Egypt is poised to ride 2021’s green bond wave + FRA is pushing NBFS players to go green

Good morning, nice people, and welcome to a policy- and legislation-heavy issue after the run of M&A that has dominated headlines for the past week and a half.

We’re also feeling very green this morning. Not because it’s nearly St. Patrick’s Day, but because we’re launching our new green economy vertical. And in the news well this morning, we have coverage of the FRA’s drive to push non-bank financial services players to put all things green at the center of their business models.

THE BIG STORY INTERNATIONALLY: The list of countries pausing the rollout of AstraZeneca’s vaccine grows bigger: France, Italy, Spain and Germany are temporarily suspending the use of the vaccine, pending further investigation after a handful of cases in which people reported developing blood clots after taking the jab. Austria, Norway, Ireland, the Netherlands and Denmark have also pressed pause in recent days.

But the WHO insists there is “no evidence” of a direct link between the jab and blood clotting incidents, saying in a statement picked up by Euronews yesterday it is reviewing the reports and adverse effects. The organization urged governments to press ahead with vaccine rollouts to “save lives and stem severe disease from the virus.”

Uh, can we talk statistics for a moment? The European Medicines Agency is a voice of reason here, with the New York Times quoting it as saying, “the numbers of such problems reported in vaccinated people did not seem higher than those usually seen in the general population.” As one top British regulator put it: “We are closely reviewing reports but the evidence available does not suggest the vaccine is the cause.”

So would we take AstraZeneca this morning, if offered the chance? Yep. 100%.

The AstraZeneca vaccine — one of Egypt’s jabs of choice — is still being administered in Canada, Belgium, Poland, the Czech Republic, and Ukraine. Thailand is also set to begin rolling out the jab today, after safety concerns led to a “brief delay,” BBC notes.

Egypt is set to receive some 40 mn doses of the vaccine this year, with the first batch of 6 mn doses set to arrive by the end of the month as part of an 8.6 mn dose order placed through the Gavi / Covax program.

*** CATCH UP QUICK from Monday's edition of EnterprisePM:

• Egytrans has conditionally approved Hassan Allam Utilities' purchase offer to take over a controlling stake in the company via a reverse merger.
• GSK Egypt has turned down Acdima’s request to start due diligence, closing sale talks.
• Taaleem Management Services has valued its initial public offering on the Egyptian bourse at EGP 5.48-6.02 per share. Taaleem submitted its formal request to list on the EGX and its shares could start trading as early as next month, according to a report in this morning’s print edition of Al Mal.

We promised you late in November that we were redoubling our focus on the issues that will define our generation. The list of policy issues that will shape our lives (in business and out) is long, but few are more all-encompassing than climate. With that in mind:

We’re honoured this morning to launch Going Green — your weekly briefing of all things green economy in Egypt — with the support of our friends at Infinity. Our third weekly industry vertical, Going Green will focus on the business of renewable energy and sustainable practices in Egypt. The scope of the Going Green is massive, covering everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

Look for Going Green every Tuesday for a hand-picked selection of stories, analysis pieces, explainers, interviews, and reports that will help keep you informed on the green economy.

In today’s issue: Egypt’s USD 750 mn sovereign green bond issuance made waves last year. But other planned issuances stalled amid covid turbulence. This looks set to change in 2021, with more sovereign green bond issuances planned and CIB looking to close the first tranche of its USD 100 mn corporate green bond issuance — Egypt’s first — by 1H2021. This is all being spurred by investor appetite for Egyptian debt, green bonds, and ESG investment, sources tell Enterprise.

WHAT’S HAPPENING TODAY-

The Federal Reserve begins its two-day meeting to decide interest rates today. The consensus: No rate hikes until 2023 and the USD 120 bn-a-month bond buying program will be left untouched. But the recent rise in US treasury yields means markets are pricing for an earlier than originally expected rate hike, writes DoubleLine Capital portfolio manager Gregory Whiteley for the Financial Times, and the Fed may have to scale up its asset purchase program to increase its support if it wants to achieve its target of full employment before enacting an increase.

It’s also interest rate week here at home: The Central Bank of Egypt meets on Thursday to review interest rates. All 12 analysts we spoke with for our regular poll believe the central bank will leave rates on hold. A Reuters poll published yesterday indicates the same anticipated outcome.

Local banks will be able to settle USD transactions for their retail clients within the same working day beginning 1 April, and EUR transactions shortly thereafter, Central Bank of Egypt (CBE) Deputy Governor Rami Aboul Naga told Al Arabiya yesterday. The CBE will first introduce the quicker settlement mechanism to foreign currency interbank payments on 22 March, under a recent decision that aims to make FX transfers in Egypt less costly for banks and faster for clients, and then extend the system to the day-to-day USD payments made by bank clients to third parties.

PSA- Visit your local moroor and get an RFID sticker affixed to your car’s windshield before the deadline on 30 March, the Interior Ministry said in a reminder yesterday.

CIRCLE YOUR CALENDAR-

Business tech expert and TEDx speaker Patrick Schwerdtfeger will explain how entrepreneurs, businesses and investors can harness disruptive tech during a two-hour webinar hosted by AmCham today at 3:00pm CLT. The two-hour event will see Schwerdtfeger talk block chain, AI and crypto, and discuss how the business community can reposition in a world undergoing rapid technological change. You can register for the event here.

Egyptian tennis champion Mayar Sherif will participate in the Miami Open Main Draw, with the 2021 tournament taking place between 22 March and 4 April, Sherif announced on Facebook. As a “wild card” Sherif was directly invited to play by the tournament organizers.

Some 1-2k people in Egypt are being vaccinated against the virus that causes covid-19 each each day, Noha Assem, advisor to Health Minister Hala Zayed, told Masaa DMC's Eman El Hosary (watch, runtime: 10:32). This figure is expected to rise when people feel more confident about vaccines, she said. The country started the vaccination campaign on 24 January for frontline medical staff and began administring the jab to elderly and vulnerable people on 4 March.

The Health Ministry reported 631 new covid-19 infections yesterday, down from 644 the day before. The ministry also reported 40 new deaths, bringing the country’s total death toll to 11,340. Egypt has now disclosed a total of 191,555 confirmed cases of covid-19.

The EU might have to eat their words on Sputnik: Long dismissed in Western media as dangerous and untrustworthy, European leaders are considering turning to Russia’s Sputnik V covid shot as the bloc’s vaccination campaign falters on supply problems and safety concerns, Reuters reports.

Egypt’s natural gas output could dip next year: Egypt anticipates natural gas production coming in at 7.2 bcf/d in FY2021-2022, the Oil Ministry said in a statement on Sunday. This would be more than 250 mcf/d short of projections for the current fiscal year, which see daily production reaching 7.54 bcf/d, up significantly from 6.55 bcf/d in FY2019-2020. Natgas production from the Zohr field currently stands at 3 bcf/d, Oil Ministry spokesman Hamdi Abdelaziz told Ala Mas’ouleety’s Ahmed Moussa last night (watch, runtime: 16:41).

The ministry is trying to ramp up exploration activity: Nine agreements worth USD 981 mn were signed to drill 18 natgas exploration wells in the first half of FY2020-2021, and last month the ministry launched its first oil and gas exploration auction of the year, putting up 24 blocks for auction in a round that will conclude on 1 August. It also aims to finish drilling 10 wells in the Delta and the Mediterranean, make preparations to drill another nine, and sign three development agreements worth almost USD 380 mn.

We’re also going to be exporting more: This comes a few weeks after the Damietta LNG plant restarted operations and sent out trial shipments of gas, almost eight years after shutting down in 2012. The facility has a production capacity of 4.9 tonnes per year, and has helped to raise Egypt’s export capacity to 27 mn cbm/d in January and February, more than double the rate in 2020.

The minimum wage for civil servants will be raised to EGP 2.4k from EGP 2k as of the next fiscal year on the instructions of President Abdel Fattah El Sisi following a review of the draft budget yesterday, according to an Ittihadiya statement. The increase is expected to cost EGP 37 bn, the statement says. The president also ordered a 13% hike for pensioners, which will cost state coffers an additional EGP 31 bn in FY2021-2022. The pension increase far outpaces last year’s rate of inflation, which came in at 5.1%, head of the National Authority for Social Ins. Gamal Awad told Ala Mas’ouleety’s Ahmed Moussa yesterday (watch, runtime: 3:07). The Pensions Act stipulates that the annual increase in pensions must at least keep pace with inflation.

New raises are also coming: Civil servants whose employment is covered by the Civil Service Act will also get annual raises worth 7% of their gross salaries. Public sector employees not covered by the act will get an annual raise equivalent to 13% of their basic wage.

Bureaucrats whose work will move to the new administrative capital are also getting a special bonus, the statement says. The budget has earmarked a total of EGP 1.5 bn for the employees’ bonus, but the statement does not clarify whether each employee will get a one-off payment or if the amount will be tacked on to their monthly salaries.

Could the private sector get a minimum wage, too? Watch for a potential meeting between Planning Minister Hala El Said (in her capacity as head of the National Wages Council) and private sector players to determine whether or not this is in the cards, Finance Minister Mohamed Maait told El Hekaya’s Amr Adib (watch, runtime: 0:34). The council had met back in 2019 to discuss implementing a minimum wage for those employed in the private sector, with an eye to set a minimum salary of EGP 2k at the time. The proposal to impose a binding minimum wage was put on the back burner because of the pandemic.

BUDGET WATCH- What we know about the budget so far: The FY2021-2022 budget forecasts total spending rising 9% y-o-y to EGP 1.76 tn, with revenues expected to rise 13% y-o-y to EGP 1.26 tn, Finance Minister Mohamed Maait said on TenTV yesterday (watch, runtime: 6:34). The budget is penciling in a 1.5% primary surplus, up from the 0.6% expected in the current fiscal year, according to the Ittihadiya statement. Expectations point to the overall deficit narrowing to 6.6% of GDP from 7.8% of GDP in FY2020-2021, according to Maait. The statement, which is otherwise scant on the details of the budget, says debt levels are expected to “remain stable.”

Education and health spending are set to increase in the next fiscal year, particularly as the government continues to roll out its universal healthcare scheme in more governorates, Maait told Kelma Akhira’s Lamees El Hadidi. Maait did not disclose how much the budget has earmarked for education and health (watch, runtime: 1:05).

There are no planned tax hikes in the pipeline, Maait reassured Adib, saying that the state will continue to grow its tax revenue stream by widening its taxpayer base and improving its tax collection mechanism (watch, runtime: 3:56).

Egypt to exempt sovereign sukuk from local regulatory oversight: A state-owned special purpose vehicle (SPV) that would be set up under the Sovereign Sukuk Act to manage the government’s sukuk sales may not be subject to oversight from the Financial Supervisory Authority if an amendment to a proposed framework governing sovereign sukuk sales passes the House of Representatives, Masrawy reported. The amendment, which was proposed by Finance Minister Mohamed Maait and approved “in principle” by the House Economic Committee on Sunday, would ensure the law treats sovereign sukuk in the same manner Egypt’s legal framework treats other instruments sold by the government, including eurobonds, green bonds, and local treasuries. It implies sovereign sukuk sales, unlike corporate sukuk, wouldn’t require the FRA’s approval, but rather an authorization from parliament.

Why this matters: Egypt’s maiden sovereign sukuk sale is expected soon after the bill makes its way into law. The bill, which received cabinet approval in November, would set up a company to issue sukuk on behalf of the government, govern how the debt is securitized and traded, and lay out the rights and responsibilities of sukuk holders — making sovereign sukuk a legal reality. The bill is currently being discussed by MPs at committee-level, a process after which it should make its way to a final general assembly vote.

Egypt is encouraging non-banking financial players to go green with their investments: The Financial Regulatory Authority (FRA) officially rolled out its Regional Center for Sustainable Finance to encourage and facilitate sustainable investments, the regulator said in a statement on Sunday.

What will the center do? The center will support NBFS firms by providing third-party vetting and auditing to local companies to instil investor confidence when tapping regional markets, Sina Hbous, who is chairing the organization and heads the FRA’s sustainable development division, told us. It will also provide training programs, advisory and research services to companies, support issuance of green debt financing instruments, including green bonds, and will try to ensure that companies adhere to green financing requirements, she said.

An advisory committee of up to 13 members chaired by IMF Executive Director Mahmoud Mohieldin will be formed to propose the center’s policies, possible cooperation programs, in addition to exchanging experiences with local and global sustainable financing entities.

Among the committee’s members: CIB Chief Sustainability Officer Dalia Abdel Kader, Federation of Egyptian Industries senior advisor El Sayed Torky, and Hussein Abaza (the advisor to the planning and environment ministries, not the CIB CEO of the same name). Also on the committee: Institute of International Finance’s managing director of global policy initiatives Sonja Gibbs, acting head of the OECD’s financial markets division Robert Patalano, and UNCTAD’s investment and enterprise director, James Zhan.

The Regional Center for Sustainable Finance has been in the works for a while: The FRA had greenlit a proposal to set up the regional organization to promote green investment in Africa and the Middle East in 2019, with the aim of channeling global investment into environmentally-friendly projects in the new administrative capital and a replicating the success of major projects like the Benban solar park.

This comes as part of a drive to grow the green economy: The government said last October that it will invest EGP 36.7 bn in green projects during the current fiscal year, after issuing the region’s first USD 750 mn green bond issuance in a sale that was 5x oversubscribed. Some 30% of the state’s investment budget in the next fiscal year will be geared towards green projects, according to Planning Minister Hala El Said. But Egyptian companies’ sustainable practices still have a long way to go, with Egyptian companies making up only 4.5% of the Middle East’s first regional green index’s weighting on its launch last year.

Want more on the green economy? Look no further than our new industry vertical, Going Green, the inaugural issue of which you’ll find below.

The American University in Cairo has elected Mark Turnage (LinkedIn) as chair of its board of trustees, succeeding Richard Bartlett, three-time chair of the board and first chair emeritus at AUC, according to a press release (pdf). Turnage is the CEO of dark net threat intelligence platform DarkOwl as well as the tech and telecom adviser to Blackstone Entrepreneurs Network Colorado and was senior adviser to the Colorado Impact Fund. He has served as an AUC trustee since 2016 and vice chair of the board of trustees at the California Institute of Technology over the last year. Turnage studied at AUC for three years during his undergraduate years to learn Arabic and has stayed in the region since.

Reda Abdel Moati has been reappointed vice chairman of the Financial Regulatory Authority for another one-year term, effective from the end of March, the authority said in a statement. Moati was first appointed in 2016.

The belle of the ball on last night’s talk shows: The planned increase in pensions and civil servants’ minimum wage. Finance Minister Mohamed Maait blanketed the airwaves to explain and discuss the increases, with phone-ins to everyone from Hadith Al Kahera’s Khairy Ramadan and Karima Awad (watch, runtime: 14:16) to El Hekaya’s Amr Adib (watch, runtime: 19:49). We have chapter and verse in the news well, above.

It’s an ultra-quiet morning for Egypt in the international press. The only story out there worth a skim this morning is the Jerusalem Post’s look at the business of narcotics smuggling between Egypt and Israel’s border.

Palm Hills is bringing the UK’s King’s College brand to Egypt: Palm Hills Development (PHD) has partnered with multinational schools operator Inspired Education Group to open a King’s College branded British school in PHD’s The Crown compound in West Cairo by 2022, when it will take in students from pre-kindergarten through year 12. PHD, King’s College and Inspired will set up four of the school’s campuses across PHD’s communities, with the remaining three planned for Palm Hills Alexandria, Palm Hills New Cairo, and Badya, according to an EGX disclosure (pdf).

GB Auto’s consumer finance arm, Drive Finance, plans to roll out consumer finance services in 2H2021, Managing Director Ahmed Osama told the local press. The company currently only offers car loans but will later expand its lending services to encompass consumer goods, GB Auto’s IR Manager Marina Kamal told us. The company received a license from the Financial Regulatory Authority at the end of last year to offer consumer finance services beyond its core auto finance and factoring business. Drive is targeting 35% y-o-y growth this year, raising its share of the market to 25%, Osama said.

Egypt’s arms imports have more than doubled over the past decade, according to figures released yesterday by the Stockholm International Peace Research Institute. The institute, which collects data on the global arms trade, said that Egypt’s imports rose 136% between 2016–2020 compared to its imports between 2011–2015, with big investments seen in its navy and airforce.

The Transport Ministry is looking to secure more than USD 1 bn of funding from international institutions to finance the development of a cross-border railway between Egypt and Sudan.

An international quartet to mediate stalled negotiations on the Grand Ethiopian Renaissance Dam (GERD) could soon be established after Sudan made a formal request to the African Union, European Union, United Nations, and United States to play a role in mediating an agreement on the dam’s filing and operation, Sudan Tribune reports, citing an unnamed senior official. The initial proposal to set up an international quartet — which Addis Ababa opposed on the grounds that it would undermine the AU’s efforts to resolve the impasse— came after talks have been floundering since last year after Ethiopia, Egypt and Sudan were unable to reach a binding agreement on the GERD.

Meanwhile, Egypt appears to continue rallying African support for its position on the GERD talks: Irrigation Minister Mohamed Abdel Aty met with his South Sudanese counterpart Manawa Peter for talks on cooperating in water-related issues, according to a cabinet statement, which we assume includes GERD.

Libya has sworn in its first unity government since it collapsed into civil war seven years ago: The breakthrough comes following successful UN-brokered talks between political rivals in the east and west of the country. Prime Minister Abdul Hamid Mohammed Dbeibah, chosen by UN delegates last month, will head a new cabinet to transition the North African country into parliamentary and presidential elections in December.

WHO’S TALKING- Regional developments and Egypt’s ties with Guinea-Conakry were on the agenda for foreign ministers Sameh Shoukry and Ibrahim Kaba, who met in Cairo yesterday, according to a cabinet statement.

March: Potential visit to Cairo by Russian President Vladimir Putin.

11-20 March (Thursday-Saturday): Photopia’s Cairo Photo Week 2021 will take place with this year’s theme being Depth OFF Field.

16 March (Tuesday): AmCham webinar featuring business tech expert Patrick Schwerdtfeger. Non-members can register here.

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

23 March (Tuesday): The second edition of the Egypt Retail Summit takes place at the Nile Ritz Carlton hotel.

23 March (Tuesday): The British-Egyptian Business Association (BEBA) virtual conference on sustainable manufacturing in Africa.

25-27 March (Thursday-Saturday): The Real Gate real estate exhibition, Egyptian International Exhibition Center, Cairo.

29-30 March (Monday-Tuesday): Arab Federation of Exchanges Annual Conference 2021.

31 March (Wednesday): Deadline to visit the moroor and get an RFID sticker affixed to your car’s windshield — or run afoul of the Traffic Police.

31 March (Wednesday): Income tax deadline for individuals. Real estate tax deadline.

1-3 April (Thursday-Saturday): HVAC-R Egypt Expo.

8-10 April (Thursday-Saturday): The TriFactory’s Endurance Festival at Somabay.

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 (TBC),

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

1 May (Saturday): Labor Day (national holiday).

2 May (Sunday): Easter Sunday.

3 May (Monday): Sham El Nessim.

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

25-28 May (Tuesday-Friday): The World Economic Forum annual meeting, Singapore.

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).

7 June-9 June (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

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, Cairo, Egypt.

30 June (Wednesday): 30 June 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.

12 August (Thursday): National holiday in observance of the Islamic New Year.

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

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

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.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

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

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

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.

27 June – 3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

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.