Foreign bondholders love Egypt, sending holdings back to near pre-pandemic high

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THE BIG NEWS at home this morning: Foreign holdings of EGP-denominated debt are creeping back up to their pre-pandemic high, Finance Minister Mohamed Maait said yesterday. We have chapter and verse in the news well, below.

TODAY IN COVID- The Finance Ministry has set aside USD 1.5-1.6 bn to purchase vaccines against covid-19, minister Mohamed Maait said yesterday. Meanwhile: Seasonal and day labourers started getting the second EGP 1 bn installment of the new round of stimulus payouts yesterday as the Madbouly government looks to keep people afloat amid the second wave of covid-19. The program comes as part of a EGP 100 bn stimulus package introduced in March to protect the economy. We have more in this morning’s Covid Watch, below.

THE BIG NEWS ABROAD: It’s Fortress Washington as the District of Columbia joins state capitals in preparing for possible armed violence by white racists ahead of the 20 January inauguration of Joe Biden. “Washington is fortified amid fears of more violence,” reads the lead story in the FT. State capitals were braced for pro-Trump violence yesterday, but it largely failed to materialized. Still, “troops, blockades and an eerie quiet pervade a locked-down Washington” and state capitals are on alert ahead of the 7pm CLT inauguration on Wednesday.

Inside Trump’s final days: Aides struggle to contain an angry, isolated president.

PSA- It’s going to be chilly today with a daytime high of 18°C and an overnight low of 8°C, setting the tone for the coming 14 days, according to our favourite weather app.

IN THE HOUSE TODAY-

Prime Minister Moustafa Madbouly and his cabinet will appear before the new parliament today after being invited to the chamber by House Speaker Hanafi El Gibali. Madbouly will deliver a speech laying out the state of play with the government program and ministers will be invited to give statements briefing MPs on how their ministries have performed since 2018. Look for this to lead the news cycle this afternoon and tomorrow.

The day’s proceedings were all over the airwaves last night: Kelma Akhira (watch, runtime: 6:48), Al Hayah Al Youm (watch, run time: 6:27), Masaa DMC (watch, runtime: 2:18), Ala Mas’ouleety (watch, runtime: 3:00).

What’s on the House of Representatives’ agenda this week?

• The draft sovereign sukuk law is up for discussion today at the House Economic Committee, according to Al Shorouk, paving the way for the government to take its maiden issuance to market.
• The Planning and Budgeting Committee will consider amendments to the 2010 Public-Private Partnership Act that would streamline PPP contracts.
• The Housing Committee will tomorrow discuss amendments to the unified building code that would ease the process of building licensing and registration, Youm7 says.

ALSO MEETING THIS WEEK to sort out their agendas for the coming months are the energy and environment, education, and transport and communications committees. We have your rundown on everything that matters to business here. Or you can tap here to see who’s running key committees in the House.

WHAT ELSE IS HAPPENING TODAY?

President Abdel Fattah El Sisi is due in Jordan today to visit King Abdullah II, the Jordanian news agency reported. Restarting the Palestinian-Israeli peace process is expected to be at the top of the agenda, Saudi’s Asharq News reports, quoting unnamaed official sources. The trip comes a week after El Sisi met Jordan’s foreign minister on the sidelines of recent talks about the peace process in Cairo.

Palestinian elections + reconcilation ahead? This comes a day after Egypt and Jordan’s intelligence chiefs travelled to Ramallah for talks with Palestinian Authority head Mahmoud Abbas, and discuss the PA’s election plans announced this week, Masrawy reports. Planned to be held in May and July, the elections will be the first since Hamas triumphed in the 2006 parliamentary elections, leading to the 15-year schism with Fatah and the PA. Hamas has (so far) welcomed the election call, raising speculation that the two sides may be about to kiss and make up.

The push for a breakthrough in Palestinian politics got a lot of attention on the airwaves last night: Kelma Akhira’s Lamees El Hadidi (watch, runtime: 7:50), Masaa DMC’s Eman El Hosary (watch, runtime: 0:54), and Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 2:10).

El Nasr Automotive will sign today the final contracts with China’s Dongfeng to assemble electric vehicles in Egypt, Public Enterprises Minister Hisham Tawfik told Masrawy. The two companies plan to install the assembly line in 2Q2021 and begin production in 4Q2021, which will eventually see them produce 25k vehicles each year.

EgyptAir resumes its flights between Cairo and Doha today after Egypt reopened its airspace to flights into and out of Qatar last week.

Egypt is set to play against Sweden tonight at 7pm CLT for our last Group G game in the 2021 Men’s Handball World Championship, having qualified for the main round of the competition after beating North Macedonia 38-19 on Saturday. The Swedish team holds four Handball World Championship titles — tied with Romania who also holds four, second-best only to France who snagged six titles out of the 26 tournaments held.

There are also seven other matches in the lineup for today. You can check out the full schedule here. Yesterday’s match that was set to be played between Germany and Cape Verde was canceled after two Cape Verde players tested positive for covid-19, making it unclear whether the team will attend the match against Uruguay tomorrow.

*** 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: A new unified platform for private university admissions is coming, and last week we broke down what to expect from it. Today, we look at all the reasons why a new admissions system is necessary.

Foreign investment in EGP bonds has continued to rebound through the beginning of 2021, with total holdings now standing at USD 26 bn, Minister Mohamed Maait told Al Arabiya and CNBC in separate interviews yesterday. This is up from USD 23 bn at the end of November and is less than USD 2 bn shy of the USD 27.8 bn seen in February before the huge covid-inspired sell-off that swept emerging markets.

Egyptian assets were hammered by the covid-19 sell-off in the spring: Investors sold more than 60% of their holdings of Egyptian bills and bonds between March and May as capital fled emerging markets in response to the escalating pandemic. Over the three months foreign holdings fell from almost USD 28 bn to just USD 10.4 bn.

The money soon came roaring back: Holdings more than doubled in the following five months to hit USD 21.1 bn by mid-October. It was part of a reversal of flows that the minister described yesterday as a “very big shift.”

GDP targets upgraded: Egypt’s economy is now expected to expand between 2.8 and 4% this fiscal year under the Finance Ministry’s amended targets, while the debt-to-GDP ratio is penciled in at 89% rather than 83%, Maait said. The growth upgrade compares with the most recent expectation of 2.8-3.5% and comes after the release of 1H2020 fiscal data. The minister told Enterprise last week that GDP figures and budget targets for FY2020-2021 would be amended in line with the data.

The projected overall deficit is now expected to come in at 7.9%, up from the 6.3% originally penciled into the budget, while the primary surplus is expected to come in at EGP 35-40 bn, less than a third of the EGP 130 bn target in the budget. The government also expects to forgo some EGP 150-200 mn of revenues in FY2021-2022 in light of the continued economic instability caused by covid-19.

The amended targets come days after the Madbouly Cabinet agreed to extend 2020-2021 spending by an extra EGP 2 bn to help finance measures to support the economy through the pandemic.

M&A WATCH- It’s official: Blom Bank is selling its Egypt arm to Bahrain’s Bank ABC in an EGP 6.7 bn transaction, the two parties confirmed in a statement yesterday after Reuters reported last week that the sale was wrapping up. The two hope to close the sale by the end of 1H2021 after getting clearance from the Central Bank of Egypt and the Financial Regulatory Authority.

Blom is pulling the pin on Egypt as Lebanese lenders face pressure to hike their equity by 20% to cope with recent market challenges in their home market.

That’s a 1.4x premium to book and implies a PE ratio of about eight, based on Blom Bank Egypt’s September financials, EFG Hermes wrote in a note yesterday.

Egypt is “one of the most attractive markets in the region,” said Bank ABC CEO Khaled Kawan. Bank ABC is acquiring the 99.4% of Blom Egypt held by Blom’s Lebanese parent and will make a mandatory tender offer for the remaining 0.6%.

How big will Bank ABC be post-transaction? The bank hopes to crack the ranks of the top 20, it said in a statement. It already offers commercial, retail and other banking and financial services in Egypt and runs a 27-branch network. Add Blom’s 41 branches in Egypt and the new Bank ABC will have 68 points of presence nationwide.

Bank ABC expects the transaction to wrap in 2Q2021, it said in a filing with Bourse Bahrain (pdf).

DID YOU KNOW? The Olds among us will remember that Blom Bank was formerly known as Misr Romania Bank. Blom bought it back in 2006 when the Central Bank of Egypt drove a wave of consolidation in the banking industry. In the years since, the CBE has resolutely refused to issue new banking licenses, saying that any player — foreign or domestic — who passes the sniff test will need to buy into the sector through acquisition.

WHO’S NEXT? As we noted this yesterday: First Abu Dhabi Bank’s potential USD 700 mn acquisition of Bank Audi Egypt, which has been in the works since the two resumed negotiations in September.

ADVISORS- HSBC is acting as sole financial advisor to Bank ABC, with Freshfields Bruckhaus Deringer and Zulficar & Partners acting as legal advisors. Blom Bank Lebanon was advised by CI Capital, while Baker McKenzie acted as legal counsel.

OTHER M&A NEWS- The Financial Regulatory Authority has approved a mandatory tender offer for up to 90% of El Nasr for Manufacturing Agricultural Crops by a consortium of Al Raed for Agricultural Production and New Smart Construction Company, the regulator said in a filing (pdf). The consortium is targeting some 7 mn shares at EGP 45 apiece, giving the MTO a potential value of EGP 315 mn.

HSBC ❤️ Egypt, MENA: The global bank is getting plenty of attention in the domestic press for a statement attributed to Martin Tricaud, its group CEO for the Middle East, North Africa and Turkey, saying that the bank has “ambitious plans for growth in MENAT, which is positioned to be one of the fastest growing regions of the world over the coming decade.” Todd Wilcox, HSBC Egypt’s CEO, said the bank would be prioritizing “digital payments and transactions, international investor demand for exposure to Egyptian assets, or supporting government initiatives to deliver low-carbon, sustainable ways of doing business.” You can read the statement here (pdf).

Russia is open to handing Egypt the production technology to locally manufacture the vaccine, the Russian Embassy in Cairo said in a statement. Moscow hopes that Egypt could act as an export hub for the vaccine in Africa, Egypt’s ambassador to Russia Ihab Nasr told El Watan.

Egypt could begin receiving shipments of Sputnik V as soon as this month, the Russian Embassy added. Sputnik V has an efficacy of 91.4% and is registered for use in countries including Algeria, Bolivia and Argentina, with UAE expected to follow soon.

Egypt’s Vacsera is an African leader in vaccine production and will likely serve as the production hub if an agreement is reached with Moscow.

The Health Ministry reported 890 new covid-19 infections yesterday, up from 887 the day before. Egypt has now disclosed a total of 156,397 confirmed cases of covid-19. The ministry also reported 56 new deaths, bringing the country’s total death toll to 8,583.

The number of patients entering ICU units and being placed on ventilators has fallen 50% since the start of the month, compared to December, Health Minister Hala Zayed said in a statement.

Orascom Construction (OC) and Arab Contractors are working with Siemens on the USD 23 bn high-speed electric rail network after the consortium signed an MoU with the National Authority for Tunnels, OC confirmed in a statement (pdf) yesterday. The three companies will design, install, and commission the rail system, which the statement says will span a 1,000 km network but Transport Minister Kamel El Wazir said on the airwaves earlier this week will cover 1,750 km in total.

Wait, weren’t there other companies working on this rail network? Unconfirmed local press reports last year had suggested that a consortium of Samcrete, Arab Organization for Industrialization, China Civil Engineering Construction Corporation, and China Railway Construction Corporation were awarded the contract for the first phase of the rail network. Other reports emerged indicating that the Transport Ministry also brought in OC, Arab Contractors, and Concord for Engineering and Contracting to speed up the construction process. It appears, however, that none of these companies was actually contracted and that they were simply throwing their hats in the ring, and the Transport Ministry scrapped the initial tender altogether because the offers were too expensive.

Where will the rail line run? The first phase will link Ain Sokhna to El Alamein via the new administrative capital and Alexandria.

The Finance Ministry’s digitalization drive shows exactly zero signs of slowing down. Up next: a pilot program kicking off in 2Q2021 for a digital inventory of real estate now that the government’s drive to bring online registry offices nationwide seems to be wrapping up. The program, which is yet to be confirmed, is being widely discussed in the domestic press, with an unnamed government official promising it will lead to a “substantial” increase in real estate taxes.

The digital inventory has been in the works for two years now. A prototype of the real estate appraisal system was ready in March 2019 and included a model database of property prices which would yield location-based values together with the help of geographic coordinate systems, head of the real estate appraisal program Mohamed Salheen told us at the time. The system is part of the proposed amendments to the Real Estate Tax Act, which are largely aimed at reducing real estate tax discrepancies.

In parallel, the Customs Agency is going to be implementing electronic Advance Customs Information (ACI), a World Customs Organization protocol that provides shipping lines, port operators and governments real-time information on the potential arrival in port (or departure from port) of dangerous goods, Finance Minister Mohamed Maait said. The trial starts on the first of April and will become mandatory for anyone pushing goods into or out of Egypt’s ports by July.

What’s ACI? Think back to when you used to travel. Remember seeing “API” on your boarding pass? That means the airline sent your name, DOB and passport information into a security database under the “API” (Advance Passenger Information) standard. ACI is API, but for freight. You can learn more about it here (pdf).

WHY IT’S SMART POLICY- For the first time in recent memory, most arms of government (including rival authorities within individual ministries) are working in concert to bring the informal economy kicking and screaming into the light. The government’s goal: To widen the tax base and reduce chances to avoid paying the taxman (or customs office or licensing authority) its due. You see this on the government side in everything from the e-tax registration system for companies and individuals to a near-complete ban on cash payments to government agencies. The Central Bank of Egypt, meanwhile, is pushing banks to promote digital transactions as part of its sweeping financial inclusion drive.

Planning to buy an EV? You should have access to 3k charging stations within three years as the government continues to encourage a move towards electric and natural gas powered vehicles, El Watan reports, citing unnamed sources in the know. The plans also include the establishment of electric vehicle parking and charging stations in shopping center garages, as well as at the Tahrir and Ramsis garages. The oil, electricity, finance, and public enterprises ministries are coordinating on how to set up the infrastructure for the stations. The 3k stations goal appears to be more ambitious than statements given by Public Enterprises Minister Hisham Tawfik last January, in which he said the government would be targeting 1k stations by the end of three years.

A number of EV charging points have already been rolled out to select gas stations, with the first inaugurated in February 2018 on the Cairo-Suez highway. EV outfit Revolta Egypt says it has completed 87 charging stations across the country, and announced its intention to bring that figure to 690 by the end of 2020, though its website currently boasts 130.

The government has proposed a number of incentives to promote the EV conversion, including set charging prices and subsidies of up to 50k per vehicle, and requiring public enterprises to replace 5% of their fleet every year with electric cars. Egypt plans to begin manufacturing electric vehicles locally under a partnership agreement between El Nasr Automotive and China’s Dongfeng that should eventually see the assembly of 25k electric vehicles per year, and is expected to cost some EGP 2.5 bn. The agreement could be signed as early as today, as we note in What We’re Tracking Today, above.

The long-awaited executive regulations for the NGOs Act are now the law of the land less than two months after getting the green light from the Madbouly Cabinet. The regs come into effect just days before the Biden administration takes over the White House, which pundits have suggested could mean more scrutiny of Egypt’s human rights record. Civil society and making room for NGOs to operate legally has been a persistent strain on the US-Egypt relationship since the 2013 NGO trial.

Refresher on the legislation: The NGOs Act, which President Abdel Fattah El Sisi ratified in August 2019, replaces the controversial Law No.70 of 2017, which had generated criticism in Egypt and abroad for its curtailing of civil society. The law grants more space for foreign involvement in civil society, including allowing up to 25% of organizations’ board of directors to be foreign residents (up from 10% under the old law), allowing foreign NGOs to operate in the country, and allowing local organizations to open offices in other countries and receive donor funds. The new law still forbids NGOs from participating in political activities, but has eased penalties on violators of the law by scrapping prison sentences.

So, what’s in the regs? In addition to laying out the new limits on foreign involvement in NGOs, the regulations require organizations to set up at least one account within the same bank to receive all of their funding, while allowing organizations with annual revenues or expenditures north of EGP 5 mn to set up accounts in different banks. The regulations also require NGOs to provide a host of data to register with the authorities, including information on its founders and its planned activities. Organizations are being given one year to comply with the regs. Read them in full here.

Also on the legislative front:

• Street car park attendants (aka a “sayes”) now need to submit driving licenses and prove they don’t abuse substances, among other things, to be permitted to work on the country’s streets under the executive regulations to a law regulating street parking passed last year.
• We’ll be paying an extra EGP 5 for sport and plane tickets and college and club membership applications to support a state fund to compensate martyrs and wounded soldiers under amendments given House approval yesterday.
• The House Legislative Committee approved the Bankruptcy Act and draft legislation to regulate special judicial mediation for out-of-court trade and civil dispute settlements.
• The House Manpower Committee is looking into the planned liquidation of state-owned Egyptian Iron & Steel.

Crypto asset platform Rain raises USD 6 mn series A: Bahrain’s Rain Financial, whose subsidiary Rain Management is the region’s first fully licensed digital currency exchange, has raised USD 6 mn in a series A funding round led by Middle East Venture Partners with participation from Coinbase, Vision Ventures, CMT Digital Ventures, JIMCO, and DIFC Fintech Fund, according to an emailed statement (pdf). Rain plans to use the investments to expand its engineering team and work on growing its presence in the Middle East.

We’ve been following Rain since 2018. Egyptian Yehia Badawy is one of four co-founders of the outfit, which landed a sandbox license from the Central Bank of Bahrain in 2017.

EDITOR’S NOTE: This story was corrected on 19 January, 2022 to reflect that we have been following Rain since 2018, not 2019. 

Consumer finance company Rawaj is reportedly planning a EGP 308 mn issuance of securitized bonds in a sale arranged and managed by CIB, Al Mal reports, citing unnamed sources with knowledge of the matter. The issuance is awaiting approval from the Financial Regulatory Authority, and should be concluded by the end of January.

Rawaj would be the latest in a slew of businesses offloading receivables in the country’s hot securitization market, including Sarwa Capital, Palm Hills Development, CI Capital’s Corplease, GB Auto subsidiaries GB Lease and Drive Finance, Amer Group, and Talaat Moustafa Group.

OTHER DEBT NEWS-

Fawry has taken on a EGP 160 mn loan (pdf) from the Egyptian American Enterprise Fund.

Banque Misr’s NBFS arm BM Lease plans to expand into factoring and is looking to extend a total of EGP 2 bn worth of finance in 1Q2021, CEO Hisham Sheta told Al Mal.

CORRECTION- 18 January 2021

An earlier version of this story incorrectly said that BM Lease is the National Bank of Egypt’s NBFS arm.

A huge archaeological discovery at Saqqara is leading the conversation on Egyp tin the foreign press this morning: Egypt has announced details of a large archaeological find at the Saqqara complex, including a funerary temple and a collection of 54 coffins thought to be some 3k years’ old. Everyone from the AP to Deutsche Welle and Sky News has the story.

A Cairo court has ordered the seizure of assets belonging to former President Mohamed Morsi’s family and 88 other members of the Ikhwan, including Supreme Guide Mohamed Badie, his deputy Khairat El Shater, and former MP Mohamed Beltagy, a judicial source told France’s AFP. The Times of Israel picked up the story from the French news agency.

TMG purchases 21 mn sqm of land for massive new capital development: Talaat Moustafa subsidiary the Arab Company for Projects and Urban Development has purchased 21 mn sqm (5.2k feddans) of land from the New Urban Communities Authority (NUCA) for a EGP 500 bn residential project in the Capital Gardens district near the new administrative capital, cabinet said in a statement. The price of the land wasn’t disclosed, but Al Mal claimed that NUCA valued it at 1.35k per sqm, translating to an overall price of EGP 28.5 bn. The company will pay for part of the land in-kind, and the rest in direct transfers. It plans to build a Madinaty-style city with up to 600k residents in nearly 140k homes, cabinet added.

IN DIPLOMACY: Egypt remains committed to working within the African Continental Trade Area and will do what it can to help fully implement the continent-wide agreement, President Abdel Fattah El Sisi told AfCFTA Secretary-General Wamkele Mene during talks yesterday, Ittihadiya said in a statement. The 24 African countries to have ratified the agreement (among them, Egypt) began trading under the rules when the area had its official launch at the beginning of 2021. It will take several years at least before the trade zone is fully implemented, with many of the finer details still to be agreed, countries yet to sign on, and institutions still to be built.

13-31 January (Wednesday-Sunday): Egypt will host the 2021 Men’s Handball World Championship in four venues in Alexandria, Cairo, Giza and the New Capital.

19 January (Tuesday) Financial Regulatory Authority’s (FRA) annual conference on non-banking financial services.

19-22 January (Tuesday-Friday) Global Energy Forum, Abu Dhabi, UAE. The Atlantic Council-organized event will focus on the post-pandemic energy system.

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

25-29 January (Monday-Friday): The World Economic Forum’s “Davos Dialogues” (virtual)

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

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

31 January (Sunday): The deadline for businesses to electronically submit their annual tax return to the Egyptian Tax Authority.

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

6-18 February (Saturday-Thursday): Mid-year school break (public schools — enjoy the break from bumper-to-bumper traffic)

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

13 April (Monday): First day of Ramadan (TBC).

25 April (Sunday): Sinai Liberation Day.

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

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

1 May (Saturday): Labour Day (national holiday)

3 May (Monday): Sham El Nessim.

13-15 May (Thursday-Saturday): Eid El Fitr (TBC).

18-21 May (Tuesday-Friday): The World Economic Forum’s annual meeting “The Great Reset”

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

30 May-15 June (Wednesday-Thursday): Cairo International Book Fair.

1 June (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).

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

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

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

30 June (Wednesday): June 30 Revolution Day

1 July: (Thursday): National holiday in observance of 30 June Revolution

30 June- 15 July: National Book Fair.

1 July (Thursday): Large taxpayers that have not yet signed on on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

19 July (Monday): Arafat Day (national holiday)

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday)

23 July (Friday): Revolution Day (national holiday)

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

9 August (Monday): Islamic New Year

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

1 October (Friday): Expo 2020 Dubai opens

6 October (Wednesday): Armed Forces Day

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

18 October (Monday): Prophet’s Birthday

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

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

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

Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish below between the actual holiday and its observance.