How Actis is doubling down on investment in physical infrastructure.

Good morning, everyone, and welcome to a busy Monday as newsflow gathers steam. We have the inside track on Actis’ pipeline of potential Egyptian investments this year and beyond and take a deep dive into trends in the country’s edtech sector — plus the latest on the (near) end to Eastern Company’s monopoly on cigarette manufacturing and more.

PSA- It’s going to be another windy, dusty morning in the capital city, with a 20% chance of intermittent showers, according to the national weather service.

THE BIG STORY INTERNATIONALLY- Turkey’s TRY tumbled 15% to 8.10 to the greenback following President Recep Tayyip Erdogan's decision to fire the country's third central bank governor since mid-2019, Bloomberg reports. The move to install a hawkish governor is “a blow to investor confidence and raises concern the country will once again embark on a path of rock-bottom rates,” which would be poison for the Turkish carry trade.

The good news for Egypt: The TRY could be dethroned from its status as the “best” carry trade this year, clearing a path for the EGP to take the title as the CBE keeps rates on hold and Egypt’s real interest rate remains among the highest in the world.

** CATCH UP QUICK on the top stories from yesterday’s edition of EnterprisePM:

• Egypt, Saudi Arabia and the UAE led a boom in e-commerce in MENA last year, as the covid-19 pandemic caused the value of the sector to surge 52%.
• Eastern Company has confirmed its decades-long monopoly over the tobacco sector may be (partially) coming to an end after it emerged over the weekend that the government has issued a tender for a new manufacturing license.
• The next IMF World Economic Outlook appears set to deliver mixed news: an upward revision of its global growth forecast to 5.5%, but a warning that emerging markets may now lag even further behind advanced economies.

Prolific writer Nawal El Saadawi passed away yesterday at the age of 90, leaving behind a legacy of more than 50 works of fiction and nonfiction that champion women’s rights. Often referred to as the Simone de Beauvoir of the Arab world (a comparison she wasn’t particularly fond of), El Saadawi was a pioneer of feminist writing in the region. You can read more about her remarkable life in our Your Wealth issue on modern Egyptian icons here. El Saadawi’s passing leads coverage of Egypt in the foreign press this morning, with everyone from Bloomberg and the New York Times to BBC and CNN taking note of her remarkable life.

CIRCLE YOUR CALENDAR-

Prime Minister Moustafa Madbouly will be in Amman tomorrow to attend a meeting of the Joint Jordanian-Egyptian Higher Committee, according to Jordan’s Petra news agency.

The Real Gate real estate exhibition will kick off on Thursday and run until Saturday at the Egyptian International Exhibition Center.

The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo) is taking place from 17-20 June at the Cairo International Conference Center. The second edition of the expo will feature 48 exhibitors and 172 brands from across the region.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

*** 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: How has Egypt’s edtech scene fared during a year of covid? We speak to some of the key players in the industry to find out.

Actis is doubling down on investment in physical infrastructure: It’s music to our ears when a major global investor such as Actis starts talking about big-ticket investment in key infrastructure sectors including social infrastructure such as education and healthcare — and that’s just what partner and Middle East & North Africa chief Sherif El Kholy (LinkedIn) told us in an exclusive sit-down.

Actis has a pipeline of transactions in education, renewables, water and healthcare on which it will be executing in the near future, including an announcement of an Egypt acquisition by Honoris United University — Actis’ regional education platform and Africa’s largest private higher education network, spanning countries from Morocco to South Africa.

Actis is also investing in its existing portfolio of companies. The global emerging markets champion has invested over USD 1 bn in Egypt and today stakes and board representation in high-profile businesses including leading payments firm Fawry and hospitals group Cleopatra.

Edited excerpts from our conversation:

Our Egyptian portfolio has been the best in the region. We’ve had some liquidity and operational challenges within the region [thanks to covid], but when it comes to Egypt our assets have by and large been very resilient — we’ve got very high-quality assets here. Healthcare has obviously been doing particularly well, in all elements — including diagnostics, hospital services, and payments. We’re the largest shareholder in Cleopatra Hospitals, which has just signed a mega-acquisition of 100% of Alameda Healthcare. As I’m sure you recognize, this was with our full support and involvement.

Our portfolio of high-quality Egyptian assets also includes our investments in renewables. We’ve made a huge investment in our wind power station in West Bakr (Actis backs Lekela Power, which has invested some USD 350 mn in its 250 MW West Bakr wind farm). These types of both physical and social infrastructure have been areas that we’ve historically been very big in and we’re 100% committed to continuing our support for them.

And then some, as we are going to be doubling down on these physical assets. Today, across our markets, we see a huge and growing opportunity in all areas related to infrastructure. This includes: Electricity generation, distribution, and transmission; water treatment and desalination; digital infrastructure like fiber and data centers; and real estate.

And of course, that also means education, where we’re also working on an interesting new acquisition in Egypt. Actis is the controlling shareholder of the largest private higher education business in Africa: Honoris United Universities. Honoris is prioritizing an Egyptian entry in the coming period, and is working on closing an acquisition during 2021.

Beyond education, we’re looking to expand in a host of other sectors: We’re also looking to expand our portfolio of renewable assets in Egypt and the region — both greenfield and acquisitions of existing opportunities. It’s hard to pin down a number for how much we’re planning to deploy in 2021, considering everything that’s going on with covid. But we’re getting ready to participate very strongly in upcoming water treatment and desalination projects. We’re exploring investment prospects in digital infrastructure — everything from data centers to fiber to the home. And we’re working on developing opportunities in the real estate sector, or even in hospitality — hotels and business travel.

Actis is committed to being an ESG investor — not just in Egypt, but globally. Our entire portfolio is absolutely at the top echelons of ESG commitments. Every single investment we make is held to a very high level of accountability in terms of ESG standards, across all the different sectors.

What does that mean for our fossil fuel investments? We’re trying hard to be an agent of change away from thermal energy and fossil fuels in general.

Having said that, we’re still interested in getting in on the privatization of the Siemens power plants. We remain very interested in that. We’re still in talks with the Sovereign Fund of Egypt about it, and we’re ready to move forward when the government’s ready. But still our focus is very much on investing in clean energy. By this, we mean both onshore and offshore wind, as well as solar energy. Then in due course, we’ll even be looking at hydrogen.

Our push on infrastructure and our agreement with Apis does not mean we’re divesting from financial services. For Actis, it’s really business as usual. We’re the owner and manager of all our assets, and we retain all legal responsibility for them. These remain our operations and funds, under our administration. So in that sense, nothing is changing. What we have with Apis is a partnership where we can work together on our financial services portfolio. It’s essentially a co-advisory arrangement, where we benefit from their FS sector expertise in an advisory capacity. And this is great because Hossam wants to focus on financial services, and Apis is a financial services fund. So I think there’s a meeting of minds there.

[Editor’s Note: London-based financial services PE outfit Apis announced last month that it will play a co-advisory role in managing certain investments, including Fawry, in Actis’ financial services portfolio. Hossam Abou Moussa, and Actis partner of 15 years moved over to Apis, where he will, among other things, help Actis manage those assets under a co-advisory arrangement.]

There’s nothing new happening in terms of our strategy. We’re continuing to invest very heavily in our existing portfolios and platforms. We just want to focus increasingly on deployment into the areas I noted above.

The bidding process for a license to establish Egypt’s second major tobacco company will be assessed on a points system, according to the conditions booklet the Industrial Development Authority (IDA) has released for the auction, the local press reports. Bidders looking for a piece of Eastern Company’s monopoly on the sector should earn at least 70% of the system’s total 13k points to qualify for the tender.

What does the license allow you to do? Go head to head with Eastern — provided you don’t mind having the state-owned giant on board as a 24% partner in your venture.

Who’s interested so far? An unnamed Emirati is likely to throw its hat in the ring, according to a report in Al Mal’s print edition, which notes the bidder has a particular interest in non-traditional nicotine products including e-cigarettes. Major tobacco distributors and brand owners have expressed reservations about the conditions of the license sale, including a complaint that giving the new company an effective monopoly on e-cigarettes and heated tobacco would be anti-competitive.

The value of the license may reach USD 350 mn, Eastern’s CEO Hany Aman told El Hekaya’s Amr Adib last night (watch, runtime: 7:20).

There are, naturally, conditions: The IDA’s conditions would protect Eastern’s market share by preventing the new company from producing cigarettes at the same price point as the monopoly’s mass-market Cleopatra brand, which accounts for 98% of Eastern’s revenues, the state-owned cigarette manufacturer confirmed yesterday. Other conditions:

• Minimum production of 15 bn cigarettes a year and a maximum of 50 bn (Egypt currently produces 80 bn smokes per year);
• No restrictions on exports;
• Allowed to purchase or rent some of Eastern’s unused assets
• Must pay 25% of the value of the license within a month of being selected, with the rest in three quarterly chunks;

Bidders will accumulate points in two categories: Industry track record (7.5k points with a relative weight of 60%) and the pillars of the manufacturing proposal (5.5k points with a 40% relative weight). Track record covers everything from experience specific to the tobacco industry, the bidder’s forays into other industries, investments in other industries, and a financial analysis of their portfolio and sources of funding, among other criteria. Bidders will also be scored based on the types of cigarettes they plan to make, the expected water and energy consumption levels and emissions, the timeline for getting the company off the ground, the expected size of its staff, and how much it would rely on Eastern labor force.

The CBE’s decision to leave interest rates on hold this past Thursday reflects Egypt’s “manageable” inflation rate and strong portfolio inflows, Jefferies International MENA Analyst Alia Moubayed told Bloomberg TV (watch, runtime: 07:02).

Egypt keeping its monetary easing cycle on pause is consistent with achieving the target inflation rate of 7% (±2) by the end of next year, the CBE said in its Thursday statement. With core inflation at 3.6% and urban inflation at 4.5% in February, Moubayed believes that “as long as we are in this range of inflation, I think the central bank can afford to remain where it is now.”

But high rates could keep Egypt’s growth muted in the long term, says Moubayed. “The tension moving forward is really about ensuring that this level of rate does not obstruct the growth recovery which Egypt needs the most, while ensuring that flows are sustainable,” she said.

Maintaining sustainable inflows is essential for Egypt’s external financing bill, with needs for this year reaching USD 30 bn, Moubayad said. Foreign holdings in local Egyptian debt hit its highest-ever level of USD 28.5 bn in February, reversing the huge outflows seen at the height of the global covid market crash last year, which saw foreign investors sell 60% of their holdings between March and May.

Thursday’s rate hold had been expected by all 12 analysts we surveyed ahead of the meeting, who cited the possible impact of heightened commodity prices on domestic inflation, as well as the potential for rising bond yields in the US to hit our all-important carry trade.

Real estate firm Marseilia Group plans to jump from the small-cap Nilex to the EGX before the end of this year, Vice President for Commercial Sector Affairs Mysarra Ashour told us. The company is currently working on completing the paperwork it needs for the upgrade to the main market, he added, including a capital increase to meet the minimum required EGP 100 mn capital requirement for resident companies on the EGX. The company raised its capital by EGP 12 mn to EGP 72 mn in 2019, as we noted at the time.

Following in Speed Medical’s footsteps: The medical diagnostics upstart was the first company to make the jump from the small-cap index to the EGX in December 2020, and Egyptian Modern Education Systems says it wants to follow suit.

Some 2 mn tourists have visited Egypt since commercial flights resumed last July, Tourism and Antiquities Minister Khaled El Anany told reporters, according to Sada El Balad. El Anany said last month that Egypt has been seeing between 270k and 290k tourist arrivals per month between December 2020 and February 2021, a significant increase from 90k when the government eased first covid-19 restrictions last summer and allowed charter flights to land in Red Sea tourist destinations. This suggests a quicker than average potential turnaround for the industry, which was battered in 2020 due to the pandemic.

Pharma may have appetite for capex as two manufacturers take on debt to finance new production capacity: Future Pharma Industries (FPI) has secured a EGP 350 mn loan from the National Bank of Egypt and QNB AlAhli to fund a new EGP 500 mn plant, Chairman Gamal El Leithy tells Souq Al Dawaa. SPE Capital, which acquired a 30% stake in FPI for EGP 500 mn, will finance the remaining funding needed to develop the project. The factory will produce ampoules and eye drops, and is expected to be operational by 2023, according to El Leithy.

Meanwhile, Marcyrl Pharma is borrowing EGP 300 mn from QNB to bankroll the development of an aseptic production line for needles and drops in the company’s factory in Obour City, General Manager Wagdy Mounir tells the newspaper. The manufacturer aims to see a 20% boost in sales during 2021, Mounir said.

Companies importing capital goods they need to grow — including heavy equipment and machinery — could get a breather under upcoming changes to the Customs Act’s executive regulations (pdf), the draft of which the Finance Ministry has completed ahead of their being put up for public consultations. The regs would allow importers to pay customs in chunks over six months for businesses that are up and running, and over the course of one year for ventures that are still in the construction phase.

Shippers could also be allowed to move goods out of Egypt without submitting waybills on the spot and would instead be given the option of handing over the documentation 48 hours after leaving the country. This applies to cargo ships, planes, and other vessels with or without cargo. The Customs Authority had agreed to introduce this concession in the act’s executive regulations last month.

Background: We have a bulleted rundown on the new Customs Act here if you need to get up to speed. The recently-approved law came into effect late last year and aims to expedite customs clearance. It received a final nod from the House of Representatives in August 2020, but has since been met with pushback from exporters, shipping agencies, and customs brokers. Their grumblings led the Finance Ministry to make minor concessions, including on ins. requirements.

IN OTHER LEGISLATION NEWS-

FGM is now punishable by at least five years in prison and up to a decade if the victim is permanently disabled after the Senate signed off on tougher penalties for the illegal procedure in a plenary session yesterday, Al Shorouk reported. The penalty in the case of a victim’s death is at least 20 years in prison. Medical professionals found guilty of FGM will face similar prison terms and will be stripped of their medical license for at least five years. Those who promote or encourage the practice will also face prison time.

Egypt is on the cusp of a third wave of covid-19 infections, President Abdel Fattah El Sisi warned yesterday, urging citizens to take the necessary precautions, especially during Ramadan (watch, runtime: 2:39). We were relatively lucky with the first and second waves and managed to weather the storm, El Sisi said, but there is no certainty we’ll have the same outcome if faced with an aggressive third wave.

The Health Ministry reported 647 new covid-19 infections yesterday, up from 644 the day before. The ministry also reported 41 new deaths, bringing the country’s total death toll to 11,598. Egypt has now disclosed a total of 195,418 confirmed cases of covid-19.

Developing countries shouldn’t expect donations from the European Union for a while until there’s “a better production situation” in the EU, which is already providing financial support to the Covax initiative, European Commission President Ursula von der Leyen said, according to Bloomberg.

The UAE is expanding its vaccination campaign to include people aged 16 and above, state-run WAM news agency reported. The country had prioritized the elderly and those with chronic diseases, but will now start rolling out the jabs to the broader public. The UAE has so far handed out more than 7 mn jabs to its 10 mn-strong population.

Palestine’s covid-19 vaccination campaign kicked off yesterday with the first shipment of some 61.4k doses of AstraZeneca from the World Health Organization’s Gavi / Covax program. The shipment arrived last week and is being used to inoculate the West Bank’s eligible population, Palestinian news agency Wafa reports.

EARNINGS WATCH- Cleopatra Hospitals Group’s (CHG) net income rose 21% y-o-y in 4Q2020 to EGP 116 mn, up from EGP 95 mn in 4Q2019, the company said in an earnings release (pdf). Revenues for the quarter grew 19% y-o-y to EGP 611 mn, up from EGP 511 mn in the same quarter of 2019. Over the course of the year the company reported a 12% increase in net income to EGP 298 mn on the back of an 11% rise in revenues and efforts to reduce costs.

Rising patient volumes in 4Q point to full recovery from covid headwinds: The company saw patient numbers fall 11% during the course of the year, but an uptick in the final quarter is raising hope that a “full recovery” in volumes is around the corner, CEO Ahmed Ezzeldin said. “We expect to see them return to their pre-crisis growth trajectory in the near future,” he added.

Looking ahead: In the short-term, the company plans to enhance the quality of its services and support the increase in patient volumes through marketing campaigns. It will also continue rolling out new digital systems to improve operational efficiency. Over the longer term, the company is looking to open two new centers — one specialized in oncology at Queens Hospital, the other respirology at El Katib — and will continue working to obtain permits for a new hospital in Beni Suef.

CIB’s CEO for Institutional Banking, Amr El Ganainy (bio), has stepped down from CI Capital’s board of directors, the company said in a statement (pdf). El Ganainy stepped down after Banque Misr closed its takeover of a 66% stake in CI Capital. CIB was one of the major shareholders that offloaded their stakes in the EGP 3.06 bn transaction, giving Banque Misr control of 90% of CI Capital. CI has also accepted the resignation of board members including Omar Mehana, Mahmoud El Gammal and Wael Ismail.

The talking heads fixated on Mother’s Day yesterday, with wall-to-wall coverage of President Abdel Fattah El Sisi’s directives at the “Mother of the Year” ceremony to introduce new policies to support women and mothers in Egypt. Among those singing praises were from Kelma Akhira’s Lamees El Hadidi (watch, runtime: 1:26) and Masaa DMC’s Eman El Hosary (watch, runtime: 1:35). The president also phoned into CBC’s Min Masr to reiterate the state’s commitment to supporting women, especially those with success stories (watch, runtime: 5:30).

Among the key priorities: The president ordered his government to address the phenomenon of indebted women who are jailed over unpaid debts, which he previously touched on at a similar ceremony back in 2019. This long standing issue could be resolved through legislative amendments, El Hekaya’s Amr Adib said (watch, runtime: 3:43). Misr El Kheir Foundation is also currently working on a program to help put an end to the phenomenon, foundation director Mohsen Mahgoub told Adib (watch, runtime: 4:59).

The president also called for changes to the Personal Status Act that would set a minimum age of marriage for both women and men to crack down on child marriage, which Adib hailed as a “historical milestone” (watch, runtime: 4:14). The draft law — which has been met with plenty of public controversy — will be put up for public consultations, Social Solidarity Minister Nevine El Kabbaj told El Hosary. El Kabbaj drew a parallel to the NGOs Act, which was also highly controversial in its initial form but went through several rounds of consultations with key stakeholders before being passed into law (watch, runtime: 8:11).

The passing of high-profile writer and feminist icon Nawal El Saadawi leads the conversation on Egypt this morning (as we note in What We’re Tracking Today, above). In the runner-up spot: coverage of our latest vaccine shipment from China. The Associated Press and Reuters are running with news of the 300k-dose shipment of vaccine from Sinopharm that we received over the weekend.

Also making headlines: Yet another piece looking at the colonial roots of tensions over the Grand Ethiopian Renaissance Dam (The Conversation) and a look at desert megacities in Egypt and Saudi Arabia (Haaretz).

Dice will hire an advisor to prepare a fair value report after its shares shed more than half their value since late February, triggering a regulation that grants the Financial Regulatory Authority the right to order a valuation through an independent financial advisor, the regulator said in a filing (pdf). The clothing manufacturer’s shares closed yesterday’s session at EGP 1.52 apiece after losing 12.47% in intra-day trading, representing a 55% decrease from EGP 3.37 on 22 February. Dice rotated out of the benchmark EGX30 earlier this year due to the sustained loss of market cap in the index’s latest rebalancing under new inclusion criteria.

Other things we’re keeping an eye on this morning:

• Heliopolis Housing has postponed offering the conditions booklet for developing the Heliopark real estate project in New Cairo to 4 April, with the deadline for investors to submit bids extended to 16 June.
• Egypt and Italy are mulling setting up direct shipping lines between the two countries’ ports.

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

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.

23 March (Tuesday): AUC Women on Boards Observatory event to launch 2020 annual monitoring report.

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.

6 April (Tuesday): French Chamber of Commerce and Industry in Egypt working breakfast with Sovereign Fund of Egypt CEO Ayman Soliman.

7 April (Wednesday): British-Egyptian Business Association (BEBA) webinar on digital banking and fintech.

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).

7-9 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.

17-20 June (Thursday-Sunday) : The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo), Cairo International Conference Center.

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.

30 June- 15 July: National Book Fair.

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

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.