Egypt’s renewables + infrastructure are getting a slice of Actis’ new USD 4 bn regional fund

Good morning, ladies and gents, and welcome to what is (so far) a relatively calm news day.

We love writing to all of you each morning, but there’s nothing we love more than to see how engaged our readers are. A number of you wrote to us over the weekend to give us your two cents on our latest edition of Your Wealth, our special monthly briefing, in which we dipped our toes into the expansive world of art. We read each and every one of your messages (even the multi-paragraph emails) and truly appreciate you all taking the time to drop us a line with your feedback.

Calling all golf aficionados: Our friends at Somabay are hosting a three-day golf tournament over the upcoming three-day weekend (8-10 October) on the Somabay Championship Gary Player Course. The tournament, which will follow the rules of golf approved by the Royal & Ancient Golf Club of St Andrews, will be held under the auspices of the Egyptian Golf Federation. You can register for the event by contacting ghada@somabay.com or calling +201223934205, and find out more about special accommodation packages here.

It’s PMI day, with the September figures for Egypt, Saudi Arabia, and the UAE due out here at 6:15am — just a few minutes after our usual dispatch time. The recovery of Egypt’s non-oil private sector stalled in August despite growth in output and demand, after business conditions rebounded in July.

Other news triggers over the coming weeks:

• Foreign reserve figures for September should be out this week.
• Inflation data for September will land on Saturday, 10 October.

We’ll have a final list today of candidates standing in the upcoming House of Representatives elections that are scheduled to kick off later this month and run through early December, according to the National Elections Authority public timeline. Voters go to the polls to elect a new House of Representatives in a multi-stage process starting 21 October (voters abroad) and 24 October (in Egypt).

Investors will be able to bid on industrial land in manufacturing zones this week, said Mohamed El Sayed Fadel, head of the Trade Ministry’s Industrial Development Authority, according to Al Mal. The ministry has set specific industries and projects that can be set up in these zones based on market needs, Minister Nevin Gamea said yesterday (watch: runtime: 19:05).

The Health Ministry reported 108 new covid-19 infections yesterday, up from 109 the day before. Egypt has now disclosed a total of 103,683 confirmed cases of covid-19. The ministry also reported 11 new deaths, bringing the country’s total death toll to 5,981. We now have a total of 97,355 confirmed cases that have fully recovered.

The ministry is now gearing up for a potential second wave of infections, with President Abdel Fattah El Sisi stressing yesterday the importance of being prepared, Ittihadiya said in a statement.

New preventative measures for stopping the spread of covid in schools: Classes will be closed for 28 days if more than one case of covid-19 is detected within a two-week period, according to new guidelines for public, private and international schools published by the Education Ministry yesterday. The entire school will be shuttered for 28 days should more than one classroom be closed in a two-week period. On her first night back on the airwaves, Kelma Akhira’s Lamees El Hadidi got the details on the Education Ministry’s guidelines for containing covid-19 infections in schools from Minister Tarek Shawki, who noted that these policies were put in place in coordination with the Health Ministry (watch: runtime: 4:58).

Pilgrims returned to Mecca yesterday after the government lifted its Umrah ban, reviving the holy site that has been all but deserted for the past seven months, Reuters reports. Only local residents were allowed into the holy site with a 30% maximum capacity, or 6k people a day, with international pilgrims to be allowed entry starting from 1 November.

Almost half the jobs in the Middle East’s aviation-dependent industries may be lost this year as a result of border closures that have slashed the industries’ contribution to GDP, the International Air Transport Association (IATA) has said. The trade association urged countries to ramp up covid-19 testing “as an alternative to restrictive quarantine measures” to avoid further job loss in the region.

Middle Eastern sovereign wealth funds are helping investment firms splurge on lending to major corporations battered by the pandemic, as private borrowing becomes increasingly popular thanks to the flexibility and privacy it offers compared to conventional forms of financing, the FT reports. Abu Dhabi’s sovereign wealth fund, Mubadala, teamed up with private equity firm Apollo earlier this year to exclusively seek out big ticket loan agreements for no less than USD 1 bn each, with an eye to loan out USD 12 bn in only three years.

Uber has offloaded a stake in its freight arm for USD 500 mn to a group of private equity firms as the company looks to focus on its core business and recover from painful losses suffered during the pandemic, the FT reports.

Go long on Musk: The space economy will more than triple in size over the next decade to become a USD 1.4 tn industry, a Bank of America analyst wrote in a note picked up by CNBC. With record investments and B2B spending largely unaffected by the pandemic’s outbreak, the bank is estimating that based on the industry’s growth rate over the past two years, revenues will grow from USD 424 bn last year to around USD 1.4 tn in 2030, CNBC reports.

In international miscellany:

• Facebook is preparing to defend itself against potential anti-trust lawsuits, arguing in a legal document that it would be expensive, nearly impossible, and harmful to users to break up its social media empire, the Wall Street Journal reports. This preemptive defense comes as the House Antitrust Subcommittee prepares to announce the findings of its investigations into Facebook, Google, Apple, and Amazon later this month.
• Things are continuing to escalate in the Caucasus: Armenian forces have escalated clashes with Azerbaijan, firing rockets at its second city of Ganja, killing one civilian and wounding four, Reuters reports.

US ELECTION WATCH- Presidential hopeful Joe Biden is leading by his widest margin in two separate likely voter polls — one conducted online by Reuters and Ipsos following incumbent Donald Trump’s covid-19 diagnosis, and another over the phone by Wall Street Journal and NBC News following last week’s debates. Biden’s 10-point lead comes as many US citizens believe Trump would have avoided catching the virus if he hadn’t played down the pandemic from early on, says Reuters. The former vice president led by 14 points even before Trump’s confirmed diagnosis, according to the WSJ-NBC poll.

Meanwhile, Trump’s health appears to be improving but might have been worse than initially thought, according to Reuters. His doctors are monitoring his lungs after a drop in his blood oxygen levels, but refused to give details of what they’re seeing, says the newswire. The president could be released from the hospital and return to the White House today to continue a five-day treatment of Remdesivir.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Education leaders give their opinions on Egypt’s policy of internationalization and reform to retain more students and become an education hub.

The Education Ministry’s new policies to handle any covid-19 outbreaks in schools led the conversation on the airwaves last night, with Al Hayah Al Youm’s Mohamed Sherdy (watch, runtime: 3:30) and Masaa DMC’s Eman El Hosary (watch, runtime: 14:00) taking note. We have the details in What We’re Tracking Today, above.

A meeting today between Libyan officials in Cairo ahead of upcoming peace talks in Geneva was also on Kelma Akhira’s Lamees El Hadidi’s radar. The Libyan delegations are set to meet with US ambassador Jonathan Cohen (watch, runtime: 2:27).

Tuition fee exemptions for children of pensioners, martyrs, and others: The government is waiving EGP 1.2 bn-worth of tuition fees at public schools for the children of martyrs from the 25 January revolution and pensioners, Education Minister Tarek Shawki told Kelma Akhira’s Lamees El Hadidi (watch: runtime: 4:58). The Social Solidarity Ministry is also dishing out another EGP 320 mn to cover tuition fees for 1 mn students who do not meet the conditions of the Takaful and Karama program, Minister Nevine El Kabbaj told Lamees (watch, runtime: 18:28).

Egypt has begun manufacturing plasma derivatives for the first time as part of its covid-19 treatment plan with the help of a “major” international company, presidential advisor for health affairs Mohamed Awad Tag Eldin told Ala Mas’ouleety’s Ahmed Moussa. We could soon move to export the plasma, Tag Eldin suggested (watch, runtime: 21:42).

Some 420k prepaid water meters have been installed in buildings across the country, with another 60k set to be installed soon, Holding Company for Drinking Water and Sewage head Mamdouh Raslan told Masaa DMC’s Eman El Hosary. Raslan also noted that the company has contracted e-payments player Fawry, among others, to allow citizens to top up their meters from their points of sale (watch, runtime: 5:32).

PRIVATE EQUITY WATCH- Actis eyes Egyptian renewables, infrastructure projects for new Actis 5 fund: Emerging markets private equity giant Actis is looking to raise USD 4-4.5 bn to set up a new international fund, Actis 5, to invest in renewable energy and infrastructure projects with a particular focus on the Middle East and North Africa, partner and head of MENA Sherif El Kholy told Hapi Journal. The firm is considering investing in Egypt’s wind farms operating under a build-own-operate framework as well as combined-cycle power generation projects, Kholy said in a nod to the stake in the Siemens-built plants the firm bid for last year. The new fund will only be open to institutional investors and is expected to be up and running by the end of the year. Actis is also targeting water desalination and treatment projects through its USD 1.2 bn infrastructure fund. It is unclear how much of these investments will be earmarked specifically for Egypt.

The firm is open to the Sovereign Fund of Egypt (SFE) participating in Actis 5: “We have not previously discussed the idea of the SFE ​​subscribing to the fund, but there is nothing to prevent its participation if there is a desire to do so,” El Kholy said. Actis and the SFE previously signaled intent to cooperate on investments, signing an MoU earlier this year that could see the two coordinate on energy and infrastructure projects. The SFE has said it plans to prioritize infrastructure in light of the covid-19 pandemic, setting a specialized sub fund which last month channeled EGP 30 bn in investments towards the first phase of the government’s EGP 134.2 bn plan to build desalination plants across the country.

Background: The announcement comes a day after Bloomberg published statements by Torbjorn Caesar, a senior partner at the firm, who said that the fund plans to pivot towards longer-term investments in energy and infrastructure assets. El Kholy announced in July that the fund is aiming to close a new investment in Egypt’s renewables sector by the end of the year, while the company said last month that it is looking to increase its holdings in African energy projects, without giving specifics.

M&A WATCH- Has Ezdehar found a buyer for its stake in Dsquares? Lorax Capital Partners is reportedly looking to acquire Ezdehar Egypt Mid-Cap Fund’s 22.5% stake in loyalty services provider Dsquares, the local press reports, citing sources with knowledge of the matter. The sale could be worth more than double what the PE outfit paid for its stake two years ago, the sources suggested, stopping short of pointing to a specific value for the transaction. Ezdehar’s founding partner Emad Barsoum said last week that it is planning to exit Dsquares, as well as two other companies, in the coming six months. Lorax Capital is an Egypt-focused private equity firm that manages the Egyptian-American Enterprise Fund’s funds and makes investments on its behalf.

Upmarket real estate developer Sodic is on track to begin delivering units in its Eastown District New Cairo (EDNC) complex in 2021, the company said in a statement (pdf). The company has so far signed EGP 1.7 bn in contracts with construction firms and over 50% of the construction work has now been completed. As the commercial component of Eastown, EDNC is the company’s first non-residential offering in East Cairo, and will provide 90k sqm of commercial and retail space. Sodic Managing Director Magued El Sherif said the project falls into a larger strategy of retaining non-residential assets to facilitate recurring income, and that “EDNC will serve as the cornerstone of SODIC’s recurring income portfolio.” The development is partially financed by CIB, which provided a EGP 1 bn loan for the project.

More of leading e-payment platform Fawry’s merchants will now have access to Visa’s digital acceptance solutions, including card and QR code payments, through a strategic partnership agreement the two companies signed, according to a press release (pdf). The agreement, which will help accelerate the use of digital payment solutions, is aimed to introduce “cashless solutions that will not only grow the digital payments ecosystem, but will also bring formal financial services to the underbanked and underserved communities,” Visa North Africa’s General Manager Ahmed Gaber said.

Background: Visa partnered with Careem earlier this year to provide drivers with quicker access to their payments, while Fawry is already trailblazing in the realm of cashless payments, partnering with the National Bank of Egypt to expand its internet banking services and setting up a remittance transfer service for Egyptians abroad this year. Fawry became Egypt’s first listed company to achieve a USD 1 bn valuation last August.

DEBT WATCH- The European Investment Bank (EIB) has approved a EUR 750 mn facility for Banque Misr to on-lend to SMEs impacted by the covid-19 pandemic to finance working capital, according to the bank’s website. The facility has been in the pipeline since mid-August. The EIB signed off in July on a combined EUR 1.9 bn in financing for Egypt, which included EUR 800 mn for “covid-19 related business investment” and another EUR 1.1 bn for public transport infrastructure. The European Bank for Reconstruction and Development similarly also recently extended at least USD 100 mn in credit facilities for SME on-lending to each of Banque Misr, CIB, the National Bank of Egypt, QNB, and the National Bank of Kuwait.

In other funding news, the World Bank could provide as much as USD 250 mn toward a railway upgrade project that would cost upward of USD 680 mn, the bank said in the project’s info document (pdf). The government will cover another USD 240 mn of the project from its own resources, leaving a financing gap of USD 190 mn, according to the bank. We took note of the planned project — which involves new signaling and tracks along the Alexandria-Cairo-Nagaa Hammadi line, other safety and reform measures, and provisions to encourage private sector participation — late last month. Besides physical upgrades, the railway improvement project will involve precautions to make rail travel safer for women, and employ more women in the railway. “The project will [also] bring lessons on Smart Mobility and Big Data and machine learning from smart mobility projects such as the Wuhan Integrated Transport Development Project,” the bank said.

Etisalat Misr has snapped up 20 MHz of bandwidth on offer from the National Telecommunications Authority (NTRA), edging out Orange Egypt, which also bid in the auction, Youm7 reports, citing sources with knowledge of the matter. The bandwidth, which was offered by the authority for at least USD 150 mn per 10-MHz band, will be owned by Etisalat for the next 10 years, the sources said. Results of the auction will be officially announced by the NTRA once they are approved by the authority’s board.

Background: Both mobile network operators had sat out an auction last month which saw Vodafone Egypt and Telecom Egypt’s WE bid on 40 MHz of bandwidth for USD 600 mn and another 20 MHz for USD 300 mn. The results of the first sale have not yet been announced. Mobile network operators in Egypt have repeatedly asked the NTRA to provide access to more spectrum since 2017 when the regulator first launched 4G in the country.

A total of 340 companies will be required to submit tax returns and sales receipts electronically as of February, when the Tax Authority kicks off the second phase of its new electronic invoicing system, said Mohsen El-Gayar, director of taxpayer services at the authority, according to Al Masry Al Youm. Those companies will be able to use a mobile application the authority plans to develop to issue e-invoices. El-Gayar previously said that as many as 2.5k companies would take part in the second phase. It appears that the authority has decided to downsize the number of companies included in this phase.

Background: Currently, 134 companies are on board the first phase of the system being trialed by the authority. Companies will be able to submit tax returns and sales receipts electronically on the system, which will also give businesses the ability to complete audit requests online, eliminating the requirement to maintain physical receipts of sales invoices. This all comes as part of the government’s planned unified digital tax payment system, which will enable businesses to file and pay income tax, stamp tax, VAT and real estate tax through a single online platform.

REGULATION WATCH- SMEs looking to IPO on the Nilex are getting a 50% break on evaluation fees charged by the Financial Regulatory Authority (FRA), the regulator said in a statement. The reduction would also apply to fees levied to qualifying companies seeking regulatory approval on market activities such as capital increases, M&A, and bond and sukuk issuances. The decision follows recommendations from the International Organization of Securities Commissions designed to encourage newcomers to join the capital markets and lower financial barriers, FRA Chairman Mohamed Omran said.

Not all the recent changes have given small firms a leg up: New rules forcing Nilex-listed firms to contract with official corporate sponsors hasn’t gone down well among most firms on the exchange. More than half complained to the regulator last month that the requirement imposes an additional financial burden on companies, squeezing bottom lines during a period of economic uncertainty. The EGX has defended the rules, arguing that providing more expertise and support to small-caps will boost trading volumes and make it easier for them to upgrade to the main market.

MOVES- The Egyptian Federation of Investors Associations (EFIA) has tapped Moharam Helal as its chairman, succeeding the late Mohamed Farid Khamis, who passed away in the US last month, according to a local press report. The federation’s board has also been reshuffled to include Farid Khamis’ eldest daughter, Yasmine, as an honorary member, alongside other changes.

On a slow morning, no single story is leading the conversation on Egypt in the foreign press. Voice of America took note of our yet-to-recover tourism numbers, noting that “a few tourists walk among Egypt’s ancient wonders,” while Al Monitor says some 300 new mosques opened their doors in September following criticism over a slew of demolitions in Alexandria earlier this year. Meanwhile, Al Manassa reporter Basma Moustafa was detained in Luxor, where she was reportedly covering the alleged killing of a man by police forces, reports the Associated Press.

Ship dismantlers hit the jackpot as pandemic batters cruise industry: As the pandemic continues to put the cruise industry on life support, some are salvaging what they can from the (figurative) wreckage. Reuters takes a look at how a ship recycling group at Ali Arga in Turkey’s west coast are stripping cruise ships to sell scrap metal, furniture, and home appliances to the area’s hotels. They expect to sell some 1.1 mn tonnes to steel by year’s end (watch, runtime: 1:32).

It’s a quiet morning on the diplomacy and foreign trade front. Leading coverage is Foreign Minister Sameh Shoukry’s discussion of recent developments in Syria and ways to push for a political resolution with the UN’s special envoy to the country, Geir Otto Pedersen, according to a ministry statement.