EnterpriseAM — Competition watchdog scolds business community on M&A

TL;DR

ECA issues warning to companies that wrap up M&As without informing it. (Competition Watch)
Willis Towers Watson eyes two Egypt-based ins. brokers in regional plan. (M&A Watch)
Cairo trucking startup Illa closes seven-figure round. (Startup Watch)
EgyptAir gets House backing for FinMin guarantee of EGP 5 bn loan. (Debt Watch)
FT says some bond funds are getting pressure to divest from countries where activists are raising flags over human rights. (Egypt in the News)
Aspire Capital establishes Kheir Microfinance (Microfinance)
New delta subvariant could be 10-15% more transmissible. (Covid Watch)
What would a green manufacturing future look like for Africa, and Egypt? (Going Green)
Planet Finance— Fertiglobe could become Abu Dhabi’s third largest listing yet.

WHAT WE’RE TRACKING TODAY

Good morning, wonderful people. We have an unusually calm news day for you this morning (not that we’re complaining…) with no single story driving the narrative. At home, there’s plenty of investment news from planet startup and the ins. industry, while abroad the big story is the FT’s piece on bond investors getting pressure from activists to pull back from countries with spotty rights records.

HAPPENING TODAY- President Abdel Fattah El Sisi will be in Athens today for a summit alongside Cypriot President Nicos Anastasiades and Greek Prime Minister Kyriakos Mitsotakis. The three officials will review trilateral cooperation, according to a statement from the Cypriot government. This meeting comes shortly after Egypt signed MoUs with Greece and Cyprus to link electricity grids.

SMART POLICY- Flights between Luxor and Sharm El Sheikh will begin running on Wednesday, 27 October for EGP 1.8k, in a bid to merge beach and antiquities tourism, cabinet said in a statement. It’s unclear whether the flights will be operated by EgyptAir, one of its subsidiaries or another operator.

CORRECTION- The government is leaving *electricity* prices for industry fixed for the next few years as part of a package of incentives for the private sector. We incorrectly said in yesterday’s EnterpriseAM that natural gas prices would be fixed for four years. We’ve updated the story on our website to reflect this correction.

THE BIG STORY ABROAD- Preparations for the global climate summit scheduled to take place at month’s end in the United Kingdom. Bloomberg has an exclusive chat with UK PM Boris Johnson in which Boris is warning that the talks will be “extremely tough.” The Wall Street Journal is similarly warning that poor nations say they want tns of USD from rich countries as a condition for reaching an agreement to reduce emissions. The gathering runs in Glasgow from 31 October through 12 November.

Christmas came early for our fellow iSheep as Apple announced last night completely redesigned 14- and 16-inch MacBook Pros. The highlight of the night was not the unveiling of the new M1 Pro and M1 Max processors — which blow the doors off anything Intel has in its arsenal — but the return (at last) of ports *and* MagSafe to the Pros. The new devices feature three Thunderbolt 4 ports, an HDMI port, an SD card slot and a headphone jack. The fact that it has crazy battery life, gorgeous new screen tech and insane processing power for folks who code, edit photo or video, or do other “compute intensive” work? Just a bonus. Also: The touch bar is finally gone and the keyboard looks great. Apple also announced new AirPods, which thankfully do not have the horrible tips on the AirPods Pro.

Missed the launch? You can catch it here (runtime: 50:17) or you can check out the Macs here on Apple’s website. Want more coverage? The Verge’s liveblog of the event is always good, and the story is getting lots of coverage everywhere from the FT and Bloomberg to CNBC. Also read: The 8 biggest announcements from Apple’s Unleashed event

CIRCLE YOUR CALENDAR-

Two days left until the Cairo International Furniture Show, Le Marche. The four-day event runs from this Thursday, 21 October until next Sunday, 24 October. It is the first and largest furniture, material and home accessories exhibition in the region.

Fall conference season is still going strong. Among the exhibitions and business events here and throughout the region:

The GITEX Global at the Dubai World Trade Center is on its third day today and runs through this Thursday. The event brings together players in Big Tech to discuss what’s next in areas such as AI, cloud, 5G, cybersecurity, blockchain, and more.
Cairo Water Week begins next Sunday, 24 October. The annual event will wrap next Thursday, 28 October.
The two-day Intelligent Cities Exhibition & Conference takes place next Wednesday and Thursday, 27 and 28 October.
Later this month: 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 Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Manufacturing in Africa could have a shot at avoiding the costly transition of industry to green technologies at a later stage by investing in decarbonizing strategies early on, according to a report by McKinsey & Company. The report estimates that reaching net zero emissions would require a hefty USD 2 tn investment over the next three decades, but highlights a number of upsides in the long term. We look at the policies McKinsey recommends and how far along Egypt is in implementing them — especially as Egypt contributes 20% to the total manufacturing emissions of the continent, which themselves make up 30-40% of the continent’s total emissions.

This is your shortcut to a comprehensive platform, designed to bring you closer to 10 mn m2 of incomparable experiences, and a colorful art gallery inspired by the natural beauty of Somabay.

COMPETITION WATCH

ECA poking into M&As again

The Egyptian Competition Authority (ECA) is not happy that a number of mergers and acquisitions that have taken place without it being notified. In a statement yesterday, the competition watchdog warned businesses making EGP 100 mn in annual revenues that they must inform the ECA of M&A activity within 30 days of the transaction closing. Failing to do so could see them run afoul of the ECA Act, it said. The statement did not name the companies alleged to be in violation.

Al Borsa cites unnamed sources as adding that the ECA has found at least 10 instances of M&A that went through without the agency being informed, adding that the transactions include some in the automotive and steel industry. We can’t recall any recent transactions in either industry large enough to trigger the ECA’s interest.

What power does the ECA have to do this? The ECA Act of 2005 grants the authority the power to raise red flags about mergers and acquisitions that could be anti-competitive, but only after a transaction is concluded. Successive antitrust bosses have sought the power to approve or reject M&As before they go through. Amendments to the act have been recently introduced, but are still making their way through the House of Representatives, with the House Economics Committee having given its preliminary approval to the amendments earlier this year.

M&A WATCH

STARTUP WATCH

DEBT WATCH

EARNINGS WATCH

MICROFINANCE

COVID WATCH

ENTERPRISE+: LAST NIGHT’S TALK SHOWS

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EGYPT IN THE NEWS

Human rights and finance are together the big story on Egypt as the Financial Times reports that some bond funds are coming under pressure to divest from markets where there are rights concerns. Egypt gets plenty of ink in the piece, which appears in FTfm’s responsible investing section, with fund managers talking about why they bought into the country’s inaugural green bond despite Freedom House and International Federation for Human Rights driving the narrative in the piece. The story gives passing mention to Belarus and Saudi Arabia (and, curiously, not China), but Egypt is the “star” of the piece.

Also from the human rights file: Activist Alaa Abdel Fattah appeared in court yesterday after two years of pre-trial detention. His next hearing is scheduled on 1 November (AFP).

Meanwhile: Reuters ran a piece looking at the last of Egypt’s fez-makers, writing that the once widely-worn symbol of stature is now only in demand among clerics and Al-Azhar scholars, while Egypt got a mention in the top-five African holiday destinations, with the Financial Times recommending a dahabieh Nile cruise.

Other headlines of note:

Egypt is said to be interested in more trade with Israel though the Nitzana border crossing, a topic of conversation in a recent meeting between intelligence chief Abbas Kamel and Israel’s Economy Minister Orna Barbivai (i24 News).
Egypt allegedly barred UK-based Palestinian filmaker Said Zagah from boarding a flight to Hurghada to pitch a film at El Gouna Film Festival for unclear reasons (Variety).

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ALSO ON OUR RADAR

Etisalat’s Nile Online will expand the outsourcing and call center services it offers in Egypt under an agreement signed with the ICT Ministry’s ITIDA, the ministry said in a statement on the sidelines of Dubai Expo 2020. ITIDA will work with the company to train and hire at least 2.1k Egyptians for outsourcing jobs over the next three years. Separately, ICT Minister Amr Talaat held talks with Indian multinational outsourcing provider Tata Consultancy Services’ regional director Ajay Singh to bring the company to Egypt, the statement noted.

Will PPP projects have to price their final good or service with low income earners in mind? House Rep. Maha Abdel Nasser thinks the Public-Private Partnership (PPP) Act still needs to address how services offered by projects executed by PPPs will be priced, taking into account income levels, Al Shorouk reports. She’s pushing for a motion to add an article on prices to the preliminarily approved bill, especially in ventures in fields including education, healthcare, and transport.

The newly-formed Urban Development Fund just got a board of directors, with Khaled Sedeek as chairman, according to press reports citing an official cabinet statement. Members include eight others with experience in several different fields and representing the cabinet, the Finance Ministry, GAFI, the Mortgage Finance Fund, the CBE, and the New Urban Communities Authority (NUCA). The new fund was established by the Madbouly cabinet earlier this year to work alongside existing agencies such as NUCA and the General Authority for Urban Planning to develop areas in partnership with the private sector and real estate developers, as well as remove buildings in unsafe areas. It reports directly to the prime minister.

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

The Transport Ministry will soon launch an international tender for a private sector company to manage six new passenger trains being supplied by Spanish company Talgo, with plans to select the management firm by the end of the year.
Oil company SDX Energy has started drilling a development well in West Gharib’s Meseda field, the first in a 12-well development campaign that aims to grow production from a current 2.4k bbl/d to 3.5-4k bbl/d by 2023.
A Health Ministry-run healthcare center, AFRI Egypt, opened its doors in Jinja, Uganda yesterday as part of the government’s bid to boost its presence in Africa.

PLANET FINANCE

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Fertiglobe could raise as much as USD 830 mn through its IPO on the ADX, after the company said it will price its shares at the top end of its indicative range of AED 2.45-2.65 apiece, according to terms seen by Bloomberg. This pricing would make Fertiglobe’s IPO Abu Dhabi’s third-largest listing. Fertiglobe, a joint venture between Abu Dhabi National Oil Co. and Nassef Sawiris’ OCI, is offering 13.85% of the company in the IPO. The nitrogen fertilizer producer will be valued at USD 6 bn, according to Bloomberg, as it benefits from soaring fertilizer prices and damage dealt to rivals as a result of the natural gas supply crisis. Our friends at EFG Hermes are bookrunners on the transaction.

Was lockdown trading (and meme stocks) just a flash in the pan? Covid-related restrictions saw many normies take up trading as a pastime, the FT writes, citing data showing that 30 mn new investing accounts were opened in the US in the first year of the pandemic. The unprecedented rise in retail investors saw them make up 25-30% of total US trading at their peak, up from the 10-15% recorded pre-pandemic. But this “army of lockdown traders” has slowed down now that countries are opening up again: 3Q2021 saw an 8% drop in trading activity in comparison to the quarter before.

Other stories worth knowing about:

A group of investors in Aramco’s oil pipelines is looking to issue at least USD 4.5 bn in bonds to refinance a USD 10.5 bn loan they had taken out to fund their investment, Bloomberg reports.
Goldman Sachs is the latest Bulge Bracket bank to have gotten the OK to take full ownership of its China unit.

EGX30	11276.17	+1% (YTD: 4%)
USD (CBE)	Buy 15.66	Sell 15.76
USD at CIB	Buy 15.66	Sell 15.76
Interest rates CBE	8.25% deposit	9.25% lending
Tadawul	11,758.02	-0.1% (YTD: 35.3%)
ADX	7,893.01	+0.7% (YTD: 56.4%)
DFM	2,817.17	+0.5% (YTD: 13%)
S&P 500	4,486.46	+0.3% (YTD: 19.4%)
FTSE 100	7,203.83	-0.4% (YTD: 11.5%)
Brent crude	USD 84.08	-0.9%
Natural gas (Nymex)	USD 5.00	-7.6%
Gold	USD 1,764.90	-0.2%
BTC	USD 61,812.77	+1.66% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 1.1% at yesterday’s close on turnover of EGP 1.4 bn (7% below the 90-day average). Local investors were net sellers. The index is down 4.0% YTD.

In the green: GB Auto (+7.8%), CIRA (+6.6%) and Pioneers Properties (+4.4%).

In the red: Abu Kir Fertilizers (-4.3%), AMOC (-2.4%) and MM Group (-2.0%).

Asian markets are (ever so slightly) in the green, while futures suggest European shares will have a mixed open this morning and Wall Street is on track to start the day largely flat ahead of earnings reports expected today from Netflix, J&J, P&G and United Airlines.

DIPLOMACY

Can Africa’s manufacturing go entirely green by 2050? Mckinsey seems to think so: With Africa’s manufacturing making up only 2% of the global value-added output, there could be a unique chance for manufacturers to entirely sidestep a trajectory of carbon intensive development and avoid the costs of going green at a later stage once these industries have already been built out, according to this McKinsey & Company report (pdf).

A USD 2 tn pipe dream, or the wave of the future? The report estimates that reaching net zero emissions would require a hefty USD 2 tn investment over the next three decades, with a number of long-term upsides to committing to this ambitious goal. The report points to the creation of a total 6.6 mn “green jobs” — with 3.8 mn of those being newly created — and avoiding the more costly transition to low carbon manufacturing in the future.

Today, we look at the policies McKinsey recommends and how far along Egypt is in implementing them — especially as Egypt contributes 20% to the total manufacturing emissions of the continent, which themselves make up 30-40% of the continent’s total emissions.

The report outlines three broad pathways to development: The most ambitious net-zero scenario would ultimately reduce emissions by 90% relative to 2018 levels, which the report has soberly labeled “very difficult to achieve.”

Five highly polluting industries need to be reformed: Cement, petroleum refining, iron and steel and ammonia—would have to undergo a major overhaul.

Cement tops the handful of high-polluting industries, currently accounting for 32% of total African manufacturing emissions, and 23% of Egypt’s total GHG emissions in 2015. Decarbonizing the cement industry on the continent would require CAPEX of some USD 12 bn between 2021 and 2030, if countries stick to their current commitments under the 2015 Paris Agreement (what the report refers to as the “base case”), and USD 15 bn under the net-zero route. Between 2030 and 2050, the base case costs rise to some USD 37 bn, while only inching up to USD 17 billion in the net zero scenario, meaning that costs associated with a net-zero-oriented transition would fall significantly over the long term.

But what does it actually mean to decarbonize the cement industry? Factories could phase out their coal-based heating processes for biomass fuels, which could be complimented by utilizing carbon capture storage to offset the emissions linked to cement production — though this could lead to additional costs of some USD 35 to USD 70 per ton of cement, the report suggests. Substituting clinker, a mixture of limestone and minerals essential to the production of cement, for energetically modified cement and calcined clays could reduce CO2 emissions by 50%. Some companies in Egypt have already begun this transition. The report also floats the idea of using cross-laminated timber in construction as an alternative to cement altogether, saying that 40% of cement demand would have to move over to timber to meet targets.

How exactly are companies in Egypt adapting to the times? Suez Cement currently uses low-emissions pozzolanic and limestone (blended) cement and Lafarge Egypt introduced a PZZ cement earlier this year. Otherwise only a handful of companies produce low emissions PZZ cement. Setting CO2 emissions quotas, like those outlined in Mckinsey’s report, could have a much more substantial impact.

When it comes to coal, however, we’re still far behind. Some 16 of the 18 cement companies in Egypt use coal in at least a portion of their manufacturing processes — after a number of them outfitted their facilities to run on coal in 2016 in response to the lifting of fuel subsidies. Coal consumption is expected to expand in Egypt over the coming decade to comprise somewhere between 16 – 29% of our energy mix by 2035, if no action is taken.

Ammonia production would also have to undergo a revamp: The ammonia industry relies primarily on methane steam in its manufacturing process, which produces some 1.7 tons of CO2 per ton of ammonia. Otherwise, hydrogen extracted from fossil fuel and coal power ammonia production. To reach a net zero emissions target in the next three decades the industry would have to substitute 60% of its greenhouse gas emitting energy sources for green hydrogen, and boost its carbon capture and storage capabilities by 40% before 2030.

The hurdle lies in the price tag for carbon capture and storage, which would run companies some USD 30-40 per ton. Domestically, carbon capture has yet to reach wide scale adoption as it is very expensive relative to other decarbonization strategies, like renewable energy development.

Iron and steel manufacturing would need to undergo changes as well: Currently, an estimated 1.83 tons of CO2 are emitted for every ton of steel produced. Utilizing green hydrogen in direct reduced iron (DRI) electric arc furnaces — which bypasses traditional extraction of iron from iron ore without using coal — could become the primary pathway towards zero emissions steel production. Commercial level production of this alternative is expected to become feasible by 2024, and DRI would need to replace traditional iron extraction by 2030 in order to reach that net zero target. Steel recycling also needs to see at least 45% growth by 2050. Egypt is the largest steel consumer in the MENA region, and steel production was responsible for 1% of the country’s CO2 emissions in 2015.

Every other manufacturing process would have to rely on substantial developments in green energy. Solar and wind-generated power would have to be scaled up on the continent by 70% from current levels, and 95% of power would need to come from renewables by 2050 to provide for industrial operations under a net zero goal, according to the report. In Egypt, the government has set its sights on having 42% of the country’s electricity generated from renewable sources by 2035, but as of 2019 renewables only accounted for 3.4% of our energy mix.

Green hydrogen is high up on the list of supplemental cross-sector strategies for meeting the net-zero target: Hydrogen produced using renewable energy — which by some estimates contains almost three times as much energy as fossil fuels — must become a crucial driver of the continent’s transition, and the cost of production of green hydrogen should fall to some USD 2 per kg by 2030, according to the report.

Egypt is already on the road to large-scale green hydrogen production and could soon launch an initial phase of projects worth some USD 3-4 bn. Taqa Arabia is among the private sector players that have already signed an MoU with German-based Man Solutions to pilot a green hydrogen project in Egypt, but we’re still not at a commercial level, executive chairman of the New and Renewable Energy Authority (NREA) Mohamed El Khayat previously told us.

And the cost of all this? That estimated USD 2 tn in additional investments the report suggests will be needed, some USD 600 bn will go to transitioning existing manufacturing industries to low carbon processes, with the remaining USD 1.4 tn going towards creating new industries that supplement or substitute cement, coal to liquids, and petroleum refining sectors. Besides funding, an immense challenge lies in getting countries to commit to these transformational strategies today, when fuel sources with no GHG emissions remain out of reach.

Your top climate stories for the week:

SFE, Fertiglobe, Scatec agree on green hydrogen plant: Norwegian solar company Scatec has entered an agreement with the Sovereign Fund of Egypt and Nassef Sawiris-backed Fertiglobe to develop a new 50-100 MW green hydrogen plant in Ain Sokhna.
Independent power producer Globeleq acquires ARC Renewable Energy’s 66 MW PV solar plant in Aswan’s Benban for an undisclosed sum. Globeleq, a subsidiary of the UK government’s development finance arm CDC Group, will provide ARC with asset management services and oversee the plant’s operation and maintenance.
The green energy transition is gaining pace — but not enough to avert catastrophic warming. That’s according to the International Energy Agency’s (IEA) World Energy Outlook 2021 report, which urges governments to get more ambitious on clean energy targets ahead of November’s COP26 UN climate summit.
The Environment Ministry’s newly-set-up National Council for Climate Change held its third meeting yesterday, and touched on the key topics due to feature on the agenda of the upcoming 2021 COP26 conference in Glasgow.

CALENDAR

14-22 October (Thursday- Friday): El Gouna Film Festival.

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.

20 October (ًWednesday): E-Finance begins trading on EGX.

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.

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

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

7-10 November (Sunday-Wednesday): Cairo ICT 2021, Egypt International Exhibition Center, New Cairo.

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

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

25-27 November (Thursday-Saturday): RiseUp Summit, Cairo, Egypt.

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.