Contact closes its second EGP 2.5 bn sukuk offering

Good morning, ladies and gentlemen — we have a moderately busy issue for you this morning so let’s just jump straight into it.

WHAT’S HAPPENING THIS WEEK-

The CEO of the Africa Finance Corporation (AFC) is in town this week for talks with senior Egyptian officials about its investment plans. Samaila Zubairu kicked off his visit with a meeting with Planning Minister Hala El Said yesterday, discussing potential investments in infrastructure, renewable energy, transport and pharma projects, the Trade Ministry said yesterday. El Said said that Egypt is committed to becoming a full member of the African multilateral lender, which currently has 31 African member countries.

***Stay tuned: We sat down for an exclusive chat with Zubairu this week about the AFC’s plans for Egypt. We’ll publish the full interview later this week.

It’s Fed day: The Federal Reserve begins its two-day meeting to review interest rates today. It’s set to be an interesting meeting: with inflation at highs not seen since 2008 and the spreading delta covid variant raising concerns over the trajectory of the economy, the Fed is increasingly between a rock and a hard place. Though the US economy remains growing at a solid rate, the pace of inflation shows no signs of slowing, leaving members of the Federal Open Markets Committee divided about when and how it should begin to unwind its stimulus program and ultra-low interest rate regime. Check out Bloomberg, the FT and the AP for pre-meeting previews.

The political turmoil in Tunisia is still the biggest story in the region: Tunisian president Kais Saied has imposed a nationwide nighttime curfew and banned gatherings until the end of August, a day after firing the country’s prime minister and dissolving parliament following violent anti-government protests. President Kais Saied also dismissed the defense and acting justice ministers, a day after assuming executive power in response to nationwide protests against the government’s handling of the pandemic and the economy. Saied has denied any claims of staging a coup, saying yesterday that he acted in accordance with the country’s constitution.

The story is getting plenty of coverage in the Western press, which has taken a mostly negative stance on events. The New York Times is claiming that Tunisia’s democracy is “on the verge of collapse,” the Wall Street Journal writes that Saeid is “tightening his grip on power,” and Reuters says that the country’s democracy is “in turmoil.”

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

• Thndr to add funds, eyes margin trading: The zero-commission trading app is looking to add new investment funds, including one that invests in sharia-compliant equities and before the year is out, and is also angling for a license to allow its clients to trade on margin.
• Could Chinese crackdown on education investment be good for Egypt? An overhaul of China’s USD 100 bn private education industry will eliminate foreign investors from much of the sector, and could drive investors to other markets, like Egypt.
• Bye bye Souq, hello Amazon.eg: Amazon.eg will launch later this year, replacing Souq as the company’s selling platform in Egypt. Vendors on Souq are now able to register on the Amazon Seller Central to begin selling on Amazon.eg as soon as the site goes live.

GLOBAL EARNINGS WATCH- Tesla kicks off tech earnings week. The US electric-vehicle and clean energy giant shrugged off the global chip shortage to report higher-than-expected earnings in 2Q2021. Tesla’s net income reached USD 1.1 bn during the quarter, a tenfold increase from 2Q2020, while revenues almost doubled to USD 12 bn. Earnings per share came in at USD 1.45, comfortably beating the 97.5-cent forecast.

Coming up this week: Alphabet, Apple and Microsoft report their earnings today, Facebook is up on Wednesday, and it’s Amazon’s turn on Thursday.

The earnings are front page news everywhere in the global business press this morning: CNBC | FT | Bloomberg | Wall Street Journal | Yahoo! Finance.

CIRCLE YOUR CALENDAR-

Startups have until Thursday, 29 July to apply for round two of the Green Works Growth Acceleration Program, which aims to support green enterprises in Egypt. The 10-month program is supported by Hivos and implemented by Nahdet El Mahrousa and will see 10 startups receive financial and non-financial support. Chosen startups will be eligible for up to EGP 250k in funding. You can read more about eligibility requirements and the program here (pdf) and register using this form.

The Clean Energy Business Council will host a webinar focused on female entrepreneurs in the MENA renewable energy scene at 3 pm on Wednesday, 28 July.

Egypt will host the Africa Food Manufacturing exhibition at the Egypt International Exhibition Center on 2-4 August.

The Central Bank of Egypt will meet to review interest rates on Thursday, 5 August.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, 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.

In today’s issue: As the government continues to tout waste-to-energy (WtE) as a win for the private sector, efforts are underway to get projects off the ground. The WtE feed-in tariff has been set at EGP 1.4/Kwh, a national project to establish WtE plants in multiple governorates is in the pipeline, and WtE projects are set to receive financing at a subsidized interest rate of 8%. But despite these efforts, private sector players say that more financial incentives are needed to make WtE investment viable.

Egypt will grow at a 5% clip in FY2021-2022, according to a Reuters survey of analysts and economists. The figure is the same as expected by analysts in a similar poll by the newswire in April, but is slightly below the 5.4% targeted by the government and the 5.2% forecast by the IMF (pdf).

This is significantly higher than 2020-2021 growth forecasts: The government expects the economy to have grown by 2.8% in the previous fiscal year — exactly half the rate achieved in 2018-2019 — as the pandemic hit the local economy and caused global disruption. Egypt was one of the few countries in the world that managed to avoid a covid-induced recession, recording only a single quarter of contraction in 2Q2020 when output fell 1.7% during the first wave of the virus.

Growth will continue to accelerate the year after: The economy will expand at a 5.5% clip in FY2022-2023, according to the 5-26 July poll. This is more or less the same as the IMF’s latest estimates, which see the economy growing 5.6% in FY2022-2023 and 5.8% in FY2024-2025.

The downside: Egypt continues to have a high trade deficit, which has widened over the past year as the pandemic hit key sources of hard currency. The trade deficit increased 9% y-o-y to USD 30.6 bn during the first nine months of FY2020-2021, according to central bank figures (pdf).

"The hope is that non-oil foreign direct investment picks up, local industry, local manufacturing takes over, and then you have substitution for imports," Naeem Brokerage's Allen Sandeep told Reuters. This is what the IMF is predicting, saying in its recent report on the Egyptian economy that FDI will jump by as much as 60% this year, before rising to USD 16.5 bn by 2024-2025.

Inflation still likely to remain muted despite rising global prices: Annual urban consumer price inflation will average 6% during the current fiscal, within the lower bound of the central bank’s 7% (-/+ 2%) target. This is slightly below the 6.4% expected in the last poll three months ago.

What’s holding down prices? Companies have stockpiled inventories due to the supply chain shock caused by the pandemic last year, while consumer spending remains weak. The IMF expects inflation to average 6.6% during 2021-2022, before ticking up to 6.9% the year after.

Contact closes its second EGP 2.5 bn sukuk offering: Contact Financial Holding, formerly Sarwa Capital Holding, has closed its second sukuk issuance worth EGP 2.5 bn, the company said in a statement (pdf). The sharia-compliant mudaraba sukuk carries a seven-year tenor and will be used to finance the expansion of Contact Credit and its subsidiaries. The security received a credit rating of A- by Middle East Ratings and Investors Service.

This brings Contact’s total sukuk issuances to EGP 5 bn after closing a EGP 2.5 bn offering last November.

The issuance is the first sukuk sale to take place in Egypt this year and the fourth since the Financial Regulatory Authority adopted the regulatory framework in 2019. In addition to Contact’s two sales, Talaat Moustafa Group and private education outfit CIRA also took sukuk to market last year

More sukuk sales to follow (we just don’t know when): Contact is cooperating with others, mainly real estate developers, to manage sukuk issuances worth EGP 5-7.5 bn through its sukuk arm, the Sarwa Sukuk Company. The planned offerings include a EGP 5.5 bn sale for Palm Hills Development, a EGP 3 bn issuance for Hassan Allam Properties, and a EGP 1.1 bn offering for Amer Group. In June, Wadi Degla Developments also revealed plans for a sukuk issuance worth some EGP 2 bn through Contact. It remains unclear when the companies plan to market the securities.

Advisors:The issue was co-underwritten by CIB and Ahli United Bank. Sarwa Promotion and Underwriting, a subsidiary of Contact, was assigned as lead manager and arranger on the transaction. Misr Capital and Banque Misr acted as underwriters. Alieldean Weshahi & Partners acted as the legal advisor, while Elite Consulting Group was the independent financial consultant on the transaction.

IN OTHER CONTACT NEWS: Contact Financial Holding and real estate marketplace Sakneen have joined forces to offer a one-stop-shop for people searching for both a new home and mortgage finance, according to a statement (pdf). Prospective homebuyers can look for properties eligible for financing on sakneen.com and receive preliminary approval. Contact is offering 10-year loans of up to EGP 3 mn to Sakneen clients. Sakneen earlier this year raised USD 1.1 mn in seed funding with “major participation” from Sarwa Capital.

The value of Egypt’s food exports’ increased 13% y-o-y during 1H2021, reaching USD 2 bn against USD 1.8 bn in the same period last year, according to figures released by the Food Export Council yesterday. Food accounted for 13% of the country’s non-oil exports during the six-month period, which saw Egyptian companies ship goods worth USD 15.4 bn overseas.

Who’s buying? Arab countries were the most important importers of Egyptian food products during 1H2021, accounting for more than half of the country’s total exports. Countries in the region imported food worth USD 1.09 bn during the six-month period, up 9% from last year. The European Union (14%), non-Arab African countries (11%), and the US (5%) were our next biggest customers.

Food has been surprisingly covid-resistant: Food exports made it through the worst of the covid-related trade disruption last year to tick up to USD 3.5 bn, from USD 3.4 bn in 2019.

Mortgaged properties yet to be added to the national real estate registry are going to be logged on a new temporary database held by the Financial Regulatory Authority (FRA) under amendments to the Mortgage Finance Act greenlit yesterday, FRA boss Mohamed Omran said in a statement (pdf). Any agreement between a mortgage lender and borrower will be added to this electronic log until the lender completes steps required to officially register the property under its name, Omran said.

Why the move? This aims to protect the rights of mortgage lenders, who face a lack of clarity when it comes to proving that they own the underlying property. The changes will also allow rights-to-use a mortgaged property to be inherited. They still need to be tabled to the House of Representatives for a final vote.

Background: The 20-year old Mortgage Finance Act, which was signed into law back in 2001 and aimed to encourage mortgage lending in Egypt, hasn’t been amended since. Its implementation on the ground showed several shortcomings, particularly in how it regulates registering mortgages, the FRA said yesterday. The mortgage financing market more than doubled to EGP 3.4 bn since 2017, driven by subsidized mortgage lending initiatives launched by the Central Bank of Egypt in recent years, and recently expanded considerably.

Tunisia’s political turmoil dominated airwaves last night: The talking heads were taking the side of President Kais Saied, who yesterday fired the country’s prime minister and dissolved the parliament, which was dominated by the moderate Islamist Ennahda movement. Kelma Akhira’s Lamees El Hadidi framed the recent protests against the government as a recall of the 30 June uprising (watch, runtime: 1:05). Amr Adib also had a full coverage of the Tunisian developments and analysis of reasons behind Saied’s decisions (watch, runtime: 8:54 I 5:43). El Hadidi also covered an IMF statement that pledged to help Tunisia combat the impact of covid-19 on its economy (watch, runtime 2:00), while Al Hayah Al Youm took note of the Arab League’s show of support for the Tunisia.

Ikhwan under fire: In an interview with Al Hayah Al Youm, a Tunisian journalist blamed the Ikhwan for the country’s economic and social crisis (watch, runtime 10:36), while another journalist told El Hadidi that Saied didn’t violate any laws and acted within the constitution (watch, runtime: 10:45). Ala Mas’oulety’s Ahmed Moussa also attacked the Tunisian Ikhwan (watch, runtime 6:18), while Al Hayah Al Youm showed footage of Tunisians celebrating Saied’s decision (watch, runtime 4:48).

Egypt’s first Olympic medals also got attention: The winning of two bronze medals in Taekwondo by Hedeya Malak and Seif Eissa were covered by El Hekaya (watch, runtime 2:40), Al Hayah Al Youm (watch, runtime 6:05), and Kelma Akhira (watch, runtime 1:20). We wrapped up the third day of the Olympics in yesterday’s PM edition.

It’s a ghost town in the foreign press this morning. Nobody has anything to say as far as Egypt is concerned.

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

• The American University in Cairo (AUC) signed an agreement (pdf) with the International Financial Corporation (IFC) to bring Massachusetts Institute of Technology’s (MIT) venture monitoring program to the Egyptian market.
• Egypt has retrieved an ancient statue of a priest dating back to the Old Kingdom from the Netherlands. The artifact was illegally smuggled out of Egypt.

The Health Ministry reported 35 new covid-19 infections yesterday, down from 39 the day before. Egypt has now disclosed a total of 284,059 confirmed cases of covid-19. The ministry also reported seven new deaths, bringing the country’s total death toll to 16,494.

Despite tight restrictions, organizers of the Tokyo Olympics have so far logged 153 cases of covid-1, reporting an additional sixteen cases yesterday, among them three athletes, according to a statement (pdf). Only one of the new cases was staying in the Olympic village, while the rest were either contractors or people working at the Games.

The decision to hold the Olympics amid a pandemic has been controversial in Japan, with a majority of the public calling for the event to be postponed. The organizing committee has taken measures to assuage public fears such as restricting spectators and enforcing a bubble system.

Low- and middle income countries will be getting faster, cheaper access to covid-19 vaccines under a new World Bank and Covax financing mechanism to fast-track rollout in developing countries, Reuters said. With funding from the World Bank, Covax will be able to make advance purchases based on aggregate demand across countries. This will enable the scheme to provide vaccines at a competitive price for low-income countries, where only 1.1% of the population has been vaccinated with at least one dose.

Covax is falling far short of its targets: The WHO / Gavi-backed organization wants to deliver 1.8 bn doses by early next year but has only distributed 138 mn since launching in January.

Egypt has received more than half of its allocation: Egypt has so far received 2.6 mn vaccines from Covax, more than half of the 4.5 mn it has been allocated.

A combination of AstraZeneca and Pfizer covid-19 shots could be six times as effective at generating antibodies as two jabs of AstraZeneca at boosting neutralizing antibody levels, a study from South Korea found, according to Reuters. The mixed vaccination schedule showed similar amounts of antibodies as two Pfizer jabs. But the order of administration matters, with the first jab being AstraZeneca and the second being Pfizer proving to provide the best T-cell responses, a separate British study found last month.

US to maintain travel restrictions amid delta spike: The US decided not to remove current covid-related travel restrictions amid the spread of the infectious delta variant. “The more transmissible delta variant is spreading both here and around the world. Driven by the delta variant, cases are rising here at home, particularly among those who are unvaccinated and appear likely to continue in the weeks ahead," Whote House spokesperson Jen Psaki told reporters. The restrictions have been in place since last year, and bar non-US citizens who have been to the UK, the EU, China, India, South Africa, Iran and Brazil from entering the country. The story got wide coverage in the global press: Bloomberg I CNN I Reuters I CNBC.

Lebanon has another PM-designate: Lebanese Sunni businessman Najib Mikati has been named the country’s new prime minister-designate — the country’s third since the Beirut port explosion last August — after winning a majority of parliamentary votes, according to Reuters. Mikati will now be tasked with forming a government able to undertake serious reforms to steer the country away from an economic collapse.

Biden announces Iraq military pullback: President Joe Biden and Iraqi Prime Minister Mustafa Al Kadhimi said yesterday that the US would end its combat mission in Iraq by the end of the year, Bloomberg reports.

It’s not immediately clear what difference on the ground: There won’t be a significant reduction in American troops, which will remain in the country to assist the Iraqi government’s fight against Daesh by providing training and assistance to security forces. The announcement comes a few weeks after Washington ended its 20-year war in Afghanistan, and began pulling thousands of troops out of the country.

The UAE is at the center of a new lobbying scandal in the US: The former chairman of Trump’s inaugural committee pleaded not guilty yesterday to charges that he had illegally lobbied for the UAE and lied about his ties to the Gulf country, Reuters reports. Federal prosecutors have accused three people of illegally using their influence in Washington to promote Abu Dhabi’s foreign policy interests.

IN DIPLOMACY:

Jordanian FM Ayman Safadi was in Cairo yesterday for talks with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry, according to an Ittihadiya statement. The meeting addressed recent moves by Egypt, Jordan, and Iraq to strengthen diplomatic ties, and comes less than a month after the three countries agreed to deepen security and economic cooperation during a summit in Baghdad. The three countries are planning to work together to establish new industrial complexes, and power and electricity projects, the statement said.

Mid-July: Legislative session expected to end.

23 July-11 August (Friday-Wednesday): Tokyo 2020 Olympics.

27-28 July (Tuesday- Wednesday): The Federal Reserve meets to review interest rates.

28 July (Wednesday): Clean Energy Business Council’s webinar Women entrepreneurs in clean energy (3pm)

2-4 August (Monday-Wednesday): Egypt is hosting the Africa Food Manufacturing exhibition at the Egypt International Exhibition Center.

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

9 August (Monday): Islamic New Year.

9 August (Monday): Russian flights to Sharm El Sheikh, Hurghada resume.

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

3-5 September (Friday-Sunday): The World Karate Federation will hold the third competition of the 2021 Karate 1-Premier League in Cairo.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

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

21-22 September (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

1 October (Friday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

1 October (Friday): Expo 2020 Dubai opens.

1 October (Friday): State-owned companies and government service bodies selling goods and services to customers that have not yet signed 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.

6 October (Wednesday): Armed Forces Day.

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

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

12-14 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

18 October (Monday): Prophet’s Birthday.

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

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

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

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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

29 November-2 December (Monday-Thursday): Egypt Defense Expo.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

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

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

May 2022: Investment in Logistics Conference, Cairo, Egypt.

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.