Wednesday, 29 September 2021

EnterpriseAM — Abu Auf’s parent company eyes IPO of up to 49% in 2Q2022

TL;DR

WHAT WE’RE TRACKING TODAY

We don’t literally ring a bell around here every time a company announces it will IPO on the Egyptian Exchange, but that doesn’t mean we’re not doing it in our heads. So welcome to the folks at Abu Auf parent company AUF, which said yesterday it would offer up to 49% of the company for sale in a market debut expected in 2Q2022. We have chapter and verse in this morning’s Speed Round, below.

The Abu Auf news is a great way to bid farewell to Q3, which comes to an end at COB tomorrow. Anyone else both delighted to see the back of 2021 (given it’s 2020 with better clothing and new lipstick) and amazed it has passed so fast?

THE BIG STORY THIS MORNING is not in Egypt, but abroad as market watchers take stock of yesterday’s carnage on Wall Street. The bears are looking for signs that their dreams have (at last) come true, while the bulls are churning out pablum designed to reassure each other that their crazy-long ride really isn’t coming to an end.

US shares had their worst day yesterday since May as the S&P 500 shed 2%, with the Financial Times suggesting that “the prospect of the world’s leading central banks moving more aggressively to stamp out inflation rattled financial markets on Tuesday.” We have the scoop in this morning’s Planet Finance, below.

How are markets doing this morning? Not great. Major indexes across Asia are in the red, with the Nikkei down 2.5%, Shanghai off 1.2% and the Hang Seng also in the red. The Kospi is down nearly 2.0%. Futures suggest a mixed open in Europe later this morning — and that traders on Wall Street may try to stage a comeback, with the Nasdaq, S&P and Dow all looking to start the day lightly in the green.

Don’t worry, bears: US lawmakers will give you plenty to chew over in the days to come, with Treasury Secretary Janet Yellen telling Congress yesterday that the US risks running out of money by 18 October if politicians don’t raise or suspend the federal government’s borrowing limit. The story is getting plenty of coverage on the front pages of the Wall Street Journal and the Financial Times and also leads the front page of the New York Times.

“A dangerous man”: US Senator Elizabeth Warren’s broadside against US Federal Reserve Chairman Jerome Powell yesterday hardly cheered the traders — needless to say, the Fed boss is more their cup of tea than is Warren. Warren said Powell was “a dangerous man to head up the Fed” ahead of his potential reappointment for a second term, citing Powell’s track record on financial regulation as the reason why she won’t be supporting his renomination. Powell faced unusually tough questioning on the Hill yesterday, Reuters notes.

MEANWHILE- How to solve the China Evergrande problem? Step #1: Find a big rug. The cash-strapped company — simultaneously billed as China’s largest real estate developer, the world’s most-indebted company and the potential trigger of Beijing’s “Lehman moment” — is about to sell a USD 1.5 bn minority stake it owns in a Chinese bank to a state-owned company. The Wall Street Journal interprets this as “an indication that authorities in the country are moving to contain the fallout from the property giant’s financial difficulties.” But that doesn’t mean that foreign bondholders, who are mulling next steps after Evergrande missed an interest payment, are going to see a penny of the proceeds from the sale, Reuters writes: The USD 1.5 bn transaction is designed to minimize Evergrande’s impact on a big Chinese bank.

** IN CASE YOU MISSED IT — catch up quick on the top stories from yesterday’s edition of EnterprisePM:

HAPPENING TODAY-

White House National Security adviser Jake Sullivan is in Cairo today for talks with Egyptian officials, a spokesperson for the National Security Council said in a statement yesterday. On the agenda: Egypt’s role promoting “security and prosperity” between Palestinians and Israel, upcoming elections in Libya, and security in the Horn of Africa. Israeli Prime Minister Naftali Bennett travelled to Sharm El Sheikh earlier this month for talks with President Abdel Fattah El Sisi. Bennett’s national security adviser will meet with Sullivan on 5 October, the statement said.

Human rights will also be part of the conversation: Sullivan will “affirm the importance of human rights in the context of the overall strategic relationship” today, the statement said. The visit comes a few weeks after the Biden administration said it would hold back a portion of Egypt’s annual military aid until the Sisi administration acts to improve the nation’s human rights record. Since then, the president has announced a new human rights strategy and charges have been dropped against another four NGOs accused of receiving illicit foreign funding — one of the conditions attached to the aid named by a US official earlier this month.

Sullivan’s visit comes as part of a Middle East tour that earlier this week took him to Saudi Arabia and the UAE. He yesterday met with Saudi Crown Prince Mohamed bin Salman and other senior Saudi officials to discuss the ongoing war in Yemen, Reuters reports.

ALSO TODAY-

Conference season resumes today with ITIDA’s DevOpsDays Cairo 2021.

The Cairo International Fair opens tomorrow at the Cairo International Conference Center, running through 8 October.

The Egypt Projects 2021 construction expo also opens tomorrow at the Egypt International Exhibition Center and wraps on Saturday, 2 October.

Dubai’s Expo 2020 starts Friday, 1 October. The event, which takes place somewhere on the planet once every five years, runs for six months and will be open seven days a week. You can learn more here.

ALSO HAPPENING THIS WEEK-

Winter retail opening hours in effect from Thursday: Shops and malls will close one hour earlier at 10pm (11pm on Thursdays, Fridays and national holidays) while cafes and restaurants will shutter at midnight rather than 1am. As during the summer, essential services such as grocery stores, supermarkets and pharmacies are exempt from the rules and can open and close their doors when they want.

CIRCLE YOUR CALENDAR-

PSA #1- Next week is a short work week. You can expect to have a three-day weekend 7-9 October in observance of Armed Forces Day, which is on 6 October. Folks whose workdays are tied to banks and the market can expect confirmation from the Central Bank of Egypt and EGX early next week.

PSA #2- We’re probably also looking at a long weekend starting Thursday, 21 October in observance of the Prophet’s Birthday, which is formally Monday, 18 October.

PSA #3- Your commute is going to get worse at the end of next week. Public schools are back in session for the fall term on Saturday, 9 October.

We’re inching closer to the end of 3Q2021 and the beginning of another month. Here are some of the key dates coming up in October:

  • MPs and senators are returning from recess to start the new legislative session: The House of Representatives will reconvene on Saturday, 2 October and the Senate will be back in Session Tuesday, 5 October.
  • PMI: September’s purchasing managers’ indexes for Egypt, Saudi Arabia and the UAE will land on Tuesday, 5 October.
  • Foreign reserves: September’s foreign reserves figures will be out sometime during the first week of October.
  • Inflation: Inflation figures for September will be released on Sunday, 10 October.
  • IMF + World Bank meetings: The IMF and the World Bank will hold their annual meetings during the week beginning 11 October.
  • Interest rates: The Central Bank of Egypt will meet to review interest rates on Thursday, 28 October.
  • A little further out: The Middle East Angel Investment Network is hosting its Angel Oasis in El Gouna on 27-29 October, with separate pricing for in-person and virtual attendance.

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

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*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and as well as social infrastructure such as health and education.

In today’s issue: The world’s largest water treatment plant opened earlier this week in Egypt. In this week’s project profile, we take a look at the Bahr El Baqar wastewater plant, which will process 5 mn cubic meters of water every day and help irrigate 475k feddans of reclaimed agricultural land.

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IPO WATCH

Abu Auf could debut on EGX with 49% stake sale in 2Q2022

Healthy food brand Abu Auf’s parent company AUF plans to make its EGX debut in 2Q2022, the company said in a statement (pdf) yesterday. AUF has appointed EFG Hermes to quarterback the transaction.

The company could offer up to 49% of its shares on the EGX, Mohamed Mahgoub, managing partner at private equity firm TCV, which holds a significant minority stake in AUF, told us. AUF plans to use the proceeds to finance regional growth, Mahgoub said.

Abu Auf in Egypt: The company currently has 180 branches in Egypt and more than 1k warehouses, distributed among 10 governorates. The company has recently expanded into coffee, saying it has opened a production facility to serve both domestic and export demand.

Abu Auf abroad: The company has been exporting its products to major global markets including England, Belgium, Germany and the Netherlands. It has also been exporting to Saudi Arabia, Kuwait and the UAE, as well as Libya and Palestine.

IN THE MARKET NOW- Meanwhile, IPO watchers are keeping a close eye on the IPO of state-owned fintech platform and payments infrastructure player e-Finance, which is in the market now.

The EGX is trying to get more companies to list on the bourse, recently amending listing rules to make it easier for larger firms to go public in Egypt. Companies no longer need to offer a 25% stake and can instead sell shares equal to the 1% of the exchange’s freefloat market cap.

INFRASTRUCTURE

Are these the partners you’re looking for?

OC, Hassan Allam in talks with SFE for desalination projects -sources: Orascom Construction and Hassan Allam Holding are in early talks with the Sovereign Fund of Egypt (SFE) for contracts to build several new desalination plants, unnamed sources told Al Mal. Enterprise was unable to get comment from the parties involved to confirm the news.

The wealth fund is looking for local and international partners to build 17 new desalination plants at a total sticker price of about USD 2.5 bn, SFE head Ayman Soliman told Bloomberg last month. The SFE would take a minority stake in each of the 17 plants alongside its private sector partners, he said, without revealing how much the fund would contribute to the projects. Expect contractors to be responsible for bringing financing for the plants.

This is part of the Sisi administration’s drive to enhance water security by stepping up investment in desalination capacity. Egypt is spending some EGP 134 bn through 2050 to build desalination plants that would give us 6.4 mn cubic meters of potable water per day. The 17 plants will produce a combined 2.8 mn cbm/d of water by 2025, Soliman said. The news comes as Egypt grapples with the prospect of a water shortage thanks to both climate change and the impact of the Grand Ethiopian Renaissance Dam.

This comes only one day after Egypt inaugurated the world’s largest wastewater treatment plant, the Bahr El Baqar wastewater treatment plant, which will treat around 5.6 mn cbm/d of water, which then will be used to irrigate agricultural land in Sinai. We have more on this in this week’s Hardhat feature, below.

OTHER INFRASTRUCTURE NEWS-

India, Pakistan and the Arabian Gulf will now be receiving 2Africa coverage, making it the largest subsea cable in the world. The 2Africa subsea cable being installed by a consortium of global telecoms firms comprised of China Mobile International, Facebook, MTN GlobalConnect, Orange, STC, Telecom Egypt, Vodafone and WIOCC will soon see new segments added that will extend to the Arabian Gulf, India, and Pakistan, according to a press release. The group’s most recent announcement sets the full length of the subsea cable to 45k-km, up from last month’s announcement that the 37k-km spanning cable would see new connections extended to the Seychelles, the Comoros, Angola and Nigeria.

COVID WATCH

Pressure is increasing on gov’t employees to get vaccinated

Government employees who remain unvaccinated in two months time will be banned from entering their workplaces, according to a circular seen by Enterprise yesterday. The directive, sent by Prime Minister Mostafa Madbouly to government ministries, will require unvaccinated employees to either take PCR tests every 72 hours or receive a vaccine to be admitted into government buildings.

The government expects the decision to allow it to vaccinate all 4.5 mn civil servants before the end of November, Sky News Arabia reports.

The Health Ministry reported 718 new covid-19 infections yesterday, up from 702 the day before. Egypt has now disclosed a total of 303,045 confirmed cases of covid-19. The ministry also reported 39 new deaths, bringing the country’s total death toll to 17,263.

The daily death tally has grown quickly in recent days: In the past 10 days the number of deaths reported by the ministry has more than doubled, and has more than quadrupled since the beginning of the month. The ministry was reporting single-figure daily deaths at the end of August.

Deaths and cases will climb further in the days ahead given the coming colder weather, the return of children to schools, and a failure to follow precautionary measures, Mohamed El Nady, a member of the government’s covid-19 committee, told Kelma Akhira’s Lamees El Hadidy last night (watch, runtime: 12:04), calling the recent rise in deaths “worrying.”

TOURISM

Italy allows travel to Sharm El Sheikh, Marsa Alam without quarantine on return

Italian tourists are now allowed to travel to Sharm El Sheikh and Marsa Alam without needing to quarantine at either end of their trip, the country’s health ministry said on Tuesday as it launched an experimental “covid-free tourist corridors” policy.

Italians will be permitted to catch some winter sun in the Red Sea resort towns — as well as the Maldives, Seychelles, Mauritius, Dominican Republic and Aruba — provided they have a “Green Pass” proving covid immunity through vaccination or prior infection and stick to what the health ministry called “controlled tourist itineraries.” Tourists must also undergo PCR testing prior to their arrival and departure.

Egypt is one of very few exceptions to Italy’s strict travel quarantine rules: Italians who visit any other destination outside of the EU must quarantine on their return.

CAPITAL MARKETS

A group of MPs want to postpone the capital gains tax

Group of MPs to fight EGX capital gains tax: A small group of MPs will draft legislation aiming to postpone for another year the reintroduction of a capital gains tax on EGX transactions, which is slated for January 2022, Masrawy reports. The group of 20 lawmakers, led by businessman and deputy chair of the House of Representatives’ industry committee Mohamed El Sallab, claims that the proposed 10% tax on stock market transactions could deal a fatal blow to trading on the Egyptian bourse. They say the EGX is still recovering from the impact of the pandemic and are calling for an “expanded dialogue” with the EGX and the House Economic Committee to find an alternative solution.

Mohamed Maait last week confirmed that it would come into force on 1 January, meaning from 2022 Egypt-domiciled equity investors will start paying a 10% tax on their net portfolio earnings. Domestic investors — who presently account for the bulk of turnover on the EGX — will be the only ones on the hook for the tax after the ministry decided to exempt non-residents.

MPs are suggesting alternatives to the CGT: One is suggesting that the government levy a development fee on market transactions instead, while another wants to replace it with a stamp tax. They have yet to make clear how their alternative taxes would be more palatable to local investors than what Maait is pushing through.

Expect debate on the tax as early as next week: Six of the MPs said they would call on Maait to discuss postponing the tax or replacing it with a development levy when the Senate reconvenes on 5 October. The House, meanwhile, is set to reconvene on Saturday.

Is the tax sapping trading on the EGX? MPs say traders welcomed the tax by sparking a sell-off last week on the EGX, with Rep. Mohamed Taha Al Khouli (Fayoum) saying shares shed some EGP 27 bn in value in the two days following the announcement. Meanwhile, El Sallab said that the recent volatility proved the need for a dialogue between the ministry and the bourse before implementation, adding that the new levy needs to be applied clearly and transparently in order to avoid hindering investment.

The securities industry is pushing back, with lobby group Egyptian Capital Market Association (ECMA) saying last week that now isn’t the time to introduce a capital gains tax. The group, like the MPs, pointed to the fragility of the EGX’s ongoing recovery.

Egypt’s benchmark EGX30 index is down 3.7% YTD after a brief stint in positive territory, while regional competitors for global capital are all handily in the green: ADX is up 54% YTD, the Saudi Tadawul is ahead more than 30% for the year and the Dubai bourse has gained 14%. Trading volumes have been reasonable in 2021 (by the standards of recent years), but have been dominated by retail investors (first and foremost), followed by local institutions. Foreign investors are yet to return to the EGX.

The CGT isn’t the only thing driving selling right now: It’s likely that both retail investors and domestic institutions are liquidating positions so they have capital to sink into e-Finance’s IPO, says Cairo Capital Securities analyst Adham Gamal Eldin. As we’ve previously reported, the state-owned fintech player is in the market now and has said it will pull the trigger on its IPO this fall. That suggests it could make its debut as early as this month. Gamal Eldin sees a bit more selling left to come before the EGX30 stabilizes at 10,300.

Global volatility also played its part last week: Last week’s EGX sell-off coincided with a sell-off in global stocks and a turn towards safer assets, triggered by events in China and concerns that the US Federal Reserve could move to taper its stimulus later this year.

DEBT WATCH

GlobalCorp could kick off EGP 3-3.5 bn securitization program in 4Q2021

GlobalCorp could have the first tranche of a EGP 3-3.5 bn securitized bond issuance ready by the end of the year, Al Mal reports. The non-bank lender is planning to sell EGP 1.1 bn of securities in 4Q2021, its CEO and managing director, Hatem Samir, told the newspaper. The issuance would come as part of a larger securitized bond program worth an estimated EGP 3 – 3.5 bn set to be completed by 2023, he said. The company is currently waiting on a MERIS credit rating ahead of its first issuance later this year.

Advisors: Misr Capital and CIB are acting financial advisors for the offering while Dreny & Partners are legal counsel.

GlobalCorp provides structured leasing products and other financial and advisory services to companies across several sectors including real estate, transport and health. Earlier this year the company said it would double its lending portfolio to EGP 6 bn in 2021 and ramp up its factoring and leasing services to companies in the construction, health, food and education sectors.

Background: GlobalCorp was set up in 2015 by local and foreign institutions including Ezdehar (60% shareholders) and Sanad (30%) — and who also announced earlier this year that they were looking to exit the company after hitting their target ROI. CEO Samir holds the 10% stake not owned by the latter two funds. GlobalCorp’s largest shareholder, Ezdehar, counts the European Bank for Reconstruction and Development (EBRD), the European Investment Bank, and the development finance arms of the UK and the Netherlands, among its limited partners. LPs also include the Sawiris family’s Gemini Holding.

IN OTHER NON-BANK LENDING NEWS-

Premium Card ups its consumer credit lines: Consumer finance outfit Premium Card plans to extend EGP 400 mn worth of credit facilities to its customers in the fourth quarter of this year, and EGP 1.7 bn in 2022, having already offered EGP 1 bn in credit so far in 2021, Hapi Journal reports.

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ENTERPRISE+: LAST NIGHT’S TALK SHOWS

The weekend seems to have started early, with a quiet night for yesterday’s talk shows.

People who have built buildings on state land next to the Nile without a permit will not be able to reconcile with the government, Irrigation Ministry Spokesperson Mohamed Ghanem said in a phone call with Kelma Akhira’s Lamees El Hadidi (watch, runtime: 8:59). Buildings and agricultural infrastructure built on waterways were not eligible for the government’s recent reconciliation drive.

So what happens? All cases will be referred directly to the military prosecution, and those who illegally encroach on the Nile will pay to demolish the structures out of their own pockets. The same laws apply for infringements on agricultural lands, while reconciliation and legalization is only possible for building infringements on private property, Local Development Ministry Spokesperson Khaled Qassem told El Hadidi in a separate phone interview (watch, runtime: 8:08).

Around 64k of a total 120k buildings that encroach on the riverbank have been removed since the launch of the campaign in 2015, Ghanem said, adding that the remainder can be removed within six months if more effort is made. As for the campaign to remove land encroachments, Qassem said that the current stage aims to remove some 16k buildings nationwide.

Women will begin work in Egypt’s Public Prosecution and State Council starting 2 October, Justice Minister Omar Marwan said in a phone call with Sherif Amer’s Yahduth Fi Misr (watch, runtime: 5:49). Eleven female judges have transferred to the Public Prosecution at the rank of chief prosecutor and general attorney, while tens of female members of the judiciary have moved to the State Council, according to Marwan. He added that civil suits can now be filed remotely online in seven governorates, while lawsuits can be updated remotely nationwide.

EGYPT IN THE NEWS

Human rights dominates the conversation on Egypt in the international press this morning: Reuters and the BBC are reporting on the opening of the trial of Patrick Zaki, an Egyptian student and human rights activist who has been held in pre-trial detention since February last year on charges of “fake news.” Zaki pleaded not guilty and asked to be released during a hearing earlier this month. The judge yesterday adjourned the case until 7 December to allow the defence to review case files. Meanwhile, Human Rights Watch is urging the UN Human Rights Council to secure UN monitoring and reporting of the Egyptian government's “pervasive abuses.”

ALSO ON OUR RADAR

Citi to finance power projects? Citibank could provide financing for renewable energy, desalination, and green hydrogen projects in Egypt, the Electricity Ministry said yesterday following a meeting between Minister Mohamed Shaker and a senior bank official.

NBE to open branch in Saudi: The Saudi cabinet has granted a license to the National Bank of Egypt (NBE) to open a branch in the kingdom.

PLANET FINANCE

Powered by
EFG Hermes - https://efghermes.com/

Bears are throwing a stagflation tea party after yesterday’s market headlines, as the rise in US bond yields heralded yet further drops across global equity markets. The yield on US 10-year treasuries passed the key 1.50% level for a second day to close at 1.53%, its highest since June. The hawkish turn by the Fed and other central banks, amid high inflation caused by surging energy prices and slower economic growth, saw investors bet on impending interest rate increases and double down on a move out of equities. “The main market narrative is one of stagflation,” said Swiss bank Lombard Odier’s chief economist.

The looming threat of a US government shutdown and a possible default next month also weighed on stocks.

All of this caused US stocks to have their worst day’s trading since May: The benchmark S&P 500 fell more than 2% during the day, but harder hit was the Nasdaq, which closed 2.8% in the red as tech stocks felt the force of the bond market sell-off. European markets also nursed losses, with shares in France, Germany, Spain and Italy all falling more than 2%.

The price of Brent briefly breached the USD 80 per barrel handle for the first time in three years, before being pulled back towards USD 79 by the equity rout.

ALSO WORTH NOTING-

The Arab Petroleum Investments Corporation (Apicorp) was expected to raise USD 750 mn from a sale of five-year green bonds yesterday, according to a document picked up by Reuters. The proceeds will be used to support green projects in Apioorp’s Green Finance Framework. The lender had not announced the results of the sale as of dispatch time this morning.

Down

EGX30

10,447

-0.5% (YTD: -3.7%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

11,382

+0.1% (YTD: +31%)

Up

ADX

7,756

+0.1% (YTD: +53.7%)

Up

DFM

2,831

+0.5% (YTD: +13.6%)

Down

S&P 500

4,352

-2.0% (YTD: +15.9%)

Down

FTSE 100

7,028

-0.5% (YTD: +8.8%)

Down

Brent crude

USD 79.09

-0.6%

Up

Natural gas (Nymex)

USD 5.84

+2.4%

Down

Gold

USD 1,734.20

-0.2%

Down

BTC

USD 41,863

-2.8% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 0.5% at yesterday’s close on turnover of EGP 1.2 bn (24.5% below the 90-day average). Local investors were net sellers. The index is down 3.7% YTD.

In the green: Abou Kir Fertilizers (+2.7%), Ezz Steel (+2.6%) and GB Auto (+2.5%).

In the red: MM Group (-3.4%), Fawry (-3.1%) and Cleopatra Hospitals (-3.0%).

DIPLOMACY

Brazil’s VP pays a visit: President Abdel Fattah El Sisi yesterday met with Brazilian Vice President Hamilton Mourão, according to an Ittihadiya statement. The pair discussed strengthening bilateral relations in security and trade, and encouraging Brazilian investment and tourism to Egypt. They also touched on regional issues including the Israeli-Palestinian conflict, developments in Libya and Tunisia, and the ongoing dispute over the Grand Ethiopian Renaissance Dam (GERD).

Mourão also met with Defense Minister Mohamed Zaki, according to an Armed Forces statement. The two discussed strengthening military cooperation.

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PROJECT PROFILE- Egypt just opened the largest wastewater treatment plant in the world: One of the biggest challenges facing Egypt in the coming years will be securing itself enough water to sustain its rapidly growing population and expanding economy. But with climate change and threat of the Grand Ethiopian Renaissance Dam (GERD) threatening to disrupt its Nile water supply, policymakers are having to turn to alternative sources to protect against water stress.

Enter Bahr El Baqar: Started in 2019 and inaugurated earlier this week, the EGP 18 bn Bahr El Baqar wastewater treatment plant is the largest facility of its kind in the world, treating around 5 mn cubic meters of water from the Bahr El Baqar basin every day. The 155-feddan facility has four treatment lines, each with the capacity to process 1.25 mn cbm of water each day.

Orascom Construction and Arab Contractors took the lead on construction, signing a USD 739 mn contract with the military in 2019 that will also see the companies in charge of operating and maintaining it for the next five years.

The plant will process water from the Bahr El Baqar drain: Located east of the Suez Canal, the drain runs 190 km, linking the eastern part of Greater Cairo with Lake Manzala, which lies adjacent to the Mediterranean Sea west of Port Said.

The Bahr El Baqar drain is one of the most polluted in the country, according to a 2018 research paper (pdf). Industrial waste and sewage from Cairo and agricultural run-off, pesticides and fertilizers from the Delta all end up flowing into the drain. The water quality scores 37-48 on the water quality index, sitting on the edge between poor and marginal,

Much of this water is used for irrigation and fishing: Water flowing into the drain is reused by farmers for irrigation, while Lake Manzala — an important fishing site — receives 60 cbm of wastewater from the drain every second.

The plant is just one part of a wider Bahr El Baqar project that also comprises pumping stations and a water carrier, all of which is expected to be completed by the end of 2022. The Arab Fund for Economic and Social Development (AFESD), which is helping to fund the project, estimated back in 2019 that the total cost of the project — including land, consultancy and related agricultural facilities — would reach around EGP 44 bn.

All of this means more agricultural land: The plant will contribute to land reclamation and cultivation of land east of the Suez Canal in the Sinai. Water will be sent from the plant to irrigate some 475k feddans of land.

We know some of where the money has come from: Gulf funds have so far provided KWD 220 mn (around EGP 11.5 bn based on today’s exchange rate. The Kuwait Fund for Economic Development provided two loans worth KWD 75 mn (around EGP 3.9 bn) and the AFESD disbursed KWD 145 mn (EGP 7.5 bn) across two loan tranches; one KWD 70 mn tranche in 2018 and a second worth KWD 75 mn the year after.

The private sector and the government are funding the rest: According to the AFESD, the private sector was due to provide two-thirds of the overall funding (EGP 29.7 bn) and the government remainder. We have been unable to ascertain where the rest of the financing is coming from.

Bahr El Baqar is part of the Sinai development program, a set of infrastructure projects and development initiatives aimed at strengthening the local economy and raising the standard of living for people in the region. Between 2014 and 2020 EGP 600-700 bn was spent on a variety of projects, including transport, irrigation, sanitation, and housing infrastructure.

A record-setting endeavour: Speaking in a daytime TV interview earlier this week (watch, runtime: 12:32), CEO of Guinness’ local partner Ahmed Makled said that the Bahr El Baqar plant broke three Guinness World Records. Not only is it the largest treatment plant in the world, processing 64.8 cbm of water per second, it is also the biggest sludge treatment facility and largest ozone generation and operation plant in the world.

Egypt is planning to break its own record with another water treatment in the pipeline: The government has contracted Orascom Construction, Hassan Allam Construction, Arab Contractors and Metito to establish the El Hammam agricultural wastewater plant, which will process 6 mn cbm of water every day — more than the 5.6 mn cbm capacity of Bahr El Baqar — allowing the irrigation of up to 500k feddans west of the Nile Delta area. Construction on the plant began in February.

Egypt is facing increasing water stress: Rising global temperatures, a rapidly increasing population and an expanding economy mean that on the current trajectory Egypt will face increasingly severe water stress in the years ahead. An MIT study earlier this year said that by the end of the decade the Nile alone may no longer be able to sustain the country, leaving it in a situation of extreme water scarcity. Currently, Egypt’s per capita annual share of the Nile’s water is 560 cbm, almost half that of the 1k cbm threshold that defines water scarcity, Prime Minister Moustafa Madbouly said earlier this year.

Egypt remains heavily dependent on the Nile, and its ability to reuse water remains limited. Egypt sourced less than 20% of its annual water supply from treated wastewater in 2018-2019. Of the 80.25 bn cubic meters (bcm) used that year, water treatment plants provided only 13.65 bcm compared to 55.5 bcm from the Nile. The government is well aware of this, of course, and has made constructing more water treatment plants a key part of its water strategy, alongside its multi-bn EGP plan to ramp up the country’s desalination capacity.

And the GERD isn’t helping: Egypt, Ethiopia and Sudan are still yet to come to an agreement about how to allocate the Nile’s water following the completion of the GERD in a few years time, leaving Egypt potentially facing a significant curtailment of its Nile water share. According to some estimates, the country could 12% of its agricultural land should it permanently lose 5 bcm of water due to the dam.


Your top infrastructure stories for the week:

  • Some building materials companies aren’t happy about the cement supply cuts: Sellers of building materials are planning to lobby Egypt’s competition watchdog to scrap cement production cuts put in place earlier this year as rising prices put distributors under pressure.
  • Shell is out of the Western Desert: Cheiron and partner Cairn Energy have acquired Shell’s oil and gas assets in the Western Desert under an agreement in March that could be worth up to USD 926 mn.
  • A Palm Hills Development subsidiary will borrow EGP 2.5 bn from Banque Misr and the National Bank of Egypt to finance its New Cairo residential development.

CALENDAR

14-30 September (Tuesday-Thursday): 76th session of the UN General Assembly, New York.

29 September (Wednesday): DevOpsDays Cairo 2021 is being organized by ITIDA and the Software Engineering Competence Center in cooperation with DXC Technology, IBM Egypt and Orange Labs.

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 (Thursday): Winter opening hours for shops and restaurants begins.

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

30 September (Thursday): First tranche of overdue subsidy payouts will be handed to eligible exporters.

30 September (Thursday): Direct flights between Egypt and three Libyan airports resume.

October: Romanian President Klaus Iohannis could visit Egypt in mid this month to discuss ways to boost tourism cooperation between the two countries.

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): Deadline for state-owned companies and government agencies to sign up to e-invoicing platform.

2 October (Saturday): House returns from recess; new legislative session begins.

5 October (Tuesday): Senate returns from recess; new legislative session begins.

6 October (Wednesday): Armed Forces Day.

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

9 October (Saturday): Public schools begin 2021-2022 academic year

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.

28 October (Thursday): Second tranche of overdue subsidy payouts will be handed to eligible exporters.

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.

16-17 November (Tuesday-Wednesday): Africa fintech summit, Cairo.

26 November-5 December (Friday-Sunday): The 43rd Cairo International Film Festival.

29 November-2 December (Monday-Thursday): Egypt Defense Expo, Egypt International Exhibition Centre.

7-8 December (Tuesday-Wednesday): North Africa Trade Finance Summit.

8-10 December (Wednesday-Thursday): Global Forum for Higher Education and Scientific Research (GFHS), Cairo, Egypt.

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.

15 December (Wednesday): Deadline for joint stock companies and investment companies in Cairo to join e-invoicing platform.

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.

22-24 April 2022: World Bank-IMF spring meeting, Washington D.C.

May 2022: Investment in Logistics Conference, Cairo, Egypt

16 June 2022 (Thursday): End of 2021-2022 academic year for public schools

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

2H2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

**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.

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