuk al muzara’a and sukuk al musaqah). They also cover less specific types including sukuk al salm, which involve a promise to purchase an asset in the future, and sukuk al istithmar, through which a fund can pool together shares or sukuk certificates and sell them on as securities.

Easing MTO requirements: The changes also amend rules governing mandatory tender offers (MTO) in M&As. They waive a previous requirement that obliged shareholders who recently acquired over 75% of a listed company’s shares through an MTO to submit another one for all the remaining shares if they want to increase their stake further. This means majority shareholders owning more than 75% would be able to increase ownership without needing to make an MTO for all the remaining shares. An MTO requirement is automatically triggered if shareholders and related parties own more than or acquire over 33% of the company’s shares.

Other changes include allowing locally licensed private equity funds to sink more than 25% of capital raised into a single transaction, a change Omran says is part of a string of regulations to expand the range of funding available through channels other than commercial banks. We took note of this earlier this year. The changes would also lower the capital requirements for credit rating companies that focus on SMEs, Omran added without giving further details.

Could industry see lower gas prices this month? A government committee that will decide on gas prices to industry is reportedly considering lowering the price of natural gas when they meet this month, Masrawy reports, citing government sources. Gas prices for all industries could be lowered to at least USD 4 / mmBtu from USD 4.50 / mmBtu this month, when the gas pricing committee meets, the source noted. The committee has been studying consumption and prices in the local market and concluded that a USD 0.50 discount would be appropriate to support industry players, the source said without elaborating.

If true, this wouldn’t quite meet the USD 2.50-3.50 / mmBtu manufacturers have been angling for. The heads of export councils met with government officials last week to push for the discount, while a number of manufacturers took the local press earlier this week to advocate for a price cut and recommend a fluid pricing mechanism pegged to global prices. The government has cut gas prices twice in the past year: once in October and six months later as part of its stimulus measures to protect the economy from the fallout of the covid-19 pandemic.

Education Ministry’s guidelines out: blended learning for K-9; high school fully online; revamp of Thanaweya Amma: The Education Ministry has finally released guidelines for reopening public and national private schools on 17 October giving administrators leeway on what the upcoming hybrid academic year will look like. Schools across the country will be permitted the option to follow either a staggered weekly rotation schedule or a single shortened week, announced Education Minister Tarek Shawki at a televised press conference yesterday (watch, runtime 42:35). While every school will determine its precise schedule based on its own circumstances, the Education Ministry has issued a set of recommendations.

What are the recommendations? That K-3 students go to school in person at least three days a week, while grades 4-6 should have two days of in-person learning. Middle schoolers will be divided into three separate groups based on grade level and will attend in person classes twice a week on alternate schedules, while high schoolers will be fully online.

School administrators are currently tasked with drafting up their own schedules in the coming weeks with Ministry recommendations in mind. Administrators may elect to bring in students more frequently as long as they are capable of maintaining the ministry’s 1.5m social distancing rule in classrooms at all times. Instruction on the ministry’s core curriculum will be made available through several state-owned television channels, YouTube, edmodo.org and a number of the ministry’s education platforms at all grade levels.

A revamp of Thanaweya Amma: The standardized Thanaweya Amma exam will be amended and electronically administered this year with a shift away from a test focused on memorization to one that places more emphasis on comprehension. There will be multiple versions of the exam as opposed to a single standardized testing sheet for everyone in the country, akin to the SATs, said Shawki. The test will be taken on tablets provided by the ministry in examination facilities, while those without access to a tablet will be permitted to complete the test on paper and electronically graded, he added.

Students will also be getting the chance to retake the full exam or certain subjects in a follow-up test scheduled for August if they seek to improve their scores. Only the highest scores students earn on individual subjects will be considered in college admissions. Shawki also floated the idea of allowing students to retake the test a third time.

We’ll be getting more details on technical and STEM education, the status of international private schools and a host of other hot button issues related to education at a forthcoming press conference.

enterprise

REGULATION WATCH- Gov’t issues new regs to crack down on illegal construction: Any transaction on property, standing or under construction, will now require a certificate from the relevant governorate clearing the premises of any building violations, according to a decree issued by the Justice Ministry carried by Youm7. Exceptions will only be made for (a) property with a pre-existing contract that includes the clearance, provided no changes have been made to the property since, and (b) carriers of certificates demonstrating seriousness of clearing any outstanding violations. The government has in recent months stepped up nationwide efforts to address building code violations, giving citizens, contractors and developers until the end of September to legalize the status of their properties.

In related news: “Final Notice” signs are being placed on buildings found in violation of the building code across the Greater Cairo governorate ahead of the deadline at the end of the month, Al Mal reports.

Modern Waterproofing’s (Bitumode) BoD approved delisting the company from the EGX and taking it private, according to a bourse disclosure (pdf). Bitumode will make a mandatory tender offer to its shareholders on the EGX worth EGP 3.91, which was the same price in Sika Egypt’s MTO when it purchased 119 mn shares in Bitumode in June, the company said in a disclosure (pdf). The EGX placed Bitumode on its “D-list” as it should have delisted after a majority stake acquisition.

CLARIFICATION- The news that SAT and SAT Subject Tests have been canceled indefinitely in Egypt due to “persistent test security incidents” was announced in an email by nonprofit organization College Board, rather than the nonprofit ETS as we reported on Sunday. ETS develops and administers the SAT exams while College Board sponsors the testing programs and decides how they will be built, administered and used. The story has since been corrected on our website. You can learn more about the two organizations here.

Egypt in the News

It’s a slow morning in the foreign press: The Economist is out with a piece on the recent move by authorities to prosecute 54 mn people who didn’t vote in last month’s Senate elections. The piece mulls whether the decision is an empty threat to spur people to vote or if the state will actually go through with the prosecution and collect the EGP 27 bn in fines. But as anyone who has lived through the 2.5 mn or so elections and referenda we’ve had since 2000 can tell you: This story is evergreen — it appears after every election, and then quietly fades away.

Meanwhile, Egypt has walk-on parts in two FT stories this morning, including a look at how China’s Mideast strategy is winning at the expense of the United States (courtesy of the Opinion section) and then a bigger role in an explainer headlined What is at stake in the eastern Mediterranean crisis?

Diplomacy + Foreign Trade

Topping news on the diplomacy and foreign trade front this morning: Egypt has extended a ban on sugar imports and the irrigation minister visited South Sudan to discuss cooperation on water projects.

The Trade and Industry Ministry renewed its ban on imports of white sugar for another three months and imposed a new ban on raw sugar imports for the same period, according to a ministry statement. Pharma manufacturers are exempted from the decision, the statement notes. A previous ban imposed in June was due to expire this month. The move is meant to protect sugar producers from a potential flood of cheap imports, as sugar prices fell in parallel with the crash in the oil markets, Trade Minister Nevine Gamea said. Egypt had planned to increase sugar production to 2.5-2.6 mn tonnes in FY2020-2021, up from 2.48 mn tonnes last year.

Egyptian exports to Brazil have surged 74% in the three years since the Egypt-Mercosur trade agreement was signed, the Brazil-Arab News Agency (ANBA) reported, marking the occasion of the third anniversary on 1 September. Egypt’s imports of Brazilian products, meanwhile, have increased by more than a fifth during the period.

Meanwhile, Nile diplomacy continues: Irrigation Minister Mohamed Abdel Aty was in South Sudan yesterday to discuss cooperation in water resource management and irrigation projects following an invitation from South Sudanese Water and Irrigation Minister Manawa Peter Kadkouth, according to a cabinet statement. Abdel Aty is expected to inspect a number of Egypt-developed drinking water and irrigation canal projects that began in 2014 after a technical cooperation and development agreement was signed between the two countries. Expect South Sudan to feature heavily in our diplomatic agenda as the stalemate on GERD continues.

hardhat

Enterprise talks to: Alfredo Abad, head of the European Investment Bank’s Cairo office: Since it inked its first agreement here in 1979 to help widen the Suez Canal, the European Investment Bank (EIB) has been a key international partner for Egypt and investor in our critical infrastructure needs. Investing more than EUR 9 bn over the subsequent four decades, the bank has provided financial support for the nation’s transportation sector, its water infrastructure, and conventional and renewable forms of power generation, as well as working with private equity groups and local banks to channel funding to the private sector.

We recently sat down for a chat with Alfredo Abad, the head of the EIB’s Cairo office, to discuss the bank’s plans. Having worked at the EIB since 2005 and previously serving as it’s representative for the Southern Africa region, Alfredo was appointed to head the bank’s Cairo office in November 2019. He has three decades of experience working on public and private sector development in emerging countries in Europe, Africa and South America.

The key takeaways:

  • Accessing funds remains the government’s biggest challenge when it comes to upgrading the country’s infrastructure.
  • We could see EIB finance for the Alexandria wastewater treatment plant disbursed before the end of the year.
  • The bank isn’t yet looking to get on board with the government’s desalination agenda.
  • The economic downturn caused by the covid-19 pandemic won’t disrupt future funding for Egypt…
  • …and neither will the bank’s pledge to end fossil fuel commitments by the end of next year.
  • The pandemic is unlikely to dent Egypt’s status as an attractive investment destination for infrastructure investors.

Edited excerpts of our conversation:

The EIB is big on transport: The transportation sector is an area where we've financed several projects in the past, and I think fits very well into the bank’s strategy, which supports public transport and green forms of transport. Under the EUR 1.1 bn agreement sealed a few months ago, we are financing three projects that should be developed in different stages, and we will mobilize the funding for the government to use in the sector over the next year. This particular loan will include sub projects, two of them in Alexandria — the Ramy tram and the Abu Qir railway — as well as the development of Cairo Metro Line 2. We are very involved in the metro lines, and are helping to finance the third phase of Metro Line 3, as well as the rehabilitation of lines 1 and 2.

A EUR 120 mn loan for the Alexandria West Wastewater Treatment Plant could be disbursed before the year is out: The Alexandria West Wastewater Treatment Plant agreement was signed in December 2019 and will increase the capacity of the existing treatment plant from 460k cbm/d to 600k cbm. This will upgrade the treatment quality from primary to secondary treatment to serve about 2.5 mn people in the Alexandria governorate. In addition, it will reduce greenhouse emissions by using wastewater treatment to generate biogas energy, which will be used as a source of power to operate the plant. We are in the process of discussing with the Holding Company for Water and Wastewater all the conditions for the implementation of the project. We plan to actually start disbursement by the end of this year or early next year.

The Tanta-Mansoura-Damietta railway project remains under review, but we might see some movement next year: The project is still under appraisal, but we have signed a cooperation agreement with the government to provide technical assistance. As part of our appraisal we are now completing some of these studies, but until we’ve completed them it will be very difficult for us to move forward. But we are making progress and I expect that in 2021 we can take it to the EIB board.

The bank probably won’t be getting involved in the government’s desalination push just yet: The EIB has financed desalination plants in other parts of the world, but we would have to look at this on a case-by-case basis because not all plants are economically viable. We would need to look at the economics of the proposal, what is the demand and what are the tariffs that can be applied. It could be a potential area but it remains something to be explored.

We have been providing technical advisory services to the Irrigation Ministry and we are discussing strategy with other partners in the EU, but this is in a very early stage. But we’re moving with caution in this area because private sector involvement has not always been the solution in many parts of the world that have adopted PPP in the water sector.

Accessing funding is the government’s biggest challenge when it comes to upgrading infrastructure: I think this government is aware that there are lots of needs to invest in infrastructure: quite a lot of the infrastructure has become obsolete, and there’s a lack of maintenance. We are all aware that the government undertook strong economic reforms and we see now that there are a lot of projects materializing that are addressing some of these challenges.

Clearly the government requires large amounts of funding, and this is where it is putting a lot of emphasis. International lenders like EIB and other partners are offering this long-term funding that is needed for large infrastructure.

We've seen also that big projects, like the Benban plant, required a lot of time and negotiations, but it shows that the government wants to engage the private sector, and provided that the right regulatory framework and incentives are in place, it will attract private investors. I would say that it’s the beginning but it’s a very important beginning. The challenges are diverse but I think there’s a strategy in place that will set a direction to upgrade the country’s obsolete infrastructure.

Egypt should start with a pilot green bond issuance to minimize risk: We are very much supportive of green bonds. We were the first international financial institution to issue green bonds in 2007 and currently we issue the largest amount of green bonds among international financial institutions (IFIs). We have found after 15 years that it’s a successful model globally. As far as Egypt’s concerned, and in order to minimize risks with green bonds, Egypt could start with a pilot phase. There is a lot that can be learned from the experiences that we and other IFIs have applied across the world.

Greater incentives are needed, especially when it comes to infrastructure projects in rural areas: For private investors obviously they will be looking at returns based on tariffs, and these are reflective of market cost right now. I think this will be part of a bigger strategy to reform the water sector to make it more attractive to private investors. Tariffs are one thing but it is also about other incentives. What is the incentive for investors to go to rural areas where the target population is maybe below 1 mn people? It’s obviously a challenge to provide these incentives to attract investment to these more vulnerable areas. Most likely this will remain part of the government’s role in the years to come. The government is also talking about desalination plants and that’s an area where there is some interest from the private sector.

The bank’s pledge to end funding for fossil fuel projects by the end of 2021 won’t affect its existing projects: It will not have any impact. We are focusing already on renewable energy and efficiency programs. In the transport sector for example, we are supporting green transport. At the Alexandria wastewater treatment plant, we are trying to reduce CO2 emissions. This is a critical component, not specifically to finance one renewable project, but to look at this in a holistic approach. This is something to which we are committed and we want to become the bank of reference for climate projects.

The economic downturn in Europe won’t affect EIB funding allocated to Egypt: Funding delays or reallocation isn’t on the table at all. The external lending mandate is part of the programs to which the EIB has allocated resources, and priorities inside the EU will not cause us to reallocate funding from outside of the EU. We continue to be firmly committed to support our partners in Egypt and the Near East region.

And the pandemic is unlikely to have a discernible impact on investment inflows into infrastructure projects: The private sector will need to take their own views on the current situation, but I think Egypt has demonstrated that it is an attractive place for investors. The country has gone through a difficult period of economic reform but the positive results were already quite visible in 2019. You see the investments in infrastructure, the number of tourists visiting the country, and how investors were coming to Egypt. And today the country is still key for investors who want to target the regional market, and has the economic fundamentals to attract investment. Some areas may still need some additional reforms but from what I’ve seen the government is working on that, and wants to attract investors and financial institutions. Egypt should remain one of the most attractive markets among emerging economies after covid.

Your top infrastructure stories for the week include:

  • Electricity privatization deadline pushed until 2025: The government has extended the timeline to privatize the electricity sector by two years, giving the state’s electricity companies until 2025 to complete the transition.
  • Tender awarded for Sokna-New Alamein high-speed rail: An Egyptian-Chinese consortium was awarded a tender for the high-speed rail link between Ain Sokhna and New Alamein, giving it responsibility for the design, finance and operation of the project.
  • SFE to invest in desalination: The Sovereign Wealth Fund of Egypt (SFE) is investing EGP 30 bn into desalination projects as part of the first phase of the government’s EGP 134.2 bn plan to build desalination plants across the country.
  • SFE to set up infrastructure sub-fund: The Sovereign Fund of Egypt will set up a sub-fund dedicated to channelling investments into infrastructure, Planning Minister Hala El Said announced.
  • ElSewedy wins Sadat City substation contract: ElSewedy Electric for Trading and Distribution has signed a EGP 355.5 mn EPC contract to build an electrical substation in Sadat City.
  • The government is assessing setting up logistical zones across north and south Sinai to facilitate the movement of goods, a cabinet statement said on Tuesday. The first centers will likely be set up in Salam city (east of Port Said), Ras Sidr and the Sinai “Technology Valley” area.

The Market Yesterday

Share This Section

Powered by
Pharos Holding - http://www.pharosholding.com/

EGP / USD CBE market average: Buy 15.74 | Sell 15.84
EGP / USD at CIB: Buy 15.73 | Sell 15.83
EGP / USD at NBE: Buy 15.75 | Sell 15.85

EGX30 (Tuesday): 10,951 (-1.7%)
Turnover: EGP 1.2 bn (8% above the 90-day average)
EGX 30 year-to-date: -21.6%

THE MARKET ON TUESDAY: The EGX30 ended Tuesday’s session down 1.7%. CIB, the index’s heaviest constituent, ended down 0.4%. EGX30’s top performing constituents was CIRA, up 0.1%. Yesterday’s worst performing stocks were Dice down 7.7%, Telecom Egypt down 7.0% and Orascom Development Egypt down 5.8%. The market turnover was EGP 1.2 bn, and foreign investors were the sole net sellers.

Foreigners: Net short | EGP -107.7 mn
Regional: Net long | EGP +27.3 mn
Domestic: Net long | EGP +80.4 mn

Retail: 73.9% of total trades | 75.1% of buyers | 72.6% of sellers
Institutions: 26.1% of total trades | 24.9% of buyers | 27.4% of sellers

WTI: USD 36.89 (-7.24%)
Brent: USD 39.89 (-5.05%)

Natural Gas: (Nymex, futures prices) USD 2.37 MMBtu, (-8.62%, October 2020 contract)
Gold: USD 1,937.90 / troy ounce (+0.19%)

TASI: 8,089 (+0.49%) (YTD: -3.57%)
ADX: 4,519 (+0.26%) (YTD: -10.96%)
DFM: 2,287 (+0.73%) (YTD: -17.25%)
KSE Premier Market: 5,815 (+0.14%)
QE: 9,760 (+0.36%) (YTD: -6.38%)
MSM: 3,701 (-0.14%) (YTD: -7.03%)
BB: 1,402 (-0.18%) (YTD: -12.91%)

Share This Section

Calendar

September: The Egyptian Federation for Securities will hold elections for its board of directors after they were postponed in March due to the lockdown.

September: The General Authority for Investment (GAFI) will host a virtual meeting with the Arab-German Chamber of Commerce and Industry and some 120 German companies to discuss investment prospects in Egypt.

5-9 September (Saturday-Wednesday): China International Fair for Trade-In Services (CIFTIS), Beijing National Convention Center, China. Registration can be found here.

8 September (Tuesday): The Education Ministry will announce what the school year will look like for both private and public schools.

8 September (Tuesday): Online Egyptian-Bahraini Businessmen Association meeting to discuss mutual trade and investment opportunities.

8-9 September (Tuesday-Wednesday): Run-off Senate elections.

9 September-25 October: KLM to run passenger flights to Cairo for the first time since 2017.

12 September (Saturday): Court session for Egyptian Resorts Company lawsuit against the Tourism Development Authority.

14 September (Monday): Postponed EU-China summit in Leipzig to be held as a video conference, focus on trade.

14-15 September (Monday-Tuesday): The Chemical Industries Export Council will organize a virtual conference to discuss export options for Egyptian chemical exporters in Kenya and Uganda.

15 September (Tuesday): 2019-2020 academic year ends for Egyptian universities.

Mid-September: Proposed time slot for UAE-Israel normalization agreement signing ceremony which will be held in Washington, US.

15-16 September (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

16 September (Wednesday): The last day for the final results of the senate elections to be announced.

20 September (Sunday): A Cairo administrative court is due to issue a ruling in a third-party lawsuit demanding the government block YouTube in Egypt for carrying an allegedly sacreligious video. The case is an infamous 2012-vintage lawsuit still wending its way through the courts.

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

24-25 September (Thursday-Friday): The European Union will discuss imposing sanctions on Turkey to limit the country’s ability to expand its search for oil and gas in contested eastern Mediterranean waters.

27 September (Sunday): Former Finance Minister Youssef Boutros Ghali to be retried on charges he squandered public funds in a case related to the printing of coupons for butane canisters.

End of September: Last chance to settle building code violations for illegal buildings.

Late October or November: Voters head to the polls to elect a new House of Representatives. Election dates still TBD.

1 October (Thursday): House of Representatives reconvenes for its sixth and final legislative session before elections for the house later in October or November.

4 October (Sunday): Senate convenes for its first session.

6 October (Tuesday): Armed Forces Day.

8 October (Thursday): National holiday in observance of Armed Forces Day.

17 October (Saturday): 2020-2021 academic year begins for K-12 students at state schools and students in public universities.

23-31 October (Friday-Saturday): El Gouna Film Festival, El Gouna, Egypt.

29 October (Thursday): Prophet Mohamed’s birthday (TBC), national holiday.

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

2 November: Former Civil Aviation Minister Ahmed Shafik faces retrial at Cairo Court of Appeals in so-called Aviation Ministry corruption case.

4-5 November (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

4-7 November (Wednesday-Saturday): Cityscape Egypt Expo, International Exhibition Center, Cairo

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

15 November (Sunday): Egyptian Tax Authority’s online intro seminar on new electronic invoice system for first tranche of companies transitioning to e-filing program.

1 December (Tuesday): The IMF will conduct a first review of targets set under the USD 5.2 bn standby loan approved in June (proposed date).

15-16 December (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

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

25 December (Friday): Western Christmas.

1 January 2021 (Friday): New Year’s Day, national holiday.

7 January 2021 (Thursday): Coptic Christmas, national holiday.

13-31 January (Wednesday-Sunday): Egypt will host the 2021 Men’s Handball World Championship at the Giza Pyramids

25 January 2021 (Monday): 25 January revolution anniversary / Police Day.

26-28 January (Tuesday-Thursday): Future Investment Initiative, Riyadh, Saudi Arabia

28 January 2021 (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

4 February 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

18 March 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

12 April 2021 (Monday): First day of Ramadan (TBC).

25 April 2021 (Sunday): Sinai Liberation Day.

29 April 2021 (Thursday): National holiday in observance of Sinai Liberation Day.

29 April 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

3 May 2021 (Monday): Sham El Nessim.

6 May 2021 (Thursday): National holiday in observance of Sham El Nessim.

12-15 May 2021 (Wednesday-Saturday): Eid El Fitr (TBC).

1 June 2021 (Tuesday): The IMF will conduct a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

10 June 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

26-29 June 2021 (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center

22 July 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

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. © 2020 Enterprise Ventures LLC.