Wednesday, 13 October 2021

EnterpriseAM — e-Finance prices IPO at the top of the range

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, wonderful people. We have a really packed issue for you this morning, so let’s jump right in:

HAPPENING NOW- It’s looking … mildly bleh for global markets this morning. US shares closed down for a third straight day yesterday, with the Dow, S&P and Nasdaq all in the red. Shares in Tokyo and Shanghai have followed suit this morning, while Hong Kong is trading sideways, leaving Seoul’s Kospi as the sole bright spot among the major Asian benchmarks. Futures suggest that US shares will open in the red again later today, while Europe is looking at a mixed open, with the Stoxx, FTSE 100 and CAC 40 all set to open down at the start of trading.

IT’S A BIG DAY FOR CAPITAL MARKETS here at home as e-Finance has priced its IPO at EGP 13.98 per share, according to a statement posted on EGX screens that has been widely picked up by the domestic press. That’s at the top end of the EGP 12.50-13.98 price range on which the company had previously guided — and makes the IPO of the state-owned fintech platform and payments infrastructure provider worth a bit more than EGP 5.8 bn. The company earlier this week raised the size of its offering to 417.8 mn shares, making it one of the largest offerings in recent memory. Foregn investor interest has been stronger than expected, Al Ahly Pharos chief Ahmed Salem told Hapi Journal. Al Ahly is one of the quarterbacks of the transaction alongside RenCap and CI Capital.

Expect a more detailed statement from e-Finance later today to confirm the final specs of the transaction. You can check out e-Finance’ intention to float here.

The travel industry’s top lobby group has asked the National Council for Wages for an exemption from the private sector minimum wage. The Egyptian Tourism Federation argues that the sector is yet to fully recover from its covid-19 setback, according to this morning’s Al Borsa print edition (pdf). Employees of private-sector companies will for the first time receive a minimum wage of at least EGP 2.4k starting January 2022 when the minimum wage comes into effect. The decision means higher labor costs and larger contributions to the nation’s Social Insurance Authority when it goes into effect. Companies have till the end of this month to submit a request to the National Wages Council if they claim they cannot afford the wage hike.

LET’S SAY NO? Or, at the absolute most, grant a very time-limited exemption. As business owners, we have a moral obligation to pay a livable wage to the people we employ — people who have futures to plan and, often, families to support. A national private-sector minimum wage was smart policy on the part of Planning Minister Hala El Said — let’s not water it down by giving one of the country’s largest industries a blanket exemption. There are other ways to continue extending support to the industry if policymakers think it appropriate.

IN REGULATORY NEWS- Importers no longer need to get invoices stamped from chambers of commerce abroad to clear their goods at Egyptian ports, according to a decision by the Customs Authority, Al Mal reports. They will, instead, only need to give a broken down commercial invoice that contains a detailed description of the packing list. The decision is based on the recently-issued executive regulations of the Customs Act, which aims to expedite customs clearance.

WHAT’S HAPPENING TODAY-

The International Conference on Climate Change in the Eastern Mediterranean and the Middle East kicks off in Nicosia today. The conference brings together 65 leading policymakers, scientists and diplomats from Egypt, Israel, Jordan, Iraq and Greece to advocate for a move away from fossils toward renewables in the region. You can check out its website here.

THE BIG STORY ABROAD this morning is the IMF’s warning on global growth, which we cover in detail below.

ALSO- The US House of Representatives has approved a bill that will ward off default for the next seven week. The House approved a bill, already passed by the Senate, that raises the government’s borrowing limit to USD 28.9 tn, Politico reports. Also in Congress: Democrats could slash US President Joe Biden’s USD 3.5 tn infrastructure bill by a lot, in a bid to push it through Congress with a narrow Democrat majority vote, House Speaker Nancy Pelosi signalled yesterday, according to CNBC.

CLOSER TO HOME- Turkey’s lira extended losses to reach a record low yesterday after President Recep Tayyip Erdogan hinted at more military involvement in Syria.

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

  • Are US equity markets turning a corner? Goldman Sachs and JPMorgan say rising inflation is transitory, suggesting the 5% dip in the S&P 500 is the extent of the correction.
  • The next cohort of executive EMBA students? Entrepreneurs.
  • Meet our analyst of the week: Beltone’s Toka Elwazery.

THE GLOBAL SHORTAGE OF EVERYTHING-

Apple is feeling the pinch of the global chip shortage: The tech giant is expecting to slash its production of iPhone 13 for the rest of 2021, making 10 mn fewer devices than it had originally planned so long as the global semiconductor shortage continues to hit its flagship product, sources told Bloomberg. The company had intended to manufacture some 90 mn of the new iPhones over the coming three months. It’s now telling its distributors it won’t be able to meet this target as Broadcom and Texas Instruments “are struggling to deliver components.”

On the bright side: The widespread supply chain disruptions resulting from a gap between supply and demand around the world are unlikely to last, CEOs of the US’ largest banks say, according to the Financial Times. According to the executives, who include JPMorgan Chase chief executive Jamie Dimon and Wells Fargo’s Charlie Scharf, the global economy was taken by surprise and markets are bound to eventually adapt. “What we just have to protect against is people making decisions that exacerbate the problem, which is trying to add to inventories too quickly,” Scharf said.

FELLOW iSHEEP- Apple is hosting an event on Monday, 18 October at which it is expected to unveil new hardware including redesigned MacBook Pros. You can tune in here at 7pm CLT to watch the event live.

MORNING MUST READ-

A whopping 85% of the world’s population has felt the direct impact of climate change, according to research published in the Nature Climate Change. The research, which used machine learning to analyze and map more than 100k studies of events that could be linked to global warming, looks at everything from extreme weather events to the correlation between risk of death from heart disease and temperature variations. This year alone, at least 388 deaths in the US were traced back to climate change, the Washington Post says. In 2009, developed countries pledged USD 100 bn a year in climate finance by 2020 to help lower-income countries mitigate the impacts of climate change and invest in green energy. That target hasn’t been met.

CIRCLE YOUR CALENDAR-

We’re within arm’s reach of our next long weekend: ​​​​The Prophet Muhammad’s birthday falls on Monday, 18 October. We expect a three-day weekend starting Thursday, 21 October. Look for confirmation from the cabinet toward the end of the week.

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, which will run until Friday, 15 October.
  • The GITEX Global is being held in the Dubai World Trade Center from 17-21 October. The event brings together players in Big Tech to discuss what’s next in areas such as AI, cloud, 5G, cybersecurity, blockchain, and more.
  • 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.

enterprise

*** 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, as well as social infrastructure such as health and education.

In today’s issue: The global chip shortage has taken over the world, delaying production and disrupting supply chains. The impact has been severe on a number of sectors, with one of the hardest hit being the automotive industry, as their chips have been pushed to the backburner in favor of more profitable industries such as mobiles and laptops. In today’s Hardhat, we explore the impact of the global chip shortage on the local automotive industry by talking to industry experts, as well as some of the biggest vehicle distributors in Egypt.

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ECONOMY

Inequality threatens pandemic recovery, IMF says in its latest global outlook

The global recovery is bruised, but not broken: The IMF slightly downgraded its projection for global growth in 2021 to 5.9% in its October World Economic Outlook report (pdf) — down a slim 0.1 percentage points from 6% in its last update in July. The international lender held its growth estimate for 2022 steady at 4.9%, adding that global growth would taper down beyond next year to average at 3.3% in the medium term. The report’s title, Health Concerns, Supply Disruptions, and Price Pressures, succinctly summarizes the risks the IMF identifies as the biggest threats that could hobble the economic recovery.

Threats abound: The report warns that global growth risks are tilted to the downside, while inflation risks are skewed to the upside. There are few surprises when it comes to what’s behind increased uncertainty over the recovery: The spread of the Delta covid-19 variant, supply-chain disruptions, price hikes, risky financial markets, and the growing impact of climate change.

What’s the common denominator? Duh, it’s covid: “A principal common factor behind these complex challenges is the continued grip of the pandemic on global society,” according to the report. It calls on developed nations to step up their game on global vaccination and other preventative health measures to stop the emergence of more virulent covid-19 strains. On the national level, the IMF advises policymakers that they will need to tread a thin line, continuing to support the recovery while also keeping a watchful eye on inflation. It also urges governments to prioritize healthcare spending above all else, echoing the World Bank’s October MENA update released earlier this week, which blamed stressed public healthcare systems for the region’s sluggish recovery.

A Tale of Two Pandemics: Relatively strong global growth data “masks large downgrades for some countries,” the IMF said, adding that “the outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics.” Low-income developing countries are set to register 3% growth in 2020 and 5.3% growth in 2021, down 0.9 percentage points and 0.2 percentage points respectively from July projections. Meanwhile, rising inflation, and the inevitable monetary tightening it will induce in rich countries, will inflict the most pain in low-income countries already suffering from a hike in food prices.

Come together, right now: The overarching message is that the widening divide between developed and developing economies has disastrous consequences for all. “Recent developments have made it abundantly clear that we are all in this together and the pandemic is not over anywhere until it is over everywhere,” the report writes, urging developed countries to commit to plans to get jabs in arms (and tackle climate change) pronto.

US and China are in the naughty corner: Both superpowers got a ticking-off from the IMF, which wrote that “escalations in cross-border trade and technology tensions” had put the recovery at risk, as had “unnecessary policy accidents” including the US failure to raise the debt ceiling and chaotic debt restructurings in China’s Evergrande crisis.

The MENA region is doing relatively well: The IMF revised its growth projection for MENA upwards by 0.4% to 4.1% in 2022.

But the economic oracle is predicting slower growth for Egypt: The IMF downgraded its growth projection for Egypt’s economy in FY2021-22 to 5.2%, down 0.5 percentage points from the 5.7% growth that it forecasted in April. That’s still more optimistic than the World Bank, which expects growth of 5% in FY2021-2022. The IMF kept its long-term estimate for Egypt’s growth steady at 5.8% in FY2025-26.

There was better news on Egypt’s inflation and its deficit: Consumer prices are expected to rise by 6.3% for FY2021-22, down 0.9 percentage points from the April forecast of 7.2%. Inflation is forecast to stand at 7.1% by FY2025-26, marginally down from the 7.3% forecast in April. The IMF also narrowed its estimate for Egypt’s current account deficit in FY2021-22 to 3.7%, down from 4% in its April report. The deficit is expected to narrow further to 2.6% by FY2025-26.

INVESTMENT WATCH

Ain Sokhna is getting fresh DP World + CDC investments

Ain Sokhna Port is getting additional investment from Emirati port giant DP World and CDC Group, the UK government’s development finance arm. The two institutions are setting up a joint USD 1.7 bn African investment platform, a portion of which will go towards Ain Sokhna, DP World said in a statement. Over the next “several years,” the platform will invest in several infrastructure and logistics projects on the continent, including origin and destination ports, inland container depots, economic zones and other logistics across Africa to increase trade. The platform “initially be seeded with minority stakes in existing DP World assets with significant capacity expansion plans,” including the Dakar Port in Senegal and the Berbera Port in Somaliland. The Financial Times also took note.

The financing breakdown: In addition to its minority stakes, DP World is putting up USD 1 bn over the next several years, while CDC will initially invest some USD 320 mn, with an additional USD 400 mn to come at a later stage.

This isn’t DP World’s first rodeo in Egypt: DP World invested USD 520 mn in the expansion of the Ain Sokhna seaport during late 2019, bringing DP’s total investments to USD 1.6 bn. The expansion included building a second dock that doubled the port’s capacity to 1.75 mn TEU from 970k. Shortly after, DP World Sokhna signed a partnership agreement with the China State Construction Engineering Corporation (CSCEC) and the China Ocean Shipping Company Ltd (COSCO), to become the main terminal for construction material imported for the central business and financial district of the new administrative capital. Last year, company CEO Sultan Ahmed Bin Sulayem described himself as “bullish” on Africa and praised Egypt’s economic policies as being pro-growth.

INVESTMENT WATCH

IFC, EBRD to invest in Algebra’s second fund

IFC, EBRD are getting in on first close of Algebra’s second fund: The International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) are set to participate in the first close of Algebra Ventures’ USD 90 mn second tech fund, Algebra Ventures Managing Partner Tarek Assaad tells Al Mal. Algebra now intends to raise USD 60 mn in the first close before the year is out, Assaad reportedly said. The VC fund had said earlier this year it plans to raise USD 50 mn in 3Q2021. (Editor’s note: Tarek: Give us a call so we can pile into the story, man, okay?)

Background: Algebra’s inaugural Egypt-focused fund closed four years ago at USD 54 mn. The new fund could make select investments elsewhere on the continent. Algebra tapped Laila Hassan and Omar Khashaba as general partners earlier this year, and Khashaba gave us the rundown on the firm’s second fund back in July.

ELSEWHERE- Kenya’s Sendy looking at USD 100 mn African expansion that includes us: Nairobi-based delivery service Sendy is looking to raise USD 100 mn by 2022 to finance the company’s expansion to new markets including Egypt, Nigeria, Ghana and South Africa, co-founder Malaika Judd told Bloomberg last week. Judd did not provide further details on how these investments might be divided among markets. Sendy arranges door-to-door delivery between businesses and individuals on its platform.

FINTECH

Fawry makes its first investment outside Egypt

Fawry has finalized an unspecified investment in Sudan’s largest online classifieds platform and marketplace, acquiring an undisclosed strategic minority stake in Alsoug.com / Cashi’s holding company. The transaction marks Fawry’s first venture outside of Egypt, according to a statement (pdf). The investment is part of a USD 5 mn funding round, which Fawry co-led alongside a consortium of undisclosed Western venture capital firms.

It’s actually the first venture capital round raised by a company in Sudan since international sanctions were lifted in 2020. The investment will go towards building out Alsoug’s recently launched fintech platform Cashi and develop its payments infrastructure. Fawry CEO Ashraf Sabry said that the company sees Sudan as an economy with “major potential across several sectors and with a significant pool of entrepreneurial talent.”

Founded in 2016, Alsoug.com is an online classifieds marketplace with nearly 2 mn downloads and includes listings of real estate, cars, electronics, furniture, in addition to services and job postings. Alsoug launched payment service provider Cashi in 2020 as a PayPay-like service provider. Cashi facilitates payment of “utility bills, airtime top-up, government education services,” as well as advertising on alsoug. Earlier this week, alsoug.com was selected as one of eight startups to participate in the Last Mile Money Accelerator, a program managed by IDEO and funded by the Bill & Melinda Gates Foundation.

EGX-listed Fawry is Egypt’s first and largest digital payments company with a market cap of c. USD 1.7 bn.

IN OTHER FINTECH NEWS- US-based Volante Technologies and MDSL will provide payment infrastructure upgrade to an unnamed Egyptian bank: Cloud payments and financial messaging company Volante Technologies and banking solutions company Calero-MDSL have signed a contract with an unnamed “major Egyptian bank” to overhaul the institution’s current payments infrastructure, according to a press release. Volante will be laying down the groundwork for the bank’s new payments solutions, while MDSL will help manage transition and offer local support services. Neither the Egyptian bank nor the specific payments processing product in question were named in the group’s release.

INFRASTRUCTURE

Orascom Construction adds nearly USD 1 bn to backlog in 3Q

Orascom Construction added USD 960 mn-worth of new contracts to its backlog in 3Q2021, growing 42% y-o-y annual increase, the company announced in a statement. Projects in Egypt made up 65% of new contracts during the quarter, including a contract to design, install, commission and maintain Egypt’s first high-speed rail system. The other 35% came from new contracts in the US, mainly large projects in student housing. Consolidated backlog grew to USD 9.1 bn by the end of the quarter.

OTHER INFRASTRUCTURE NEWS- Egypt’s Arab Contractors will develop the main port in Lebanon’s Tripoli under an agreement signed with the Lebanese government, according to Al Shorouk. The project, which involves revamping the port’s infrastructure with new customs buildings, administrative offices, and fire stations, is expected to cost USD 87 mn. It will be fully funded by the Islamic Development Bank, with work expected to begin within as little as 10 days, according to Xinhua. The agreement was signed by Lebanon's Council for Development and Reconstruction.

MOVES

Shahinaz Nabil Foda will replace Frederic Christian Abbal on the board of Elsewedy Electric, following Abbal’s resignation, the company said in a statement (pdf) today.

Essam Abdelhadi (LinkedIn), former VP for the Middle East, Turkey, Africa and Pakistan at health tech company Abbott, has joined the advisory board of Egyptian life science startup Nawah Scientific, after acquiring a stake the company. A Nawah official declined to tell us the size of the stake

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ENTERPRISE+: LAST NIGHT’S TALK SHOWS

President Abdel Fattah El Sisi’s day in Budapest was front and center on the airwaves last night. Sada El Balad (watch, runtime: 1:16), El Hayah El Youm (watch, runtime: 5:40), Kelma Akhira (watch, runtime: 2:44), and DMC (watch, runtime: 8:01) all aired highlights of the president’s speech during the Visegrad (V4) summit, which we recap in full in Diplomacy, below.

Al Hayah Al Youm’s Moustafa Sherdy and Ala Mas’ouleety’s Ahmed Moussa spoke to pundits to discuss the bigger picture. The talking heads noted that Egypt is uniquely placed as the only country from the region to take part in the closed summit and discussed the political implications of taking part (watch, runtime: 11:12 and runtime: 7:58). Moussa also phoned Presidential Spokesperson Bassem Rady for a recap of the day (watch, runtime: 5:22).

What’s the Visegrad Group? Think of it as the “Big Four” of central Europe: Members include the Czech Republic, Slovakia, Poland and Hungary.

Inflation was another topic of note last night: Spiraling energy and commodity prices worldwide, which are beginning to translate into higher headline inflation domestically, were the key discussion point in a phone call between Moussa and cabinet spokesperson Nader Saad (watch, runtime: 4:48 and runtime: 2:27).

Are importers going to get a break? Moussa asked Saad whether officials are mulling lower customs rates to limit the effect of global inflation at home. According to Saad, this is still not on the agenda, with authorities currently only focused on maintaining strategic stockpiles of key commodities to boost supply when needed (watch, runtime: 1:47).

The Egyptian Premier League draw as the nation braces for the start of the 2021-2022 football season, also made the rounds. You can watch the full event here (runtime: 38:25).

Speaking of football, the upcoming season will see the return of live fans to stadiums for the first time since covid. Attendance will be limited to 2000 per stadium under an agreement reached with the Interior Ministry, Ahmed Diab, the head of the association of pro Egyptian clubs said during the draw (watch, runtime: 6:08).

EGYPT IN THE NEWS

It’s a quiet morning for Egypt in the global press:

  • Bookings to Egypt and Turkey from the UK have soared 400% since our removal from the red list, an Easyjet executive says. (The Guardian)
  • A pair of Sphinx statues in a UK couple’s garden were discovered to be genuine Egyptian artifacts dating back some 5k years and have been sold for nearly GBP 200k at an auction yesterday. Antiquities theft? The English? Perish the thought. Certainly nothing more than a perfectly normal mistake to have made, yeah? (Express)
  • Egyptian burn victim Hend El Banna is helping others with her condition overcome stigma through her “Ehtewa’a” (inclusion) association, a charitable organization she runs from Alexandria, Egypt, reports Reuters.

ALSO ON OUR RADAR

State grain buyer GASC has called off a wheat tender as prices offered were higher than expected Reuters reported. The tender was due for shipment between 23 November and 3 December. This is the fourth time Egypt has called off a tender in recent months, with average wheat prices jumping by as much as USD 100 per tonne since the season began. GASC bought 240k tonnes of Russian and Romanian wheat in a tender earlier this week for shipment in the second half of November, and at an average price of USD 320.51 per mn tonnes FOB and USD 351.61/mt CFR. The transaction came as high tariffs on exports impact the Russian grain trade and imperil one of the main supply lines for Egypt, the world’s biggest wheat importer. That said, we have been relying less on Russian wheat, which accounted for just 20% of all grain imports by August this season, a seven-year low. Bloomberg also has the story.

Americana Holding Egypt has acquired a 53% stake in Cairo Poultry after consolidating three separate stakes that were held by sister companies or subsidiaries — Americana Group Kuwait, the Egyptian Company for International Tourism Projects (Americana Egypt), and Americana Group, according to four separate EGX disclosures (here, here, here, and here — pdf). The three companies each held 4.4%, 15.3%, and 33.8%, respectively.

Four Nile City shareholders offload their entire stakes: Amusement Touristic and Real Estate Investment has sold its entire 28.2% stake in Nile City in a EGP 703 mn transaction, according to an EGX disclosure (pdf). Minority shareholders Golden C for Real Estate and Touristic Investments and Trigger Bay for Real Estate and Touristic Investments each sold their 4.98% stakes in the company, worth EGP 124.3 mn apiece, while Gazelle sold its 0.016% holdings, according an EGX disclosure (pdf). The shares were sold at EGP 344.28 apiece.

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

  • Egypt is among 32 low-income countries that lost USD 126 bn last year as a result of the digital gender gap, according to a report on the costs of women’s digital exclusion by web pioneer Tim Berners-Lees’ World Wide Web Foundation and the Alliance for Affordable Internet (A4AI).
  • Eighty unemployed Egyptians are getting training for maintenance of rolling stock for Cairo Metro Line 2, courtesy of the European Bank for Reconstruction and Development (EBRD) and Hyundai Rotem.

COVID WATCH

The Health Ministry reported 857 new covid-19 infections yesterday, up from 846 the day before. Egypt has now disclosed a total of 314,116 confirmed cases of covid-19. The ministry also reported 39 new deaths, bringing the country’s total death toll to 17,765.

PLANET FINANCE

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SPACs get a reputation makeover: The latest incarnation of special-purpose acquisition companies has some investors hailing them as an almost no-risk venture that makes a good alternative to short-term bonds, according to the WSJ. Once seen as a fraud magnet, the unusual investment vehicles became a major 2020 craze before seeming to lose their appeal. Now some investors say the slump in the market following last year’s rapid increase in the number of SPACS means shares are trading at a discount and high yields can be achieved through short-term “SPAC arbitrage”: Redeeming shares for a higher value once a merger is announced or the SPAC is liquidated.

Shares of ACWA Power sank on their second trading day, failing to maintain the momentum of a record debut on Tadawul and finishing down 8.4% at the closing bell. The drop came after the Saudi energy player, whose listing was the biggest in the kingdom since Aramco’s, saw its share price gain a massive 30% on its first day as a public company earlier this week.

Up

EGX30

10783.92

+0.7% (YTD: -0.6%)

Down

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

11,542.88

+0.3% (YTD: 32.8%)

Up

ADX

7,786.89

+0.06% (YTD: 53.3%)

Up

DFM

2,787.72

+0.6% (YTD: 11.9%)

Up

S&P 500

4,362.22

+0.02% (YTD: 16.1%)

Down

FTSE 100

7,130.23

-0.2% (YTD: 10.4%)

Down

Brent crude

USD 83.37

-0.3%

Up

Natural gas (Nymex)

USD 5.52

+3.2%

Up

Gold

USD 1,759.10

+0.2%

Down

BTC

USD 55,757.06

-2.6% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.7% yesterday on turnover of EGP 811 mn (46.4% below the 90-day average). Regional investors were net buyers. The index is down 0.6% YTD.

In the green: ElSewedy Electric (+3.6%), Orascom Development Egypt (+2.5%), and Ibnsina Pharma (+2.2%).

In the red: AMOC (-3.9%), Pioneers Properties (-3.4%) and Raya Holding (-1.9%).

DIPLOMACY

Hungary pushes EU to give Egypt more support on anti-terrorism + economic recovery: The EU should accept Egypt as a strategic partner and provide security and economic assistance to Egypt to help build the economy and protect its borders, Hungarian Prime Minister Viktor Orban said at a joint press conference after the Visegrad (V4) summit with President Abdel Fattah El Sisi in Budapest yesterday. Orban stressed Egypt’s position as a key ally to the EU in coping with migration, according to a Hungarian government statement. . The Hungarian prime minister’s statements take us back to 2017, when Egypt was hoping to land a Turkey-style migration pact that would have seen Egypt step up its efforts to stop the flow of migrants in return for substantial investments and other financial investment from the EU.

El Sisi also touched on Egypt’s efforts to integrate refugees and raise rural living standards during his speech at the summit, telling leaders of the group’s member countries — Poland, Slovakia, Hungary, and the Czech Republic — that there was a need for Europe to have a better understanding of events in Egypt, according to an Ittihadiya statement. Egypt joined the V4 summit for the second time, after being invited for the first time in 2017.

El Sisi also talked GERD in a one-on-one with his Hungarian counterpart, János Áder, Ittihadiya said in a statement. El Sisi reiterated that Egypt is after a binding agreement with Ethiopia on filling and operating the dam to resolve the dispute, and that it’s not asking for more than its fair share of Nile water.

ELSEWHERE IN DIPLOMACY- House Speaker Hanafy El Gebali and Senate President Abdel-Wahab Abdel-Razeq met with South Korea’s National Assembly Speaker Park Byeong-seug on Monday to discuss Egypt’s diplomatic role in restoring peace on the Korean peninsula. Park met with El Sisi earlier this week to discuss economic cooperation and international security.

hardhat

How has the global chip shortage impacted Egypt’s auto sector? The global chip shortage has been wreaking havoc on the automotive industry worldwide. Major global automakers have been forced to lower production or announce additional factory downtime at their production facilities, including Toyota and Volkswagen, who cut their global output by 40%. The cost of the semiconductor shortage has ballooned by over 90% for the world’s automakers, resulting in an expected USD 210 bn hit to 2021 revenues, Bloomberg reports.

What does the impact look like in Egypt? Enterprise spoke with local distributors and assemblers to understand how the chip crisis is translating domestically. What they tell us is that demand for cars is up substantially, but chips and other components are slow to arrive, pushing supply down (you can imagine what that’s doing to prices). While automakers are not sweating currently as most are still using up their inventories from last year’s covid-induced slow downs, the worst seems yet to come should the chip shortage continue into next year, they tell us.

As an importing nation, the impact is very real: The shortage was affecting the company on two fronts: fully-assembled cars they import from abroad as well as CKDs (Completely Knocked Down) which are components that they import but assemble into a car at their local facilities, GB Auto board member Mansour Kabbani explains to Enterprise. CKDs were more affected due the automaker being unable to access enough electronic control units (ECUs). Abou Ghaly Motors has felt the impact since February of this year, Group Commercial Director Tamer Kotb told us. Their car imports have fallen 50% in 2021 due to the lack of supply in the market.

This has naturally begun to impact production: GB Auto said it was forced to slash production due to the global chip shortage back in May. GB Auto eventually ordered the missing ECUs by plane to make up for the shortage, however, their assembly lines are still operating at 70-80% of their production capacity.

And sales targets: Abou Ghaly had been targeting sales of 6k cars this year, the figure is now projected to fall short to 3-4k cars, Kotb said.

This comes despite increasing demand: Demand is expected to reach 220k cars in Egypt in 2021, compared to 175k in 2020 and 160k in 2019, according to Kotb. Passenger car sales grew 15% y-o-y in August and 43% y-o-y in July, with some 18.3k vehicles sold in August and 17.8k in July according to the latest figures from industry association Automotive Information Council (AMIC).

Global supply chain woes aren’t helping things: Shipping costs for chips and all other car components have increased around 400% YtD for local firms as a shortage in containers pushes shipping prices upwards, causing a simultaneous crisis for the local sector, said Amr Soliman, the chairman of Al Amal Group, the local agent of Lada and BYD vehicles. He tells us that Al Amal Group is currently using its existing stock of chips.

Meaning waiting times have gone up for imported cars: The high demand has led to GB Auto’s inventory turnover rate for imported cars to be at nearly 100%. Waiting times have consequently significantly increased. “Usually, people ask for a car and we direct them to the nearest dealership where it’s available. Usually, they’ll have to wait 2-3 weeks for their cars to arrive,” Kabbani says. However, waiting times have increased to three months in many cases as supply and shipping hinder availability. At Abou Ghaly motors, there’s now a waiting list to even reserve a car model — meaning once you reserve, you’ll still have to wait between 1-3 months for the car to arrive, Soliman explains.

Naturally, all this is being reflected in prices: While GB Auto has seen prices go up only 2-3% this year in their range of cars, while Abou Ghaly reports no price changes, prices on the secondary market have risen between EGP 30-200k as dealers buy from local distributors and sell at a markup, our sources said.

And even licensed distributors are going to markup their prices: Car prices could go up another 10-15% in the coming period, Soliman tells us. This is a global phenomenon, he added, with international car distributors warning about falling inventories of cars to export abroad. Dynamics Distribution and El Saba Group also signalled that car prices are due to increase in reports to Hapi Journal.

How is the auto industry adapting? GB Auto has diversified its product offerings by purchasing them from different geographic locations where they are more readily available, Kabbani explained. The chip shortage is felt most in the US and Europe, but less so in China and other Asian countries, he added. Meanwhile, Abou Ghaly has been heavily pushing its after-sales services to ensure that they still have a hold on prospective customers. They’ve also begun solidifying relations with shipping partners to create a smart and fast logistics chain, Kotb added.

But woe to the market should the shortage continue: “If the chip shortage is with us by November, we’ll definitely start feeling the strain,” Khaled Saad, the head of the Egyptian Association of Automobile Manufacturers and the managing director of the Brilliance Bavarian Company, told Enterprise. Ditto Abou Ghaly, as Kotb tells us that if nothing changes by December, the auto group is considering reducing production at the assembly facility to keep supplies around for as long as possible.

…And they expect it will: It’s expected the shortage will continue “well into 2022”, Kabbani tells us. Saad and Soliman expect the impact to diminish by 2H2022, while Kotb predicts we’ll see the light by 2Q2022. But it might take even longer than local insiders believe, with global industry experts saying the semiconductor shortage could take years to resolve. So far, no one we’ve talked to has a solid plan for what happens if the chip crisis extends beyond 2022.


Your top infrastructure stories for the week:

  • Fuel hikes: The government’s fuel pricing committee raised the price at the nation’s pumps by EGP 0.25 on Friday in response to spiraling international costs.
  • Nile Misr Healthcare goes long on Africa: 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.
  • EETC to power monorail substations: EETC has inked EGP 271 mn contracts with Elsewedy’s Egytech Cables and a consortium of Egypt Cables and Al-Gammal Contracting to power substations in Sheikh Zayed that will be used for the upcoming monorail project.
  • Investment prospect in Alexandria Port: The Alexandria Port Authority is planning to tender a 31k sqm land plot in the port’s fifth zone to private sector investors to set up container terminals or storage facilities.
  • Lebanon runs out of fuel: Lebanon’s energy crunch forced it to shut down its two main state-owned electricity plants last weekend, leaving large parts of the country with no power.

CALENDAR

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.

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

14-15 October (Thursday-Friday): The Ordinary Session of the Executive Council of the African Union, African Union Headquarters, Addis Ababa, Ethiopia.

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.

18-20 October 2022 (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

**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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

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