EnterpriseAM — From inflation to a better growth outlook and pushback on the CGT, it’s a busy morning in Egypt

Good morning, wonderful people, and welcome a busy Monday morning on which we have plenty to digest as inflation hits a 20-month high, the World Bank bumps up our post-covid growth forecast, and opposition to a tax on the gains of domestic EGX investors seems to be gaining steam.

And before we get started: A very Happy Thanksgiving to our Canadian readers. We’re thankful this morning for all of you — the readers who choose to start their mornings with us each workday. Thank you, one and all, for making it possible for us to do what we do.

There are signs of growing pushback against the capital gains tax on EGX gains: Al Ahly Financial Investments Management’s managing director and chief investment officer, Adel Kamel Al-Wali, is the latest to speak out against the 10% capital gains tax. The forthcoming tax is the biggest problem facing Egyptian fund managers, Al-Wali told Al Mal, calling on the Madbouly government to again consider scrapping it.

Background: Al-Wali’s comments come after figures from the securities industry and a group of 20 MPs voiced their concerns about the timing of introducing the capital gains tax, asking for it to be (once again) postponed, replaced with another levy, or scrapped entirely to protect a still-recovering EGX. A related drive could put the tax on the agenda of the House Planning and Budget Committee.

The worry is that the new tax will further depress the (already sluggish) bourse: Investors will be encouraged to buy equities as long as taxes remain low, Al Wali said, pointing to low trading volumes as well as the EGX’s poor performance compared to regional peers. On the plus side, he noted that the EGX’s sluggish performance means stocks across all sectors are undervalued, making them attractive to investors. The EGX30 is currently down 1.7% YTD.

What’s the CGT? The 10% tithe would hit the net realized portfolio gains each tax year of domestic investors on the EGX. Foreign investors would be exempt. After years of delays, Finance Minister Mohamed Maait has said the tax will come into effect on 1 January 2022.

THE BIG STORY ABROAD- The global business press is setting up three big stories that look set to dominate headlines this week. They are:

#1- The IMF and World Bank’s annual meetings get underway in Washington, DC, later today — and it’s make-or-break time for IMF boss Kristlina Georgieva. She stands accused of pushing staff to fudge data to make China look better in the IMF’s once-flagship Doing Business report. The US and Japan want her out, the Financial Times reports, while France, Germany, Italy and the UK are more supportive, effectively splitting the 24-member executive board of the organization in two.

Also this week: G20 finance ministers and central bank governors will meet in DC during the IMF / World Bank fall meetings.

#2- The brewing global energy crisis is deepening — and has created new room for maneuver for some countries — including Russia, which is sending not-so-subtle signals to the rest of Europe that the EU could avoid a long cold winter … if only it would bring Russia in from the cold. The news comes as energy-intensive manufacturers in the UK have warned they could have to shut down production if they don’t get help with energy prices. Industries feeling the pinch include producers of steel, glass, ceramics and paper. Closer to home, Lebanon has restored power supply to much of the country after earlier running out of fuel — and India’s coal ministry says the country has “ample coal stocks to meet demand from the power industry.

#3- It’s also a big week for market confidence in developed economies as investors fret over the risk that inflation isn’t just rising, but here to stay for a while. Third quarter earnings season kicks off in the US of A this week, and market sentiment will be significantly shaped by “what companies reveal about the impact of any supply-chain problems, labor shortages and the continuing pandemic,” the Wall Street Journal writes.

** IN CASE YOU MISSED IT- Stories from yesterday’s edition of EnterprisePM:

• Inflation continues to be the big worry abroad as continued supply chain disruptions are driving policy makers and analysts to conclude that inflation is set to continue.
• Reducing cows’ farts and burps to save the planet: Farmers and biotech companies are coming up with ways to cut down on methane emissions from cows — one of the planet’s biggest emitters.
• Let’s take this offline: Per My Last Email by Stephanie K. Wright translates all the passive-aggressive phrases commonly used in corporate emails and raises questions about the most prevalent means of communication in the business world.

CORRECTION- We picked up a report by Al Shorouk yesterday claiming that real estate developer Mountain View is in talks with Banque Misr and AAIB for an EGP 5 bn facility. We have been informed by a representative of Mountain View that AAIB is not part of the talks. The story has been corrected on our website.

CIRCLE YOUR CALENDAR-

Conference season ratchets up this month, with a number of exhibitions and business events here and throughout the region taking place this week, including:

• The Turathna Exhibition at the Egypt International Exhibition Center, Cairo, and will run until Friday, 15 October.
• The two-day Mediterranean Offshore Conference will take place in Alexandria tomorrow.
• Further down the road: 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.

*** 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: Egypt’s universities are showing strong improvements this year, according to some of the most respected global ranking systems. They’re among the fastest-rising higher education institutions in the world out of all those tracked and ranked by the Times Higher Education (THE), well represented in both the THE World University Rankings and the newly-inaugurated THE Arab University Rankings. This year’s QS World University Rankings also includes more Egyptian unis — along with, notably, a stronger performance from private universities. We take a look at what’s driving the improved rankings across the board.

Annual urban inflation continued its upward trend in September, hitting a 20-month high on the back of increasing food, healthcare and education costs, according to Capmas figures released yesterday. Headline urban inflation jumped to 6.6% last month, up from 5.7% in August. This is the highest annual inflation rate since January 2020, when it recorded 7.2%. On a monthly basis, headline inflation rose by 1.1% following August’s 0.1% rise.

Annual core inflation inched up 0.3 percentage points to record 4.8% in September compared to 4.5% in August, Central Bank of Egypt data (pdf) shows. Meanwhile, monthly core inflation recorded 0.4% last month, compared to a 0.3% drop in August and 0.1% in September 2020. The overall rate in both urban and rural areas rose to 8% in September from 6.4% in August, according to Capmas figures (pdf). Reuters also has the story.

Food and education prices were the main drivers: Food and beverages prices rose 13.1%, mainly driven by the prices of vegetables, which jumped 38.1%. Oils and fats prices saw the second-biggest price increase in the food and drink category at 18.3%. Prices in the education sector recorded a 29.8% annual increase, recreational and cultural activities saw a 6.5% rise, and housing and utilities prices rose 3.9%, which is attributed to the 9.1% increase in energy costs.

Nothing to worry about? (For now?): Despite reaching an almost two-year high, inflation remains within the CBE’s target range, which is currently set at 7% (+/-2%). The question is for how long, as the government’s fuel pricing committee raised fuel prices for the third time this year by EGP 0.25 on Friday.

Inflation is on cabinet’s radar: The Madbouly cabinet met yesterday to discuss rising commodity prices due to fuel price hikes, agreeing to mitigate the impact of the crisis on Egyptian markets, although exactly how they plan to do that was not announced. Prime Minister Moustafa Madbouly stressed that cabinet was working to ensure there would be no shortage of commodities in Egyptian markets in a statement released by the cabinet on Facebook.

Analysts are not concerned: The inflation rise itself isn’t something we should worry about, Esraa Ahmed, Pharos Holding economist told us. “The concern stems from global pressures and growing fears of global inflation and the Federal Reserve’s plans to tighten monetary conditions with the rise in inflation in major markets, especially with developments in commodity markets, especially energy,” she added. The US Federal Reserve has signaled it may start tapering its stimulus program as early as next month.

…and not expecting rates to change anytime soon: “We expect the CBE to maintain interest rates at the upcoming Monetary Policy Committee meeting on 28 October. The need to maintain the lucrative carry trade [options] in the fixed income market, particularly with the rise in global rates that is posing a risk to inflows into emerging markets, backs our view,” Beltone Financial said in a report (pdf). During its last meeting, the bank’s Monetary Policy Committee (MPC) left interest rates on hold for a seventh consecutive meeting. The inflation hike comes only a few days after.

Egypt’s economy is expected to grow 5.0% in FY2021-2022, up from the 3.3% in FY2020-2021, according to the World Bank’s October 2021 MENA economic update (pdf). The World Bank’s forecast marks an upward revision from its April economic update, when it said Egypt’s GDP would grow at a 4.5% clip during the current fiscal year.

Egypt’s economic recovery is seen “dominating” oil importing countries’ performance this calendar year, with overall real GDP growth among oil importing countries expected to come in at 4.3% by the end of 2021.

Public sector expected to account for greater share of growth: Despite being on track to record stronger GDP growth levels than it did pre-Covid, Egypt “remains constrained by anemic private sector dynamism,” the report says, pointing to a 14% y-o-y increase in public investments in 1Q2021 compared to a 43% drop in nominal private investments during the same three months.

The wider MENA region is in for a “tenuous and uneven recovery” this calendar year, with GDP now expected to grow 2.8% y-o-y in 2021, after contracting 3.8% in 2020, according to the report. The pandemic has caused the region to sustain some USD 200 bn in GDP losses, compared to “where the region’s GDP would have been if the pandemic had not hit.”

The region’s GDP per capita is expected to inch up by a mere 1.1% — a rebound from the 5.4% contraction registered in 2020 and an upward revision from the 0.6% the World Bank had penciled in back in April. The World Bank’s forecast indicates GDP per capita growth will still be 4.3% lower than it was in 2019.

One of the main culprits of this sluggish recovery in the region: Stressed public healthcare systems that were caught off guard by and unable to cope with a pandemic. Many governments in the region had also overestimated their health systems’ preparedness to cope with health emergencies, which the report suggests is partially due to “the region’s young population [creating] the statistical illusion of a healthy population.” As of 2019, Egypt’s government expenditure on healthcare as a percentage of GDP was among the lowest in the region, with only 1.42% of overall government spending earmarked for the sector.

But the key to stronger healthcare systems isn’t necessarily increased spending — it’s an increase in efficient spending. A lack of efficient spending generally leads to an increase in out-of-pocket spending on health services, which drains household incomes and “shifts purchasing power away from large population pools that demand upstream health measures, like prevention and disease surveillance, to those in need of downstream, often costlier, individual services.”

The WB is not happy with our expenditure on preventative care: Despite the rollout of Egypt’s universal healthcare system — which was first introduced on a pilot basis in Port Said in 2019 — Egypt, Tunisia, and Jordan exhibit lower rates of government expenditure on preventive health care compared to their income peers, the World Bank says. In Egypt’s 2021-2022 sustainable development plan released earlier this year, the government said it plans to aggressively ramp up its investments in healthcare infrastructure to EGP 4.7 bn, up 205% y-o-y.

Misr Ins. Holding (MIH) is looking to list 25% of its subsidiary Misr Life Ins. on the EGX during the second half of 2022, MIH Chairman Basel El Hini told us, confirming statements first picked up by Al Mal. El Hini had previously said that the IPO will take place by the end of this year or early next year, but naturally cautioned that the date of the IPO would depend on market conditions.

All aboard the state privatization program: El Hini’s statements come as state-owned fintech platform and payments infrastructure provider e-Finance opened retail subscriptions for its long-awaited IPO. We’re also anticipating IPOs from the likes of Banque du Caire and Ghazl El Mahalla. Finance Minister Mohamed Maait said that up to five state companies will be offering shares on the EGX during the current fiscal year, which ends in June 2022.

Advisors: MIH has appointed NI Capital as its financial advisor, but is yet to select an investment bank to manage the offering.

Azimut Egypt is looking to launch three new funds and hit USD 1 bn in AUM by 2024, Azimut Egypt CEO Ahmed Abou El-Saad told Enterprise. The first of the three funds, a fixed income fund, is expected to launch by the end of this month. Azimut currently has EGP 9 bn worth of assets under management in Egypt, El-Saad said, 6 bn of which are for institutional investors as well as regional and European sovereign wealth funds.

Two more funds will follow by 1Q2022, El-Saad said, with one of the funds specializing in investing in Sharia-compliant debt instruments and equities. would not reveal what the funds would be investing in.

Azimut is still new to Egypt: Earlier this year, Azimut’s third Egypt-focused equity fund, ​AZ-Opp, raised EGP 71 mn during its initial subscription period. Azimut’s first two Egypt-focused funds, equity fund AZ Equity-Egypt and fixed income fund AZ-Savings, have both grown considerably since their launch in 2020, with AZ Equity-Egypt — which currently specializes in Egyptian stocks — reaching EGP 265 mn since its launch in March 2020.

Nile Misr Healthcare to allocate 30% of its capital to three African countries: Misr Capital and Elevate Private Equity’s USD 380 mn healthcare investment platform, launched in April, will invest 30% of its capital in Ghana, Kenya and Côte d’Ivoire, the fund’s CEO Tarek Moharram told us, adding that the African expansion comes alongside a very strong presence in Cairo.

Egyptian investments are still in the works: Nile Misr has a number of Egyptian investments lined up but they’re all still under negotiation, Moharram told us, adding that the fund is in line to acquire a major radiology center among other opportunities.

About Nile Misr Healthcare: Misr Capital and Elevate Private Equity launched the fund in April, billing it as the biggest specialized fund of its kind in Egypt and Africa. Shortly after its launch, Moharram said the fund was doing due diligence on six potential investment targets including a major Egyptian diagnostic company. He added that Nile Misr Healthcare’s long-term ambition is to bring a number of its portfolio companies under the umbrella of a holding company, which would then be floated on the EGX.

The Health Ministry reported 837 new covid-19 infections yesterday, up from 831 the day before. Egypt has now disclosed a total of 312,413 confirmed cases of covid-19. The ministry also reported 37 new deaths, bringing the country’s total death toll to 17,695.

The Oil Ministry is getting serious about the state vaccination mandate: Unjabbed ministry employees will not be allowed to go to work unvaccinated starting 24 November, minister Tarek El Molla said in a statement. Employees must receive a jab at a ministry-run health center by then if they wish to access ministry premises, El Molla said.

The airwaves were quiet last night. Lamees El Hadidi gave us her on-point macroeconomic two-cents, devoting a lengthy segment to explaining persisting global inflation and the worldwide fuel shortage (watch, runtime: 1:40 and runtime: 4:07). An explosion of demand for essential commodities is weighing on the global economy, translating into a gradual rise in inflation m-o-m here at home, with the September headline figure reported by Capmas yesterday hitting a 20-month high. You can watch the highlight of her report last night here (runtime: 3:09).

Lamees spoke to Arqam Capital’s Noaman Khalid, who echoed the global sentiment that the world is running the risk of persistent inflation that may linger for months to come (watch, runtime: 2:37 and runtime: 1:39).

Finance Minister Mohamed Maait said the same to Ala Mas’ouleety’s Ahmed Moussa, noting that supply and demand are currently unbalanced, and that this will “necessarily impact prices in Egypt” (watch, runtime: 21:00). The price increase has so far been across the board, affecting everything from basic commodities to energy to freight charges, Maait said.

The start of the academic year, meanwhile, continued to be a popular topic as the talking heads follow the first few days of business-as-usual at schools and universities since covid. El Hekaya’s Amr Adib took note of the throngs of school parents waiting outside schools to pick up their children (watch, runtime: 7:23).

The mysterious disappearance of what is being dubbed the “Sahel Bridge microbus” also got attention from the talking heads, with some saying the missing bus may have fallen off of a bridge in Embaba. Accounts of the incident were mixed, and the bus was yet to be found as of midnight. Adib and Moussa were both following the story (watch, runtime: 1:28 and runtime: 1:29).

What type of morning is it you ask? A quiet one. The sole story of note in the international press is Egypt and the US ramping up mediation efforts with the Palestinian Authority and Hamas in a bid to form a coalition government and begin the reconstruction process of the Gaza Strip. (Haaretz)

Egyptian workers abroad will be able to get state-backed ins. policies here at home starting 2022 under a decision (pdf) by the Financial Regulatory Authority. The decision places a state body that had been responsible for ins. against traveling abroad in charge of tallying up expat workers and ins. them against injuries.

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

• Fawry is partnering with Uber to allow Uber customers to recharge their Uber wallets via Fawry.
• Pioneers Holdings — which will soon be rechristened Aspire Capital following the completion of a company demerger — plans to establish a microfinance arm dubbed Kheir, as well as a real estate finance company.
• Natural gas sales made by state-owned EGAS increased 5% in FY2020-2021 to 2.34 tcf from 2.23 tcf last fiscal year.
• The Civil Aviation Financial Holding Company (CIAF Holding) has launched its first EGP 100 mn investment fund. Subscription to the fund, dubbed “Tharwety Development Fund,” will be through Misr Capital and Misr Capital Fixed Income Brokerage.

President Abdel Fattah El Sisi discussed the latest on GERD during a meeting with South Sudanese counterpart Salva Kiir, who was in Cairo yesterday. The two also discussed rehabilitating several Egyptian-built electricity power plants in South Sudan, as well as working on promoting more joint projects between both countries, Ittihadiya said in a statement.

Kiir told El Sisi that “Ethiopia would have [re]started … GERD negotiations in October but has delayed it till now due to the war in the Tigray region,” Ahram Online reports.

More on the diplo front: El Sisi separately discussed cooperation in a sit down yesterday with Park Byeong-seug, the speaker of the National Assembly of the Republic of Korea, while Prime Minister Moustafa Madbouly talked across-the-board cooperation with his Yemeni counterpart, Maeen Abdulmalik Saeed.

War of words between Taiwan and China escalates: Taiwan’s President Tsai Ing-wen signaled in a speech on Sunday that the country was not going to be forced into reunification with China. Taiwan has come under growing political and military pressure from China, as Chinese President Xi Jinping vowed a “peaceful reunification” with Taiwan. In a speech on Sunday, Tsai said that the small nation intends to bolster its national defense to ensure that it isn’t forced into a way of life that is neither liberal nor democratic. Tensions in the region have escalated since last month, when Australia, the UK and the US announced an enhanced trilateral security partnership (AUKUS), which will give Australia at least eight nuclear powered submarines powered by U.S. technology.

Also worth knowing this morning:

• Iraqis headed to the polls yesterday to vote for a new parliament.
• Iran plans to offer oil for investment and goods, in a plan that could rest on the reinstating of the 2015 nuclear agreement.

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

9-15 October (Saturday-Friday): Turathna Exhibition, Egypt International Exhibition Center, Cairo, Egypt.

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

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

13 October (Wednesday): Meeting of G20 Finance Ministers and Central Bank Governors, Washington DC.

Mid-October: The Egyptian Banking Institute, the Financial Services Institute, and I-Score will begin airing in mid-October the Digital Credit Scoring Webinar Series, a line-up of webinars on the banking sector and banking regulations.

18 October (Monday): E-Finance begins trading on EGX.

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.

30-31 October (Saturday-Sunday): G20 Leaders’ Summit, Rome, Italy.

31 October (Saturday): World Cities Day, Luxor, 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.

15-21 November (Monday-Sunday): Intra-African Trade Fair 2021, Durban, KwaZulu-Natal, South Africa.

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.

1Q2022: Launch of the Egyptian Commodities Exchange.

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

19 February 2022 (Saturday): Public universities begin the second term of the 2021-2022 academic year.

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.