Wednesday, 27 October 2021

AM — Maait to meet Senate over capital gains tax on EGX trades

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, friends. We suggest it would be nice if you had a good thought for Health Minister Hala Zayed, who is reportedly in stable condition after suffering a heart attack yesterday, according to broadcaster MBC (watch, runtime 1:45). The minister is reportedly being treated at the Wadi El Nil hospital. The Health Ministry had made no official statement on her condition as of dispatch time, but Presidential Health Advisor Mohamed Awad Tag El Din told Masrawy that Zayed’s condition was improving and that she would soon be discharged.

The covid-19 vaccination drive that Zayed is leading has so far seen 24 mn citizens get jabbed, Tag El Din said in separate remarks yesterday amid signs that we may be reaching the peak of the fourth wave of the pandemic.

BIG NEWS FOR TRADERS- Maait to discuss CGT with Senate next week: The upper house of parliament’s economy and finance committee will hold a meeting with the finance minister next week to discuss the implications of a capital gains tax on EGX transactions, according to Al Mal. Committee members held a meeting yesterday as part of a series of discussions on the feasibility of the CGT, which they argue could be counter to Egypt’s long-term goal of becoming more investor-friendly. The 10% tithe would hit the net realized portfolio gains each tax year of domestic investors on the EGX and is set to come into effect as of 2022, after years of delays. Many, from fund managers to figures in the securities industry and MPs have voiced concerns about the timing of the tax’s introduction and have asked for its postponement yet again.

WHAT’S HAPPENING TODAY-

The two-day Intelligent Cities Exhibition & Conference takes place today and tomorrow at the Intercontinental Cairo Citystars.

Today is the last day for grassroots community leaders aged 25-38 to apply for the US State Department’s Community Solutions Program. Applications can be submitted here.

GASC is likely to be buying European wheat for the foreseeable future, as weak harvests in other major export hubs are seeing grain traders flocking to the bloc, Bloomberg reports. Wheat grown in Europe is projected to hit record sales by the end of this month, on the back of both the poor harvest and as Russia, the world’s largest exporter, is being slowed down by its export tax. Egypt’s latest pivot to Romanian wheat demonstrates this shift. Our state grain buyer, GASC, is the largest wheat importer in the world, and has been reliant on supplies from the Black Sea region.

Big Surprise: Not enough is being done to combat climate change. Combined commitments by countries to curb carbon emissions still put the planet on track to heat up by 2.7°C before the turn of the century, a United Nations report out yesterday ahead of next week's COP26 conference in Glasgow said, according to Reuters. Naturally, many eyes will turn to China, the world’s biggest energy consumer, in the coming years. Beijing was out yesterday with a new climate change plan that promises to hit peak emissions before 2030 and then aim for net zero emissions by 2060, while expanding hydropower and energy storage, the Financial Times reported. China wasn’t the only major power to release a climate blueprint ahead of COP26, with laggards Australia and Saudi Arabia also announcing plans this week.

And Big Oil is also about to have its best cashflow in more than a decade, with data from Bloomberg showing that the biggest oil and gas majors — including Royal Dutch Shell and Total — are due to post some USD 29 bn in FCF, the largest amount since 2008. Shareholders are waiting to see whether they’ll be raking in dividends, or whether the extra dough will be put towards further oil and gas exploration.

ALSO- Retail brands we (as a country) seem to like: Carrefour topped this year’s YouGov’s Retail Rankings in Egypt, followed by Souq.com and its parent company Amazon.com. Aswaq Fathallah Markets and HyperOne round out the top five. Also in the top 10 are home-grown brands Awlad Ragab, B.Tech and Kazyon.

THE BIG STORY ABROAD- Google parent company Alphabet and Microsoft blew past analyst expectations as they reported their 3Q2021 earnings. The story leads the front pages of the Financial Times and Wall Street Journal, and we have more in Planet Finance, below.

The latest from Sudan: Sudanese Prime Minister Abdalla Hamdok was released from custody, according to the Facebook page of Sudan’s cabinet, though the whereabouts of some 20 government ministers who had been detained by security forces since the beginning of an ongoing military takeover in the early hours of Monday morning remains unknown. Flights to and from Khartoum airport have been temporarily halted until Saturday 30 October, the country’s civil aviation authority told Reuters.

US Secretary of State Antony Blinken spoke with Hamdok according to a State Department readout released overnight in which Blinken “welcomed [Hamdok’s] release from custody and reiterated his call on Sudanese military forces to release all civilian leaders in detention and to ensure their safety.

CIRCLE YOUR CALENDAR-

It’s almost the end of October. Here are dates for some key news triggers next month:

  • PMI: November’s purchasing managers’ indexes for Egypt, Saudi Arabia and the UAE will land on Wednesday, November 3.
  • Foreign reserves: October’s foreign reserves figures will be out sometime during the first week of November.
  • Inflation: Inflation figures for October will be released on Wednesday, 10 November.

The Middle East Angel Investment Network’s Angel’s Oasis retreat runs tomorrow and Friday in El Gouna, with separate pricing for in-person and virtual attendance.

BOOK LAUNCH- Justo a Tiempo, a memoir penned by our friend ​​Maria Laura Sanchez Puerta (Morning Routine) about her family’s battle against cancer. Sanchez Puerta, who is the World Bank’s human development program leader in Egypt, is launching her memoir on Sunday, 7 November at Osana in Maadi. Argentinian Ambassador Eduardo Varela and Cairo University Professor Rasha Abboudy will also be speaking at the event.

Women entrepreneurs have until 6 November to apply to a new accelerator program launched by NGO Nahdet El Mahrousa offering up to EGP 200k in grants, mentorship, and other business support. Founders and social enterprise leaders working in ICT, creative industries, or on projects that support gender equality are eligible to apply. The program, Rabeha, was launched in partnership with UN Women Egypt, the Egyptian National Council for Women, Global Affairs Canada, and other partners. You can apply here.

GIZ and KfW are launching a call for green project proposals: Companies and public bodies working on projects related to the green economy transformation can as of 30 November submit proposals to the KfW Development Bank and GIZ’s Investing for Employment facility, which will see co-financing grants ranging from 1 mn to 10 mn EUR awarded to to each project, the GIZ said in a press release (pdf). The facility will award grants to projects that contribute towards job creation. You can find out more about the facility and the application process here.

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: Water infrastructure has been a key priority for the government in recent years. With the fourth edition of Cairo Water Week entering its final days, we recap what’s been happening on the water-saving front just as President Abdel Fattah El Sisi finally signs into law the long-awaited Water Resources Act.

enterprise

M&A WATCH

BariQ now officially belongs to Intro Group

Raya Holding has completed the EGP 571 mn sale of 100% of its recycling subsidiary BariQ to Intro Group subsidiary Intro Waste Management and Material Recovery, according to a bourse disclosure (pdf). Raya announced initial plans to sell off BariQ in November of last year, which the company said in yesterday’s disclosure is part of a 2019 plan to divest non-core assets and focus investment on the group’s core operations. Raya signed an agreement with Intro Group to sell 100% of BariQ in May of this year.

Advisors: Al Ahly Pharos had sell-side duties, while Compass Capital was buy-side advisor. RSM did buy-side financial and tax due diligence duties. Zaki Hashem and Partners provided counsel on the sell-side and Al Tamimi and Co were buy-side counsel. Al Ahly Pharos Brokerage executed for the sell-side and Beltone Brokerage did the work on the buy-side. CIB was escrow agent for the transaction.

M&A WATCH

Madinet Nasr to acquire real estate firm Minka, gets new CEO as part of the transaction

Madinet Nasr Housing and Development (MNHD) is looking to acquire real estate firm Minka Development for EGP 200-220 mn, the company’s head of investor relations, Salah Katamish, told us yesterday following a regulatory filing (pdf) from the company on Sunday. MNHD has appointed Baker Tilly Wahid Abdel Ghaffar & Co to conduct a fair value study of Minka and expects the results within four weeks, Katamish said, without disclosing when MNHD expects to complete acquisition.

MNHD and Minka know each other well: Minka agreed to purchase two land plots in MNHD’s Taj City development over the past two years for EGP 1.33 bn: The Hoft for EGP 184.8 mn in 2019, and the larger Kinda project for EGP 1.15 bn last year.

So why is the transaction in the EGP 200 mn range? So far, Minka has only paid EGP 200-220 mn for the plots, Katamish tells us. By acquiring the company, MNHD is essentially buying back the two plots it originally sold. The third project owned by Minka — Kensington, outside Taj City — will be separated from Minka ahead of the acquisition.

How is the acquisition being funded? MNHD will go ahead with a EGP 374.4 mn capital increase, part of which will be used to fund the acquisition, it said in a separate disclosure (pdf) yesterday. The remaining EGP 154-174 mn will go towards MNHD’s residential project in West Assiut.

Minka’s owners will then reinvest in MNHD: The Sallam family will use the proceeds from the sale of their company — plus an additional EGP 50 mn — to purchase a minimum 5% stake in MNHD. This will make them the third largest minority shareholder in the company after BPE Partners’ managed fund’s 29% and National Company for Construction and Developments’ 15%.

Minka’s CEO has also become MNHD’s CEO: MNHD’s board also approved the appointment of Minka head Abdallah Sallam (LinkedIn) as its CEO, according to another filing (pdf) on Monday. He will start his term on Sunday, Katamish said.

Market reaction: MNHD’s shares are off 16% this trading week so far, closing at EGP 2.22 yesterday, down from EGP 2.64 before the long weekend, according to data from Reuters. MNHD’s 52-week high was EGP 3.96.

HEALTHCARE

Cleopatra Hospitals to develop a 400-bed medical facility in East Cairo

Cleopatra Hospitals Group purchased a brownfield project in East Cairo to develop into a 400-bed medical facility, according to a disclosure to the bourse (pdf). The disclosure did not specify how much Cleopatra is paying for the facility. The EGX-listed healthcare group had signed the agreement with an undisclosed seller earlier this month and is now seeking approval from the Health Ministry and satisfying other conditions precedent before completing the purchase.

The development is expected to take 18-24 months to complete once the approvals come through, CHG Corporate Strategy and Investor Relations Director Hassan Fikry told Enterprise. The brownfield project currently lacks facilities, including beds and medical equipment, but would not require as much time to complete as would a greenfield.

The agreement, if approved, would mark the group’s first major development in East Cairo, save for one polyclinic project. The move is part of CHG’s larger plan for geographical expansion across Cairo that would see the company expanding its footprint and services. The EGX-listed company is the largest hospital group in Egypt, with six hospitals and two polyclinics under its belt. CHG had previously eyed expansion through a mega-merger with private healthcare group Alameda, but the transaction fell through earlier this year. Cleopatra had also previously acquired a 60% stake in Bedaya Hospital last year.

IPO WATCH

Ghazl El Mahalla FC lines up EGX’s second IPO this quarter

Two IPOs on the EGX in as many months? State-owned sports club Ghazl El Mahalla could debut on the EGX in November, a month after fintech firm e-Finance completed the exchange’s largest IPO in six years, according to Masrawy, citing the head of bookrunner Prime Holding. Prime’s investment banking arm has begun promoting the share sale to institutional players and hopes to initiate the offering on the exchange at the beginning of next month, CEO Mohamed Maher told the newspaper, without providing further information. Enterprise was unable to reach Prime or club owner El Mahalla Spinning and Weaving Company for comment.

Let’s keep size in context: The sale is expected to raise EGP 135 mn, which would be done via newly-issued shares that would see up to two-thirds of the club listed on the exchange. Prime will place EGP 37 mn worth of shares in a sale to institutional investors, while another EGP 98 mn will be earmarked for sale to individual retail investors, Maher had told us over the summer. E-Finance’s EGP 5.8 mn (USD 370 mn) IPO was the largest the market has seen since 2015; that’s when TMG raised about EGP 4.5 bn (or about USD 850 mn given the exchange rate at the time).

The biggest-ever IPO in Egypt? That would be Telecom Egypt, which raised the equivalent of nearly USD 900 mn in 2005.

Ghazl El Mahalla FC is spinning off from its parent company (the state-owned textiles business of the same name) and will be listed as a new company with initial capital of EGP 200 mn. The remaining capital not issued in freefloat shares will come in the form of an in-kind contribution from Spinning and Weaving to give it a stake.

e-Finance’s success on the EGX has given energy to the state privatization program. The state-owned firm’s listing this month encouraged Ghazl El Mahalla to go ahead with its own IPO, Maher told Masrawy. E-Finance met with substantial institutional and retail appetite. Four more state-owned companies could hit the bourse before the end of the current fiscal year in June, Public Enterprise Minister Hisham Tawfik said previously. Aside from the football club, Banque du Caire is a candidate, after its IPO was postponed in the wake of covid-induced market turmoil. There are also offerings in the pipeline for several large government-owned firms beyond that date, Tawfik said.

But the real question is which private-sector companies are in the funnel to go public. The parent company of health foods brand Abu Auf said earlier this fall it will list in the first half of 2022, with EFG Hermes in the driver’s seat. Macro Pharma also has plans to list, having made a last-minute u-turn on its IPO in April and later hired EFG Hermes to quarterback the sale. And non-bank financial services player Ebtikar has also said it plans to go public.

Okay, but is Ghazl El Mahalla even a good football club? After being relegated for several years, Ghazl El Mahalla made it back into the Egyptian Premier League last season and finished the year in the lower-middle of the table. They play their first match of the new season (which got underway on Monday) tomorrow against Al Masry. Ghazl El Mahalla won the league once, back in 1973, and remain a team with a large and loyal local fan base. The IPO would make it Mahalla the first Egyptian football club to go public.

STARTUP WATCH

Shorooq Partners launches MENA-wide venture debt fund

Shorooq Partners has launched what it’s calling the first MENA-focused venture debt fund, Nahda Fund I (pdf). The firm hit its fundraising target in just four weeks and Shorooq is planning to fully deploy it by the end of the year, partner Samir Yamani tells us, without disclosing the size of the fund.

What is venture debt? Think of it as a loan made to startups by investors, who are repaid in installments and interest. Unlike venture capital, where investors provide financing in return for equity in the company, venture debt provides entrepreneurs access to finance without being diluted.

Shorooq is looking to provide financing to six or seven startups before the end of the year, with each ticket size ranging between USD 5-10 mn, Yamani tells us. The fund is targeting companies operating in the agtech, e-commerce, logistics and fintech sectors, he says, without revealing names. The statement says that the fund has already committed “a majority of its capital,” and reveals one startup that has received funding: UAE-based agtech company Pure Harvest.

Any Egyptian companies among them? Yamani wouldn’t say, but did note that Egypt is a huge market that could be a focal point for the fund. “The tech startup scene, the demographic situation and the talent that is available makes Egypt very attractive. Now over and above that, if these startups also have exposure to the GCC or USD-pegged economies, that makes them even more attractive,” Yamani says. Shorooq’s local partner is seasoned VC Tamer Azer (LinkedIn).

Expect the announcement of another fund next year, Yamani says. The second round has already received “significant interest from sovereign wealth funds in the region,” he added.

Egypt is about to get a venture debt scene of its own: In Egypt, Digital Finance Holding (DFin) is looking to launch its venture debt vehicle Camel Ventures at the beginning of December. While it was initially planning to kickstart in 2Q2021, the vehicle — which will soon be registered with and approved by the Financial Regulatory Authority — is currently finalizing agreements with their investors, founder and CEO Shehab Marzban (LinkedIn) tells us.

DEBT WATCH

EFG Hermes Corp-Solutions plans EGP 1 bn bond issuance early 2022

EFG Hermes Corp-Solutions is planning a EGP 1 bn securitized bond sale early next year in early 2022, CEO Talal Elayat told Al Mal. This is in addition to a EGP 700 mn issuance the company is still planning to take to market later this quarter provided it gets regulatory approval, he said.

This could be slightly above what we were expecting: Elayat told us earlier this year that the company was looking at a EGP 500 mn issuance for the second half of 2021, and that this would be a part of a larger round of securitization. The company’s first securitization bond program was issued in 2018 with a value of EGP 350 mn.

IN OTHER DEBT NEWS- Talaat Moustafa Group is reportedly planning to take to market EGP 700 mn in securitized bonds before the year is out, Al Borsa reports, quoting unnamed sources. The sale would be part of a three-year EGP 6 bn securitization program TMG plans to push ahead with, that would involve several issuances, the sources say. EFG will reportedly act as the financial advisor for the program, while Dreny and Partners will act as legal counsel.

AUTOMOTIVE

Natgas vehicles are getting a little bit pricier

Some dual-fuel vehicles delivered through the government’s natgas transition scheme will be EGP 3-5k more expensive after the Finance Ministry approved three manufacturers’ requests to raise their prices, the official spokesperson for the initiative, Ahmed Abdelrazek, told Enterprise. Nissan, Alamal Group (which is delivering BYD and Lada cars), and Zemex microbus manufacturer the Egyptian-British Automobile Manufacturing Company all got permission to hike prices. EGX-listed GB Auto, the assembler and distributor for Hyundai, also submitted a request to raise prices, but the ministry has yet to approve it, according to Abdelrazek.

The price increase comes on the back of an increasingly debilitating global supply chain crunch, which is leading to a hike in shipment costs, as well as shipment delays of chips and other car components, Abdelrazek tells us. The scheme dictates that manufacturers can only raise prices if six months have passed since their last price increase, or if the ministry finds “just cause” for a hike. It also places a 10% cap on price increases.

The natgas transition scheme has so far given out almost 7.7k natgas-run cars, according to Abdelrazek. The multi-year scheme, which first saw the light earlier this year, also has financial incentives in place to drive more people to take part. The initiative aims to take 1.8 mn cars off the road to be outfitted with dual-fuel engines over the course of a decade.

SUEZ CANAL

Suez Canal Authority to reduce discount for LNG carriers

LNG carriers crossing the Suez Canal will only be getting a 15% cut to transit fees starting 1 November, down from 25% previously, according to a circular (pdf) the Suez Canal Authority released yesterday. The decision to effectively hike fees for LNG carriers comes amid the global shortage of natural gas, which has sent prices to a 13-year high last month, the authority said. The canal earlier this year was reported to be the preferred shipping route for US LNG carriers heading to East Asia and looking to avoid a highly congested Panama Canal.

Why is the SCA doing this? In a word, the market opportunity to start restoring prices after cutting them to keep market share as the price of oil fell in the early days of the pandemic. The rise in oil to record highs to cross USD 85 a barrel for the first time since 2014 amid a global energy shortage is driving higher demand for natural gas and other fuels.

MOVES

The Sovereign Fund of Egypt (SFE) has reportedly tapped former Central Bank of Egypt Governor Farouk El Okda to join the SFE’s board of directors, El Watan reports, citing unnamed Planning Ministry sources. El Okda joins the board as the SFE plans to launch new sub-funds and moves ahead with other investment plans, including revamping the Mogamma.

enterprise

ENTERPRISE+: LAST NIGHT’S TALK SHOWS

It wasn’t a particularly eventful night on the airwaves, with President Abdel Fattah El Sisi’s decision yesterday to not renew the state of emergency still getting airtime.

The decision was good for stocks: Al Hayah Al Youm’s Mohamed Sherdy and Ala Mas’ouleety’s Ahmed Moussa both spoke to EGX boss Mohamed Farid for his two cents on whether the decision was linked to the EGX closing 0.7% in the green yesterday (watch, runtime: 6:43 and runtime: 6:11). The takeaway: Not renewing the state of emergency sent an important message to investors that the country is the safest and most stable it has been in recent years.

Also on the airwaves last night: The three-year program Prime Minister Mostafa Madbouly signed in Paris with the OECD yesterday to support Egypt’s structural economic reform agenda (watch, runtime: 5:50) and Eni’s three new oil and gas discoveries in the Western Desert (watch, runtime: 9:02). We have more in both those stories in Also on Our Radar, below.

EGYPT IN THE NEWS

President Abdel Fattah El Sisi’s decision to lift the state of emergency for the first time in four years continues to lead the conversation in the foreign press, getting coverage from The Times | AP | Reuters | New York Times. Human Rights Watch meanwhile, called the move, “a start, but insufficient.”

Also making headlines:

  • Egyptian surrealist Ahmed Morsi’s work capturing New York’s essence landed him a spot in the fifth edition of Greater New York, MoMA PS1’s recurring exhibition. (The Financial Times)
  • Liverpool star striker Mohamed Salah is now part of the English curriculum in Egyptian public sector schools, which the government hopes will increase interest in learning the English language. (The Times)

ALSO ON OUR RADAR

Italian oil and gas producer Eni has made three new oil and gas discoveries in its Meleiha and South West Meleiha concessions in the Western Desert, the Oil Ministry announced in a statement. The three discoveries have a collective potential daily output of 6k barrels of oil, while the collective size of the deposits is estimated at 50 mn barrels. “The new discoveries have potential for additional appraisal and production wells that will be immediately planned in order to sustain the Agiba production plateau,” the company wrote in a press release (pdf). Earlier this year, Eni merged its Meleiha and Meleiha Deep concessions in the Western Desert, creating the Merged Meleiha concession. Eni operates some of Egypt’s most important oil and gas resources including the giant Zohr natural gas field, the Noor concession, and the Damietta LNG plant.

S&P maintains Egypt’s B credit rating with stable outlook: S&P Global Ratings has maintained Egypt’s B credit rating with a stable outlook, while forecasting a return to pre-covid levels of economic growth in two years, the Finance Ministry said in a statement. The ratings agency — which kept the country’s sovereign rating unchanged despite covid — sees Egypt’s economy growing at a 5.5% clip in FY2023-2024. It also said it expects the overall budget deficit to narrow to 6.8% at the end of the current fiscal year, compared to 7.3% in FY2020-2021, thanks to a wider tax base. S&P expects the country to achieve a primary surplus of 1.5% in the current fiscal year.

COVID WATCH

Another 250k doses of Astrazeneca, courtesy of Hungary

The Health Ministry reported 871 new covid-19 infections yesterday, down from 889 the day before. Egypt has now disclosed a total of 326,379 confirmed cases of covid-19. The ministry also reported 42 new deaths, bringing the country’s total death toll to 18,375.

Egypt received 250k doses of the AstraZeneca vaccine from Hungary yesterday, adding to its growing stocks of jabs, the Health Ministry said in a statement. The shipment comes just after we got our hands on 1.06 mn Johnson & Johnson vaccine doses on Monday. We’re expected to receive another 3 mn doses before the end of the month.

A US FDA panel voted almost unanimously to allow 5-11 year-old to receive Pfizer vaccines, making the US the first country to authorize vaccine use for this age group, according to the Financial Times. The move comes as the US looks to further grow its vaccine rollout and help prevent the spread of covid-19 at schools.

PLANET FINANCE

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MARKET WATCH- Alphabet and Microsoft smash estimates as they release 3Q financials: Google’s parent blew past expectations, posting 41% growth in revenues y-o-y to USD 65.1 bn (pdf), while the Windows maker saw its top line rise 22% to USD 45.3 bn, also above analyst forecasts. Twitter, meanwhile, slid to a USD 537 mn net loss (pdf) after settling a shareholder class action lawsuit and as it ramps up investment in product development.

The US junk bond market is bigger than ever: A record 149 companies have joined the US junk bond market so far in 2021 as businesses take advantage of the huge demand for yield amid an environment of ultra-low interest rates, the Financial Times reports. As the Fed continues to hold interest rates at historic lows, lower-rated issuers seeking capital and yield-hungry investors have flocked to the market, with 26 new corporate issuers arriving in September, followed by 13 so far this month. This has sent the high-yield bond market to a record size, topping more than USD 1.5 tn for the first time ever.

The Evergrande contagion isn’t quite over yet: Chinese property developer Modern Land defaulted on a bond payment citing “liquidity issues,” making it the latest in a growing list of Chinese property developers to default on payments, reported Reuters. Developers are defaulting on payments “one by one,” an unnamed investor told the newswire, as the Evergrande crisis and concerns over plans to introduce a real estate tax have dragged down the Chinese property market crisis. Evergrande, which has more than USD 300 mn in liabilities, made good on its last debt payment this week.

Up

EGX30

11256.54

+0.7% (YTD: +3.8%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Down

Tadawul

11,846.69

-0.4% (YTD: +36.3%)

Down

ADX

7,902.98

-0.4% (YTD: +56.6%)

Up

DFM

2,866.12

+0.02% (YTD: +15%)

Up

S&P 500

4,583.68

+0.4% (YTD: +22%)

Up

FTSE 100

7,277.62

+0.8% (YTD: +12.7%)

Up

Brent crude

USD 86.35

+0.4%

Down

Natural gas (Nymex)

USD 5.87

-0.5%

Down

Gold

USD 1,794.40

-0.7%

Down

BTC

USD 61,343.97

-2.4% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.7% at yesterday’s close on turnover of EGP 1.58 bn (3.6% above the 90-day average). Foreign investors were net sellers. The index is up 3.8% YTD.

In the green: Fawry (+6.8%), Sidi Kerir Petrochemicals (+6.6%) and AMOC (+4.8%).

In the red: Madinet Nasr Housing (-9.0%), Gadwa Industrial Development (-6.4%) and Egypt Resorts Company (-6.4%).

Shares in Hong Kong, Seoul, Tokyo and Shanghai are all in the red this morning, and the EuroStoxx, FTSE and DAX all seem on track to follow suit when European markets open later this morning. Futures suggest Wall Street is likely to open flat later today.

DIPLOMACY

Prime Minister Moustafa Madbouly signed an MoU with OECD Secretary-General Matthias Cormann for a three-year country program to support Egypt’s structural economic reform agenda, according to a cabinet statement. The program lays out a plan for Egypt and the OEC to roll out 35 projects under five pillars: Inclusive and sustainable economic growth, innovation and digital transformation, governance and anti-corruption, statistics, and sustainable development. “All pillars will have a strong focus on gender equality and the inclusion of women and young people in the economy and society, as well as on supporting the formalisation of SMEs,” the OECD said. The PM signed the MoU in OECD’s Paris headquarters during his current visit to the French capital.

Egypt could help Somalia build rainwater harvesting dams, after Somali Agriculture Minister Saeed Hussein requested Egypt’s support with its expertise in this area during a meeting with Irrigation Minister Mohamed Abdel Ati on Monday, according to a ministry statement.

hardhat

On the waterfront: Water infrastructure has been a key priority for the government in recent years, with ambitious aims to combat water scarcity through new legislation and infrastructure projects that cover everything from seawater desalination plants to new and upgraded wastewater treatment facilities. With Cairo Water Week underway, we have a rundown of key happenings from the five-day event, which enters its final day tomorrow. In our inaugural issue of Hardhat, we noted the government’s efforts to bolster water infrastructure, and today we’ll take a look at the latest developments since then.

A quick refresher: Egypt has recently estimated that its ambitious water-saving plan could cost nearly USD 50 bn through 2037. The plan comes at a critical time: Climate change is a growing threat that’s gradually drying up water bodies including our very own Nile, and Ethiopia is pushing ahead with its GERD-filling plans, and refusing to budge on Egypt and Sudan’s requests for a binding agreement for the filling and operation of the dam.

So, what’s the government doing about this? President Abdel Fattah El Sisi ratified yesterday the long-awaited Water Resources Act, signing it into law after much back and forth with legislators that ended with final approval only last summer. The law has been in the works since at least 2017, when it received cabinet approval, but was delayed several times until the draft got a nod from the House Agriculture Committee in 2019. The new law aims to regulate how the country utilizes its water resources, through means including regulations on groundwater management and storage, provisions against acts of vandalism near coasts, modernizing the irrigation system, and fees for pumping stations on the Nile and canals.

Funding for infrastructure projects, starring the European Union: Alongside legislation, authorities have begun overhauling our ailing water infrastructure, which leaks bns of cubic meters, making water-saving a challenge.

The EU has been one of the main sponsors of this plan, and is currently in talks with the Egyptian government to launch a “flagship initiative” which would see all EU member states and the EU Commission pool their resources together to fund infrastructure, as well as food and water security projects in Egypt, head of the EU Delegation to Egypt Christian Berger said yesterday during a seminar that was part of Cairo Water Week. His statements came after EU Commissioner for Neighborhood and Enlargement Oliver Varhelyi that Egypt could receive up to EUR 1 bn from the bloc in the next six years to help drive “long-term socio-economic development and recovery.” Water security is one of the priority areas of this plan, which comes as part of a wider EUR 7 bn deployment of funds to the southern Mediterranean.

Talks between Egypt and the EU aim to set a 2021-2027 framework that will contribute to sustainable development, particularly with projects including desalination plants, applying renewable energy to infrastructure, rain water harvesting, and rehabilitating drainage facilities, head of cooperation at EU Delegation to Egypt Ibrahim Laafia said.

EU and European financial institutions have contributed a total of EUR 3 bn to water projects in Egypt since 2007 largely towards labor-intensive infrastructure projects, with the EU alone contributing EUR 550 mn in grants, Varhelyi said this week. Projects sponsored by the bloc include water treatment in Alexandria and Kafr El Sheikh, as well as projects to combat pollution in several lakes, along the Mediterranean, and in Fayoum, Flavia Palanza, who heads operations for neighbouring countries at the EIB, said during the Water Week seminar.

Priority areas: The European Investment Bank and member states are interested in supporting three specific government projects: a 2008-2037 strategy to boost water treatment capacity, a parallel 2017-2037 plan to improve sewage treatment in rural areas, and the National Program for Rural Sanitation in Rural Areas (NRSP), Palanza said. Priority areas also include projects for Egypt as part of the EIB’s Mediterranean Hot Spots Investment Programme (MeHSIP).

Desalination plans in full flow: Separately, the Sovereign Fund of Egypt issued tenders for private companies to build 17 government-subsidized solar-powered desalination plants, part of a USD 2.5 bn plan to quadruple our desalination capacity in the next five years, fund chief executive Ayman Soliman said last week. The government plans to spend some EGP 134.2 bn through 2050 to build seawater desalination plants providing some 6.4 mn cbm/d of water.

A water treatment “alliance”: The Military Production Ministry’s National Authority for Military Production signed yesterday an agreement with US firms Aquatech, MPS and AvsecPro to partner on designing, building and managing Egyptian water desalination and wastewater treatment facilities, according to a statement. The three US companies will help the ministry make desalination plant components locally, as well as train military production staff on how to run and maintain them, the statement said without mentioning specifics or investment values.


Your top infrastructure stories for the week:

  • Desalination nation: Egypt’s sovereign wealth fund has issued tenders for private companies to build 17 solar-powered desalination plants, part of a USD 2.5 bn plan to quadruple our desalination capacity in the next five years.
  • New gas pipeline with Israel? Egypt and Israel are considering connecting their gas grids through a new USD 200 mn onshore pipeline that would run through North Sinai and could ​​boost exports by 3-5 bn bcm annually.
  • ​​Egypt seeks funding for Lake Victoria-Mediterranean river link: Egypt and several Nile Basin countries are on the lookout for USD 11.7 mn to fund the second phase of feasibility studies to move ahead with the proposed Lake Victoria-Mediterranean Sea river transport route.
  • A more accessible Cairo on the horizon: Officials are working on converting Cairo’s main streets to improve accessibility for persons with disabilities, starting with 28 streets in Maadi.

CALENDAR

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.

23-28 October (Saturday-Thursday): A high-level delegation of the UN’s International Fund for Agricultural Development (IFAD) will visit Egypt to meet with government officials and travel to IFAD-supported projects in the country.

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.

27 October (Wednesday): World Cloud Show.

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.

6 November (Saturday): Deadline to apply to Nahdet El Mahrousa’s Rabeha, a women entrepreneurship accelerator program.

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

8 November (Monday): Egypt CSR Forum, International Citystars, 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.

18-19 November (Thursday-Friday) British royal family members Prince Charles and the Duchess of Cornwall visit 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.

30 November (Tuesday): Launch of open call by GIZ and KfW for green project proposals in Egypt as part of their Investing for Employment facility (pdf).

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.

7 January 2022 (Friday): Coptic Christmas.

27 January 2022 (Tuesday): National holiday in observance of 25 January revolution anniversary / Police Day.

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.

2 April 2022 (Saturday): First day of Ramadan (TBC).

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

24 April 2022 (Sunday): Coptic Easter Sunday (holiday for Coptic Christians).

25 April 2022 (Monday): Sham El Nessim.

25 April 2022 (Monday): Sinai Liberation Day.

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

2 May 2022 (Monday): Eid El Fitr (TBC).

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.

30 June 2022 (Thursday): June 30 Revolution Day, national holiday.

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

8 July (Friday): Arafat Day.

9-13 July (Saturday-Wednesday): Eid Al Adha, national holiday.

30 July (Saturday): Islamic New Year.

6 October (Thursday): Armed Forces Day, national holiday.

8 October (Saturday): Prophet Muhammad’s birthday.

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.

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