Monday, 23 November 2020

Credit Suisse, RenCap are both bullish on Egypt in 2021


What We’re Tracking Today

We have some big news to start the day: Some of the world is about to enter the post-covid era as vaccinations in the US could start on the 11 or 12 December, the head of the government’s Operation Warp Speed program said yesterday. There’s also a chance the UK might cross the finish line first, with the National Health Service hoping to start inoculating the eldery and front-line workers on 1 December and then 18-50 year-olds from January, completing the process by April, the Telegraph reported. The news comes as Pfizer and BioNTech last week asked US regulators for emergency approval for its vaccine, which the companies say is 95% effective.

Developing countries have ordered vaccine doses from AstraZeneca that would cover more than 40% of their total needs, says Bloomberg. The vaccine has so far showed a strong immune response in adults and the results of the final stage of clinical trials are due anytime now.

Egypt has been in talks to acquire mns of doses from the UK company and is one of dozens of low- and middle-income countries set to rely heavily on the vaccine. It’s likely to be less expensive and far easier to distribute than Pfizer and Moderna’s products, which need to be kept at ultra-cold temperatures until just before being administered.

Poor countries may be waiting in line a bit longer — vaccine distribution was on the list of things the G20 wrung its hands about this week, but the final communique (pdf) from their meeting was silent on the issue of helping poor companies pay for the shots even as leaders promised to “spare no effort to ensure their affordable and equitable access for all people.” The WHO is short at least USD 4.5 bn to support the programs it needs to make that happen.

The Cairo ICT expo continues today and runs through Wednesday. This year, the fair focuses on “the big reset” of how we look at business, the economy, and life in general post-covid.

Also part of the expo: The transport tech-focused TransMea conference got underway yesterday and runs until Wednesday.

Polls open for the first of two election run-offs for the House of Representatives today and close tomorrow. Voters from Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira and Matrouh can all cast their ballots to decide the remaining 110 seats up for grabs. Today is also the final day that Egyptians abroad hailing from these governorates can vote. Thirty-two candidates won seats in the first round of voting last month.

PSA #1- We were wrong yesterday — you’re not yet in violation of the traffic law if you don’t have an electronic vehicle sticker yet. Car owners have until 31 December to stick an RFID on their windshields, the Interior Ministry said on Thursday in a statement we missed. The deadline to comply with the traffic requirement to install electronic vehicle stickers was originally on Saturday.

PSA #2- The clock is ticking for listed companies to meet regulations requiring that they appoint at least one woman to their board by the end of 2020. The Financial Regulatory Authority had issued the regulations last year, but appears to have plans to impose a 25% minimum quota for women on company boards, authority boss Mohamed Omran said last month.

PSA #3- We’re taking a publication holiday on Thursday. Enterprise will be off as we put the final touches on something new. We’ll be back in your inboxes at our customary 6am CLT on Sunday.

*** TELL US WHAT YOU THINK OF BLENDED LEARNING. We’ve put together a quick survey asking parents and students how things are going on the blended front. We’ll have the results in an upcoming issue of Blackboard. And as is our custom, we’ll draw the names of three respondents who will receive an Enterprise mug and a bag of our favorite coffee from our friends at 30 North.

Tap or click here to take the survey. It’s quick and painless, we promise.

The Health Ministry reported 351 new covid-19 infections yesterday, down from 358 the day before. Egypt has now disclosed a total of 113,027 confirmed cases of covid-19. The ministry also reported 13 new deaths, bringing the country’s total death toll to 6,548.

The Madbouly government says the health system is not facing a shortage of medical supplies. State-run hospitals are maintaining a sufficient stock of meds and are monitoring the supply on a daily basis, it said in a statement yesterday in response to claims circulating online. Meanwhile, purchases from the Unified Medical Procurement Authority should be easier now that purchase requests will be made through the authority’s online platform, the local press reports.

Med students won’t get a break as we stare down the second wave: Academic sabbaticals for graduate medical students employed by the Health Ministry have been cancelled for the next six months due to the recent increase in covid cases, Higher Education Minister Khaled Abdel Ghaffar said yesterday.

Mo Salah has finally tested negative for covid-19 after twice testing positive over the past week, Youm7 reported the Health Ministry as saying.

Over in Europe, “Operation Save Christmas” is going into effect: European governments are considering whether to loosen lockdown rules ahead of the Christmas holidays as the restrictions brought in at the end of October start to suppress the virus, the Financial Times reports. The UK, France and Italy are among the countries planning to restore a semblance of normalcy in the coming weeks while still maintaining some restrictions to prevent another resurgence as we head deeper into the winter.

enterpriseBringing you the latest in delicious dining options for you and your family to enjoy, Somabay has proudly expanded its F&B outlets and welcomes aboard our latest additions. Say hello to the Burger Factory and Baladina, now open at the Marina for mouthwatering meals.

The G20 agreed to freeze debt service payments for the world’s poorest countries until mid 2021 and called on private creditors to join the initiative, a joint statement (pdf) said. The G20 debt relief initiative launched during the initial onset of the pandemic helped 46 of 73 countries defer USD 5.7 bn in debt service payments this year and focus on shoring up their economies, but the lack of private sector participation has kept results limited, Reuters says.

Saudi renewable energy giant Acwa Power is planning a USD 1 bn sukuk issuance early next year to help finance its share of an USD 8 bn acquisition of gasification and power assets in the country’s port city of Jazan, Bloomberg reports, citing unnamed sources it says are familiar with the matter. HSBC and Samba Capital will advise of the issuance. Acwa is also planning to IPO on the Saudi stock exchange next year in a move that could raise USD 1 bn, the sources said. Acwa is a significant player in Egypt’s solar industry and is looking for ways to deploy solar here to power desalination projects.

Deadline to surrender in Ethiopia: Ethiopia’s Prime Minister Abiy Ahmed has given rebel forces in the northern Tigray region a 72-hour deadline to surrender their capital Mekelle before government troops advance on the city, in a statement posted on Twitter.

Egypt needs to keep a close eye on the guy being tipped to become Biden’s secretary of state: Long-term Biden foreign policy aide Anthony Blinken will likely get the top foreign policy job in the incoming administration after sources told Bloomberg, Axios and the New York Times that the president-elect will name him as the new secretary of state. Meanwhile, the Financial Times suggests he may instead serve as a national security adviser with the top job going to someone else (presumably Susan Rice). Biden could make his first cabinet announcement as early as tomorrow, Reuters says.

Egypt is already on Blinken’s radar: Blinken, who served as deputy secretary of state in the Obama administration, last week spoke out against the arrest of senior staffers at the Egyptian Initiative for Personal Rights. Looks like our lobbyists in DC could have their work cut out for them.

And the latest from Planet Trump: The Donald’s chances of overturning the result of the presidential election are dwindling by the day, with the president now resorting to appealing against Saturday’s ruling in Pennsylvania and requesting a third recount in Georgia as states begin to certify the results. State and local Republicans are starting to throw in the towel as Trump’s legal team continues to present no evidence to back their claims of electoral fraud. The Wall Street Journal, Washington Post, FT and Bloomberg have more.


*** 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: With Egypt on an internationalization drive in education, we look at the franchising model that has been gaining steam and appears poised to become more popular.

Enterprise+: Last Night’s Talk Shows

On the talk shows last night: You customary covid coverage, the House run-off elections and an awkward question posed about Telecom Egypt’s quest for market domination.

TE’s conflict of interest: Kelma Akhira’s Lamees El Hadidi talked to Communications Minister Amr Talaat about a range of topics from data protection (watch, runtime: 3:13) to the roll-out of network upgrades across the country (watch, runtime: 2:53). The most interesting part of the discussion came when Lamees brought up Saudi Telecom’s bid to acquire a majority stake in Vodafone Egypt and asked Talaat whether there would be a conflict of interest if WE-owner Telecom Egypt exercised its right of first refusal and bought out the remaining 55% stake it doesn’t own ahead of STC. Talaat claimed that owning two separate companies in the market would not create a conflict of interest and said that it is the responsibility of the National Telecommunications Regulatory Authority to make the call (watch, runtime: 1:38).

You can catch the full interview here: (watch, runtime: 49: 52).

A third covid-19 wave? Al Hayah Al Youm’s Lobna Assal contacted Amjad El Khouly, an epidemiology consultant at the World Health Organization (WHO), who warned of the potential for a third wave of the virus should people ignore precautionary measures. El Khouly added that the WHO had concluded several agreements to ensure that all countries have access to covid 19 vaccines. (watch, runtime: 11:57). Masaa DMC’s Eman El Hosary phoned Adel Khattab, member of the Health Ministry’s covid-19 committee, who discussed the new symptoms in the covid 19 second wave. Khattab pointed out that doctors should deal with any seasonal flu as being potential covid-19 cases, and must isolate them (watch, runtime: 9:03). Meanwhile, Education Minister Tarek Shawki was back on the airwaves with El Hosary, reiterating that there are no plans to close schools and that infection rates remain at safe levels (watch: runtime: 10:35).

House run-off elections: Kelma Akhira’s Lamees El Hadidi highlighted the start of the runoff stage of the parliamentary elections across 14 governorates today (watch, runtime: 3:42), while Al Hayah Al Youm’s Lobna Assal phoned Deputy Local Development Minister Khaled Kassem, the deputy Local Development Minister, who talked about the ministry’s preparations for the vote (watch, runtime: 5:43).

Speed Round

M&A WATCH- EFG Hermes and the Sovereign Fund of Egypt (SFE) will complete due diligence on the Arab Investment Bank (AIB) by February 2021 ahead of a potential acquisition of a 76% stake in the state-owned bank, Masrawy reports, citing unnamed banking sources familiar with the matter. SFE CEO Ayman Soliman said in September that the process could be wrapped up by the end of the year. EFG Hermes declined to comment on the report when we asked.

Background: EFG Hermes and the SFE announced in June that they had been given the greenlight by the central bank to start due diligence on the AIB, and that they planned to purchase of a 76% stake through a capital increase to EGP 5 bn, which they were hoping to complete before the year’s end. EFG would become the controlling shareholder with a 51% stake, while the SFE would take up to 25% The state-owned National Investment Bank (NIB) currently holds 91.4% of the bank, with the remaining 8.6% held by the Federation of Arab Republics.

A universal bank? EFG has positioned the potential acquisition as heralding its transformation into a universal bank offering a full suite of investment banking, non-bank financial services and commercial banking solutions.

The EGX is well-positioned for a comeback next year, thanks in large part to Egyptian equities currently being cheap because of the covid-19 market slump, Credit Suisse’s Head of Middle East Research Fahd Iqbal told Bloomberg. The EGX30 is currently the region’s worst-performer — down 22% year-to-date — and trails behind the MSCI Emerging Market Index, is up 8.5% for the year.

Egyptian stocks are now trading at their steepest discount to the MSCI EM Index in a decade. A covid-19 induced downturn in trading, as well as a decrease in the number of stocks listed on global benchmarks, and the lack of IPOs have all weighed on the EGX this year. The results of a central bank regulatory review of CIB’s business last month culminating in the resignation of its chairman also brought down the bank’s share price. CIB is the index’s largest constituent, which weighed on its overall performance.

A positive outlook for next year will help drive the rebound: “We’re positive across a lot of areas of Egypt,” said Iqbal, adding “the growth outlook for exporters and for domestically-focused companies alike is very constructive.”

RenCap bullish on Egypt, sees EM portfolio inflows gaining momentum: The benefits Egypt is reaping from its fiscal reform program — including turning a primary budget surplus and engaging the IMF — are keeping Renaissance Capital bullish on the economy, the investment bank said in a report last week. RenCap also sees an improving debt-to-GDP ratio on the horizon as the Central Bank of Egypt (CBE) continues enacting rate cuts next year. “Moreover, we think the education / electricity fundamentals are in place to help Egypt accelerate GDP growth,” the report says.

Egypt’s economic outlook, by the numbers: RenCap expects real GDP growth to clock in at 3.5% at the end of the calendar year and dipping to 2.8% in 2021 before roaring back to 5.0% in 2022. RenCap doesn’t appear to expect another rate cut when the CBE’s Monetary Policy Committee meets for the last time this year in December, saying in the report that we will close out the year with interest rates where they are. We should, however, expect rates to be cut by 150 bps in 2021 and remain at around 7-8% through 2022. Inflation, meanwhile, is expected to dip marginally to 5.5% in 2021 from 5.6% at the end of this year. Unemployment is also expected to tick up over the next two years, holding steady at 9.7%, the report suggests.

As for emerging and frontier markets, expect the incoming Biden administration to bring good things — and a weaker USD: The Trump administration encouraged US companies to bring their businesses back home — reversing FDI flows that had gone towards emerging and frontier markets — by offering tax incentives and creating trade tensions that made it risky for companies to take their business offshore. The general expectation is that president-elect Joe Biden will de-escalate many of these tensions and help drive FDI back to EM and FM in 2022. “We think this will contribute to EM FX strength, helping suppress inflation and interest rates and encourage more bank lending and investment. Faster growth will result, attracting more money to EM” and weakening the USD, the report says.

The weakening USD will also be driven by portfolio flows, particularly with low yields on developing market debt. “This is partly explained by the demographic induced savings glut and because with high DM debt ratios, any rise in [US Treasury] yields would risk sending economies back into recession (thereby reducing yields).” Emerging markets will likely attract portfolio investments in FX and local currency debt, reversing the massive outflows they sustained earlier this year as the pandemic took hold.

What about that “wall of debt” EM and FM are supposed to be concerned about? RenCap says that debt is actually not a concern for emerging and frontier markets and that, if anything, “governments should borrow like they have never borrowed before” in the coming decade. The investment bank expects to see interest rates in these markets falling, while debt servicing costs may not rise even if debt-to-GDP ratios rise more than previously seen. “While Egypt or India do have high debt, it is mostly in local currency and mostly financed by locals,” meaning their external debt is not “worrisome.”

IPO WATCH- Talk of when Banque du Caire (BdC) might reschedule its IPO on the EGX are “premature” in light of the emergence of a global second wave of covid-19, Masrawy reports, citing unnamed sources close to the matter.

Speaking to the newspaper from the Department of the Obvious, the sources said it is not advisable to list shares at a time when the global economy is still reeling from the pandemic and financial markets remain volatile.

Background: The disruption caused by the pandemic forced the bank to abandon its plans to float 20-30% of its shares in an IPO in April, and a listing in 2020 was ruled out completely by its chairman in the summer. BdC was hoping to raise some USD 500 mn in what was expected to be the country’s biggest sale of state assets since 2006. The European Bank for Reconstruction and Development, the Sovereign Fund of Egypt, and Abu Dhabi Development Holding were reportedly considering purchasing a stake.

DEBT WATCH- Biggest corporate sukuk yet gets regulatory approval: Sarwa Capital’s EGP 2.5 bn sukuk issuance was approved by the Financial Regulatory Authority’s (FRA) Sharia Supervisory Committee on Thursday, paving the way for it to become only the second company to issue sukuk in Egypt. The company yesterday signed the prospectus for the single-tranche issuance, which will offer seven-year sukuk backed by the loan book of its consumer finance subsidiary Contact. The securities will only be offered only via private placement to institutional investors.

This will be the second sukuk offering to take place in Egypt after Talaat Moustafa Group’s EGP 2 bn sale in April, and it’s the first by a player in the fast-growing non-bank financial services sector. The FRA could proceed with another three offerings worth EGP 600 mn before the year is out, Vice President Reda Abdel Moati said on the sidelines of the signing yesterday, without providing details. With Sarwa and TMG accounting for EGP 4.5 bn already, this would take the total value of sukuk issued in 2020 to EGP 5.1 bn.

That math suggests that Amer Group may be on the onramp to take a sukuk to market before the end of the year after earlier speculation that it could close out a sale by the end of the year. There was also talk earlier in the year that the state-owned Egyptian Petrochemicals Holding Company (ECHEM) could also tap the market with a maiden issuance but we haven’t heard anything new on that in months.

Is 2021 going to be the year of the corporate sukuk? The FRA sees issuances worth EGP 10.2 bn next year, the authority’s head of central finance, Sayed Abdel-Fadil, said during the signing yesterday.

And it may well be the year of the sovereign sukuk too: Egypt should have the legislation in place to begin offering sovereign sukuk to international investors early next year after the draft sukuk bill cleared the cabinet and entered the House last week. The legislation is set to be discussed by the House either at the tail-end of the current legislative session or by the new group of MPs who begin their inaugural session in January.

Advisers: Sarwa’s sukuk issuance is covered and guaranteed by Banque Misr and Misr Capital. ALC Alieldean Weshahi & Partners are providing legal counsel and KPMG Hazem Hassan financial auditing services. Contact was the first company to be granted a consumer financing license earlier this year along with Raya Holding’s Aman.


Etisalat will spend EGP 5 bn to upgrade its network infrastructure and invest in advanced technologies in Egypt in 2021, CEO Hazem Metwally told Hapi Journal. The company will focus its efforts on improving data transmission, and integrating AI, cloud computing and IoT technology into its network, he said. The network provider previously said it would invest EGP 4.5 bn in modernizing its Egypt network in 2019. Etisalat was recently awarded 20 MHz of new bandwidth by the National Telecommunications Regulatory Authority under a 10-year license. Etisalat’s announcement comes a few days after Orange said it would invest EGP 4 bn on network upgrades over the coming year.

LEGISLATION WATCH- Brokers are unlikely to get a break on new higher insurance payments introduced under recently-ratified changes to the Customs Act, but the government could consider other incentives, Customs Authority official Shahat El Ghatwary said. The authority has already sent out instructions to officials to streamline the clearance process to enjoy the benefits of the improved law ahead of issuing improved executive regulations, Ghatwary said.

Background: Customs brokers have been lobbying officials to rethink the new insurance requirements, which require large companies to deposit EGP 100k and small companies EGP 50k to be allowed to operate. Brokers previously only needed to deposit as little as EGP 5k. The new law will allow smaller companies to pay the insurance in installments, Ghatwary said.

Small businesses will be given a six-month grace period before they have to pony up for leases on units in seven new industrial complexes recently proposed by the Industrial Development Authority, Trade and Industry Minister Nevine Gamea said in a statement (pdf) yesterday. The deadline for bidding for units has also been extended by two weeks and will now end on 12 December, she added.

STARTUP WATCH- Egyptian e-commerce platform ExpandCart raised USD 2.5 mn in a series A funding round led by Sawari Ventures, Agility Ventures and Graphene Ventures, Menabytes reports. Two angel investors also took part in the funding round. ExpandCart caters to merchants and allows its users to build online stores in Arabic or English. The platform was the only African startup to be accepted into Hong Kong’s Betatron accelerator program last year, and received an investment of USD 150k.

EARNINGS WATCH- Cleopatra Hospitals Group’s net profit rose 11% y-o-y in 3Q2020 to EGP 80 mn, up from EGP 72.2 mn last year, according to the company’s earnings release (pdf). Revenues grew 16% to EGP 536 mn in the third quarter, up from EGP 462 mn a year ago. “Margins are well on their way to making a full recovery supported by revenue growth and management’s wide-ranging cost control efforts,” the company said. “Our performance was supported by the gradual lifting of restrictive measures related to covid-19 and management’s proactive multi-pronged response strategy,” Cleopatra CEO Ahmed Ezzeldin said. Earlier during the pandemic, the lockdown led to a “sharp decline in patient volumes,” causing the company’s 2Q2020 profits to plunge 67% y-o-y.

Cleopatra is now on track to beat 2019 performance: Net profit in 9M2020 came in at EGP 182 mn, up 7% on the same period last year. Revenues also rose 7% during the period to EGP 1.37 bn.

Looking ahead: “I am confident that our strategic investments over the last two years, our established position in the industry, and our proven resilience and adaptability see us ideally positioned to drive sustainable growth,” Ezzeldin said. “We look forward to begin reaping the rewards of our revenue diversification and digitalization strategies which management views as key drivers of long-term growth and value creation.”

Orascom Investment Holding (OIH) reported a EGP 19.6 mn loss in 3Q2020 after generating a EGP 61.1 mn profit in the same period last year, according to a company earnings release (pdf). Revenues came in at EGP 243 mn during the quarter, down from EGP 254 mn in 3Q2019.

MOVES- Ayman Fathy Hossam El Din has been appointed acting chairman of the Consumer Protection Authority (CPA) on a three-month contract, replacing Ahmed Samir Farag, following a decision by Prime Minister Moustafa Madbouly, Al Shorouk reports. Hossam El Din previously served as the deputy minister for supply and internal trade.

How did a family-owned lab grow into a regional diagnostics powerhouse? We explore the story behind Integrated Diagnostics Holding and CEO Hend El Sherbini in this week’s episode of Making It, our podcast on how to build a great business in Egypt. IDH operates over 450 labs across Egypt, Sudan, Jordan and Nigeria, and in 2015 was the first Egyptian company to list on the main market of the London Stock Exchange in an IPO that was 11 times oversubscribed.

You already have a podcast player on your iPhone, or you can listen to the episode through our website (no download required). We’re also on Google Podcasts | Anghami | Omny. Making It is also on Spotify, but only for non-MENA accounts

Egypt in the News

Leading the conversation on Egypt in the foreign press this morning: Five Egyptian security officials will face trial in absentia in Italy for the killing of Italian Cambridge PhD student Giulio Regeni in 2016, the Sunday Times reports. The news comes a few days after President Abdel Fattah El Sisi discussed the investigation into Regeni’s death with Italian PM Giuseppe Conte. It comes at a time when Egypt’s human rights record is in the international spotlight following last week’s crackdown on the Egyptian Initiative for Personal Rights.

Diplomacy + Foreign Trade

The big news in diplomacy yesterday: The French Development Agency has committed to providing a EUR 50 mn loan to develop Cairo’s Metro Line 1. French Transport Minister Jean-Baptiste Djebbari put pen to paper at the TransMea conference yesterday, signing the agreement with Kamel El Wazir, the Egyptian Transport Ministry said.

On the diplomatic front: President Abdel Fattah El Sisi discussed economic ties with South African president Cyril Ramaphosa over the weekend, while Egypt and Sudan inked an agreement that will see them share expertise on military-related manufacturing.

MEANWHILE- The Commercial Representation Authority is working on a new strategy to drive exports to Africa, director Abdel Aziz Al Sharif said at a symposium yesterday, and the “Sword of Arabs” joint military exercises kicked off yesterday in Egypt. Troops from Saudi Arabia, the UAE, Jordan, Bahrain and Sudan will drill through Thursday, an Armed Forces statement said.


The state of education franchising in Egypt and how it could help its internationalization drive: Franchising international schools in Egypt is increasing — and sector leaders say it’s poised to accelerate. It’s an effective way to import knowledge and expertise without relying on major investments from international partners, says Hatem Zaki, Executive Board Member of the Egyptian Franchise Development Association (EFDA). With internationalization key to Egypt’s education strategy, franchising could bring knowledge and respected brand names into the country, sources argue.

International education franchises are still recent and few: The British Columbia Canadian International School appears to be the oldest K-12 international school franchise in Egypt — here since 2004, says Vice Chairman Karim Mostafa. Malvern College Egypt, set up in 2016, is a franchise of Malvern International, operated with Azazy International Group, says CEO Azza El Sherbiny. Kent College West Cairo is due to open in 3Q2022. Saxony International School Egypt is set to open in 2021-2022 as a franchise of German holding company Saxony International School, in partnership with CIRA and education management company Eduhive, says Mostafa, who is also Eduhive’s CEO. The Global Academic Foundation was inaugurated in December 2019, a franchise of the University of Hertfordshire.

So how exactly does education franchising work? The franchisee (the Egyptian business) pays the franchisor (the international school or its owning company) an initial start-up fee and annual licensing fees. In exchange, the franchisee can use the franchisor’s curriculum, educational resources, name, trademarks, and methodology.

This means that the franchisee — along with the investors and banks financing it — assume almost all the financial risk: The franchisee invests in building the school or university, and pays additional costs to the franchisor. These include annual fees usually comprising 7-12% of their annual revenue, according to Mostafa.

Egypt’s government and banking sector urge caution: Egypt currently has no specific franchising law. The government wants to promote franchising, but ensure franchisors entering the market are legitimate with real value propositions, says EFDA’s Zaki. Banks also want clear definitions to safeguard loans and rights granted, he adds.

It’s a smart play for foreign schools seeking access to global markets… Schools are using franchising to expand globally, with the MENA region and Asia being popular destinations. These are expanding markets, where franchisors know they can capitalize on their names to jump start school business ventures, says AIS Director Kapono Ciotti. Franchising offers financial benefits to schools wanting to diversify their income streams, but educational value is also an important driving factor, says Allan Walker, Malvern’s Director of International Schools. Educational opportunities that come from having a global group of schools increase Malvern’s profile and visibility, ultimately feeding into its long-term success, he adds.

…with relatively few responsibilities: These mainly have to do with quality control and supplying educational content. Because access to knowledge, trademarks and resources can be revoked, the franchisor assumes minimal risk, notes Zaki. The franchisee — or in the case of SIS, Eduhive operating as a third-party partner — assumes responsibility for compliance with all local regulation around building construction, taxation, and curriculum approval, says Mostafa.

While franchisees have to contend with the high costs made worse by covid-19: CAPEX required to open and run a school can see a return on investment in around 7-10 years, multiple sources say. This year, there’s an extra challenge in the form of covid, with schools expected to see increased costs of at least 8-10% (possibly 10-12% for international schools) because of blended learning — including sanitation measures, construction needed for social distancing, running online platforms. This would also include possible FX losses from any depreciation of the EGP, we noted in June.

Franchisees are undeterred, however: Covid is a temporary setback, and franchisees factor in potential obstacles when planning and budgeting, says Moustafa. Long-term vision is a must when entering into a franchising arrangement, he adds.

Franchised schools also risk being bound by central offices that don’t understand local contexts and curricula, says Ciotti. AIS wasn’t established as a franchise because of this risk: “The ethos of [parent company] ESOL Education is that schools should be grounded in the culture they operate in.” Quality control and accountability are crucial, Walker agrees: “It doesn’t work to try managing a foreign institution from thousands of miles away or to imagine that everything in Cairo should be a carbon copy of the UK.” Malvern aims to give local leadership teams the tools to ensure high quality education, to advise them on day-to-day management issues, and to undertake regular inspections, he says. “I don't accept that it isn’t possible to ensure that educational standards are met by teams in different locations.”

But risks are generally outweighed by benefits, which include not building a curriculum or methodology from scratch, in addition to being part of a global brand, say sources. “You’re buying 160 years of experience in the blink of an eye,” says El Sherbiny. Malvern College Egypt exchanges experience and even staff with other members of the Malvern global franchise community, she adds. With Egypt’s international student numbers plummeting after 2011, franchising could help attract international students and expertise, argues Zaki. Operationally, franchising could reduce work for schools just starting up, says Ciotti.

So why hasn’t education franchising taken off in Egypt yet? Partly because the phenomenon itself is still very new, says Walker. But Egypt appealed to Malvern because it’s relatively economically advanced within MENA, its demographics are favorable to the education business, and education is culturally very important to Egyptians, he adds.

Proponents of the model say it looks set to grow as it adds value to the local education system. International school franchising is likely to grow because the model works, and has considerable benefits, says Mostafa. Franchising in general raises the bar for quality among local markets, argues Zaki, who believes education franchising can boost competitiveness among local schools and universities.

But some say new regulation is needed: Dedicated franchising regulation covering registration, rights and responsibilities, intellectual property, and disclosures — but leaving room for franchising partners to determine their relationship — is essential for education franchising to grow, Zaki says. The EFDA is currently engaged in discussions with the government, lawyers and other stakeholders to try to iron out these issues, he adds.

Your top education stories of the week:

  • CIRA mulls EGP 500 mn loan for Badr expansion: Leading private sector education outfit Cairo for Investment and Real Estate Development is in talks with unnamed banks to obtain a EGP 500 mn loan to finance the expansion of its Badr University.
  • Nurseries around the country could close if the pandemic worsens in the weeks or months ahead, Social Solidarity Minister Nevine El Kabbaj has said.
  • Covid-19 cases among students: Around 300 students have been diagnosed with covid since the beginning of the academic year, Education Minister Tarek Shawki last week.
  • New tuition fees for state-run schools are due to be announced in January, but the Education Ministry has so far not raised fees.
  • AUC professors recognized by Stanford: Ten AUC professors have made it onto Stanford’s list of the top 2% most-cited scientists in the world.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.58 | Sell 15.68
EGP / USD at CIB: Buy 15.58 | Sell 15.68
EGP / USD at NBE: Buy 15.59 | Sell 15.69

EGX30 (Sunday): 10,858 (-0.4%)
Turnover: EGP 1.5 bn (33% above the 90-day average)
EGX 30 year-to-date: -22.2%

THE MARKET ON SUNDAY: The EGX30 ended Sunday’s session down 0.4%. CIB, the index’s heaviest constituent, closed down 0.5%. EGX30’s top performing constituents were SODIC up 2.4%, GB Auto up 2.2%, and Pioneers Holding up 2.2%. Yesterday’s worst performing stocks were Egyptian Iron & Steel down 3.4%, Beltone Financial Holding down 2.3% and Orascom Development Egypt down 2.0%. The market turnover was EGP 1.5 bn, and foreign investors were the sole net sellers.

Foreigners: Net short | EGP -44.9 mn
Regional: Net long | EGP +10.3 mn
Domestic: Net long | EGP +34.6 mn

Retail: 88.3% of total trades | 87.4% of buyers | 89.1% of sellers
Institutions: 11.7% of total trades | 12.6% of buyers | 10.9% of sellers

WTI: USD 42.42 (+1.24%)

Brent: USD 44.96 (+1.72%)

Natural Gas: (Nymex, futures prices) USD 2.65 MMBtu, (+2.24%, December 2020 contract)

Gold: USD 1,878.20 / troy ounce (+0.61%)

TASI: 8,588 (+0.11%) (YTD: +2.37%)
ADX: 4,934 (+0.43%) (YTD: -2.78%)
DFM: 2,324 (+0.37%) (YTD: -15.92%)
KSE Premier Market: 6,133 (+0.23%)
QE: 10,202 (+0.94%) (YTD: -2.14%)
MSM: 3,612 (-0.41%) (YTD: -9.26%)
BB: 1,458 (+0.44%) (YTD: -9.42%)

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

November: An Egyptian-Russian ministerial committee will meet to discuss trade and investment in Moscow.

19-28 November (Thursday-Sunday): Cairo International Film Festival, Cairo Opera House, Egypt.

22-25 November (Sunday-Wednesday): Cairo ICT 2020 and TransMEA 2020, Egypt International Exhibition Center, Nasr City, Cairo.

23-24 November (Monday-Tuesday): Runoffs for parliamentary elections in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

24-25 November (Tuesday-Wednesday): Canada-Arab Business Forum (virtual).

30 November (Monday): Final results will be announced for Parliamentary elections held in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

December (date TBC): Egypt Economic Summit, Cairo, Egypt, venue TBD.

December: Fifth round of Egypt-US Trade and Investment Framework Agreement (TIFA) talks.

December: A meeting to finalize membership and trading rules governing Egypt’s Commodities Exchange (Egycomex).

December: The 110th regular session of the Egyptian-Iraqi Joint Higher Committee will be held under the chairmanship of the prime ministers of the two countries.

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).

4 December (Friday): Cairo Art Fair kicks off and runs through 31 January 2021.

5 December (Saturday): A court will hold a postponed hearing to look into an appeal by Syria’s Anataradous against an arbitration ruling in favor of Amer Group and Amer Syria.

7 December: Former Civil Aviation Minister Ahmed Shafik faces trial over embezzlement allegations.

7-8 December (Monday-Tuesday): Runoffs for parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

9-10 December (Wednesday-Thursday): BiznEx, the international business expo in Egypt, Nile Ritz Carlton Hotel, Cairo, Egypt.

14 December (Monday): Final results will be announced for Parliamentary elections held in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

15 December (Tuesday): House of Representatives reconvenes from recess.

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.

31 December (Thursday): Egypt-UK post-Brexit trade agreement to take effect.

31 December (Thursday): Deadline for car owners to comply with traffic regulations to install a RFID electronic sticker on their cars.

1Q2021: The Seventh Annual Egypt Automotive Summit will be held

1H2021: Egypt’s Commodities Exchange (Egycomex) will begin trading.

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.

25-29 January 2021 (Monday-Friday): The World Economic Forum’s “Davos Dialogues” will take place virtually.

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.

6-18 February (Saturday-Thursday): Mid-year school break.

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).

18-21 May 2021 (Tuesday-Friday): The World Economic Forum’s annual meeting will be held under the theme of “The Great Reset” in Lucerne-Bürgenstock, Switzerland

31 May-2 June 2021 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, Nasr City, Cairo.

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.

24 June 2021 (Thursday): End of the 2020-2021 academic year.

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.

30 July-3 August 2021 (Thursday-Monday): Eid Al Adha, national holiday (TBC).

1 October 2021-31 March 2022 (Friday-Thursday): Postponed Expo 2020 Dubai.

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