AM — Saudi Arabia provides Egypt with USD 3 bn to shore up foreign reserves

Good morning, wonderful people, and welcome to an exceptionally busy news day here in Egypt, with everything from a little help from our friends (in the form of KSA’s deposit at the central bank) to the liberalization of gas prices, a tax drawback system for tourists and a share buyback program at education outfit Taaleem.

THE BIG STORY ABROAD- COP26 begins today — and if the Rome G20 Summit is anything to go by, we face an uphill battle to reach a global consensus. The two-day summit in Rome finished yesterday with little agreement among the 20 largest economies about how to limit global warming to 1.5°C, a target which scientists say is vital if we are to prevent serious ecological damage and fundamental changes to the planet’s climate. G20 nations are trying to find consensus over how best to achieve the 2015 Paris climate goals, which aims to reach net-zero emissions by the middle of the century, but beyond agreeing to end funding for new coal-fired power stations leaders offered little in the way of concrete pledges.

Higher stakes as COP26 begins: The disappointing conference in Rome raises the pressure on world leaders to find a breakthrough at the COP26 summit, which begins today in Glasgow. Representatives from more than 100 countries are attending the two-week conference, which is being billed by some as a crucial moment that could determine whether or not we’re able to achieve the Paris climate goals.

President Abdel Fattah El Sisi yesterday arrived in Scotland for the summit, according to a statement from Ittihadiya.

There isn’t a news organization out there that doesn’t have the summit on its front page this morning: Reuters | AP | Bloomberg | Washington Post | NYT | FT | WSJ | CNBC.

WHAT’S HAPPENING TODAY-

It’s the start of a new month today. Here are dates for some key news triggers as we enter November:

• 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;
• There’s no MPC meeting this month — the central bank will next meet on 16 December to review interest rates for the final time this year. The CBE has yet to issue its MPC calendar for 2022.

Gov’t stipulated minimum charges at the nation’s hotels come into effect today: All five-star hotels must now charge a minimum of USD 40 per night, while four-star establishments must charge at least USD 28 per night, according to minimum rates set by the government in April. Putting a floor under pricing has been on policymakers’ agendas since 2017.

The Egypt Energy exhibition on power and renewable energy gets underway today. The three-day event will include speeches and discussions on the global energy outlook, the future of clean energy, financing green economy projects, and the future of connectivity with network management capabilities.

Egypt will take over the chairmanship of the African Union’s Peace and Security Council today, succeeding Mozambique, the Foreign Ministry said yesterday. Egypt will chair the committee for the month of November and will focus on the fight against extremism and terrorism, the statement said.

CIRCLE YOUR CALENDAR-

Will the Fed announce a taper this week? All eyes are on the Fed ahead of its two day meeting starting tomorrow, in which it is widely expected to announce the winding down of its USD 120 bn a month asset purchase program instituted at the start of the pandemic to stimulate the economy. Fed chief Jay Powell had previously said the central bank could begin scale back its program in November, while policymakers signalled that they could move to raise interest rates next year. Rising US rates could spell challenges for emerging market assets — including Egypt’s — as investors are tempted to sell-down riskier debt in favor of higher-yielding US treasuries.

TAX WATCH- Senate to weigh in on EGX capital gains tax: The Senate will meet in the coming two weeks to discuss the capital gains tax on stock market transactions, which will be introduced at the beginning of 2022 to the chagrin of the securities industry. Al Borsa reported last night that a committee in the upper house of parliament will convene to discuss the 10% tax, which has attracted criticism from fund managers and figures in the financial sector.

We’re still waiting to hear from the House: Lawmakers discussed the tax in the House of Representatives yesterday in a session attended by Finance Minister Mohamed Maait and representatives from the EGX, the Financial Regulatory Authority and GAFI. Until now, there has been radio silence on what was said.

The tax: The 10% tax will be imposed on net portfolio earnings at the end of the tax year, after deducting brokerage fees. Foreign investors in the bourse won’t pay a dime, as the new rules apply only to people and companies residing in Egypt.

We could soon find out this week which commodities will be traded on Egypt’s long awaited commodities exchange when it launches early next year. Supply Minister Ali El Moselhy told Al Borsa last week that we should expect an announcement following a meeting set for this coming week with EGX boss Mohamed Farid and head of the Internal Trade Development Authority Ibrahim Ashmawy.

Also happening this month:

• The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.
• Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which officials hope will make it possible for Egypt to boost its exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Public-private joint venture collaborations set up to invest in large-scale education projects have seen a surge in popularity this year. The most recent partnership of this kind is the new company set to be launched by Al Ahly Capital Holding and CIRA, the companies announced last week. But what makes these partnerships so appealing for the private sector? Today, we talk to three private sector education operators, who tell us the scale, stability and long-term nature of these investments allows for the provision of high-impact and affordable education.

Saudi Arabia has provided Egypt with USD 3 bn to help it overcome the effects of the pandemic and shore up its foreign reserves. The kingdom deposited the new funds at the Central Bank of Egypt and has extended the maturity of USD 2.3 bn worth of existing deposits, the kingdom’s finance ministry said in a statement yesterday.

Egypt has recovered around half of the reserves it spent during the height of the covid market panic last year: The country’s stockpile has gradually inched up this year, reaching USD 40.8 bn in September after having fallen almost USD 10 bn between March and May last year to USD 36 bn. The Saudi funds will put us a lot closer reaching the pre-pandemic peak of USD 45.5 bn.

Riyadh has given us significant financial support over the past eight years: Saudi provided the country with USD 5 bn immediately after President Abdel Fattah El Sisi came to power in 2013, including a USD 2 bn central bank deposit. Riyadh had USD 5.5 bn in long-term deposits at the CBE as of the end of March, according to central bank data cited by Reuters.

Pakistan also got fresh funding: The statement said that the kingdom has deposited USD 3 bn with Pakistan’s central bank and handed the government USD 1.2 bn in trade finance to ease the pressure on its balance of payments. The Saudi Fund for Development said last week that the USD 1.2 bn would be used to pay for imports of petroleum products.

The deposits come (indirectly) courtesy of the IMF: Riyadh is deploying around 70% of its latest SDR allocation from the IMF to provide the boost to Egypt and Pakistan.

Factories could see the prices they pay for natural gas change every 3-4 months if the government follows through on proposals to liberalize the market announced by Oil Minister Tarek El Molla yesterday. Policymakers are considering extending the automatic pricing mechanism currently in place for petroleum products to gas supplied to the industrial sector, the minister told Asharq Business (watch, runtime: 3:17).

The announcement comes on the heels of a price hike that from this month will see factories pay up to 28% more for natural gas. Cement, iron and steel, and petrochemicals and fertilizers producers will now pay USD 5.75 / mmBtu, up from USD 4.50 / mmBtu, while other industries will see a 21% rise to USD 4.75 / mmBtu.

The fuel pricing mechanism: The government currently reviews local prices of petroleum products every quarter and raises or lowers them by up to 10% according to price fluctuations in the international market.

The pricing committee has hiked fuel prices three times this year as international oil and gas prices have risen. Car owners are now paying up to 12% more for fuel than they were at the beginning of the year after the government hiked the prices of all fuel grades by 0.75.

Gas prices have surged worldwide this year, creating something of a global energy crisis that’s being driven by rising post-lockdown demand in Asia, tightening supply, and the near-suspension of exploration and development work in 2020 at the height of the pandemic. Natural gas to heat homes now costs European consumers, for example, about 5x what it did a year ago, and the crunch could get worse as fall gives way to winter.

IN OTHER ENERGY NEWS-

Egypt plans to start exporting natural gas to Lebanon by the end of the year, El Molla told CNBC Arabia yesterday. An agreement between Egypt, Lebanon, Jordan and Syria last month paved the way for Egypt to send emergency gas supplies to Lebanon, which is suffering crippling power shortages amid a severe economic and financial crisis. The four countries agreed to bring online the Arab Gas Pipeline connecting Egypt to Lebanon via Jordan and Syria, which will be used to feed a power plant in the north of the country.

CORRECTED ON MON, 1 NOVEMBER

Corrected to say Egypt is exporting natural gas, rather than liquefied natural gas. 

Investment firm Zilla Capital has acquired Naeem Holdings subsidiary Naeem Capital Investment, according to an EGX disclosure (pdf). Naeem Capital has an asset management license, but did not have any assets under management at the time of the acquisition, according to the filing. The value of the transaction was not disclosed.

Zilla has also reportedly acquired an unnamed financial leasing company and is looking to take 25% stakes a logistics outfit and a pharma company, according to a report in yesterday’s print edition of Hapi Journal, which cited unnamed sources. A top Zilla official declined to comment when we reached out yesterday.

Also in the pipeline for Zilla: The firm has plans to establish a microfinance arm and an SME financing firm, and to set up a private equity fund to invest in African equities within the next three months. It will also be adding to its roster four new portfolios in the next few days, with an eye to reach EGP 1.5 bn in assets under management by the end of next year.

Misr Ins. Holding has bid for 40% of the shares that Ghazl El Mahalla Football Club will offer to institutional investors in its upcoming IPO, according to statements made by Public Enterprises Minister Hisham Tawfik published in Hapi Journal (pdf) yesterday. The state-owned giant has subscribed to EGP 15 mn worth of shares on offer in the EGP 37 mn private placement, he said.

The private placement portion of the sale is set to go through in November, the minister said, with the retail offering of the club's IPO now set to hit the market in December, after having earlier been slated for November. 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. Another EGP 98 mn will be earmarked for sale to individual retail investors, Prime Holding CEO Mohamed Maher — whose firm is quarterbacking the debut— had told us over the summer. We have more on how the sale will be structured here.

Keep this in perspective: The Ghazl El Mahalla sale is tiny, especially when compared to e-Finance’s IPO last month, which raised some EGP 5.8 bn. The e-Finance transaction has breathed new life into the state’s long dormant privatization program, with Maher earlier telling Masrawy that e-Finance’s success encouraged Ghazl El Mahalla to go ahead with its own IPO.

What other state companies are thinking of taking the plunge? 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, while e-Finance has also made clear its ambitions to list two of its subsidiaries in the wake of its successful debut last month. There are also offerings in the pipeline for several large government-owned firms beyond that date, Tawfik said.

And several private sector players have intentions to go public: Macro Pharma has plans to list, having made a last-minute u-turn on its IPO in April and subsequently hired EFG Hermes, while the parent company of healthy foods brand Abu Auf is considering floating 49% of its shares on the exchange. Non-bank financial services player Ebtikar has also said it could go to market.

Tourists shopping in Egypt will soon be able to claim VAT drawback via a digital system prior to departure, the Finance Ministry said in a statement yesterday.

Tourists will need to spend at least EGP 1.5k on an item to reclaim VAT; only visitors who stay in Egypt for less than three months can claim a drawback.

The system will be gradually rolled out across the country: The project will begin in Sharm El Sheikh and Hurghada before the end of the year before being extended to Luxor and Aswan and then all of Egypt’s cities and ports, FinMin tax advisor Ramy Youssef said yesterday (watch, runtime: 4:33).

A local company will be established to run the new system alongside an unnamed international firm, according to the statement. Recently listed state e-payments firm e-Finance and its e-Tax subsidiary look set to be involved, with representatives from both firms joining the government committee tasked with managing the rollout.

The latest in a digital overhaul of taxation: The VAT drawback system joins the unified digital tax system and e-invoicing initiatives currently underway as Egypt looks to digitize its tax system.

Law regulating military jurisdiction over “public and vital facilities” extended indefinitely: The House of Representatives has given final approval to legislation that indefinitely extends powers the military was handed in 2014 over “public and vital” facilities, Ahram Gate reports. The law widens the military’s jurisdiction over a range of infrastructure, including roads, bridges, railways, gas stations and oil fields, and gives it the power to try people accused of breaking the law at these locations in military courts. Passed in 2014, the law was originally intended to remain in place for two years and has been extended since.

People convicted of leaking military secrets now face harsher penalties: Fines handed out to people convicted of leaking state secrets without the government’s consent will rise to EGP 5k-50k, from EGP 100-500 currently under amendments to the Penal Code approved yesterday. This is in addition to prison sentences ranging from six months to five years already included in the legislation. And changes to the terrorism law will now impose fines of between EGP 100k-300k on people who film, record or broadcast terrorism trials without the judge’s permission. Last year the House approved changes to the bill which introduced the death penalty for people convicted of funding terrorist groups, and broadened the definition of what counts as funding terrorism.

The expanded powers come less than a week after the government lifted the state of emergency in place since 2017.

Higher education platform Taaleem reported EGP 185.3 mn in net income during FY2020-21, up 29% from the year before, according to the company’s earnings release (pdf). Revenues for the fiscal year, which ended on 31 August, rose 34% y-o-y to EGP 602.1 mn. This growth was buoyed by a 20% rise in tuition fees at its Nahda University in Beni Suef (NUB), coupled with a 12.5% increase in student intake. Developments at NUB, including the inauguration of new departments and its partnership with Northern Kentucky University in the US, “reflect Taaleem’s commitment to providing quality education for all at affordable costs,” said CEO Mohamed El Rashidi.

What’s next for Taaleem? A share buyback program. The company’s board of directors has also agreed to kick off soon a share buyback program for the shares it sold on the EGX earlier this year through its IPO. The company did not disclose the size of the buyback program. Taaleem’s was the first IPO on the EGX in 2021 after a two-year drought, closing its institution portion 2.3x oversubscribed.

Operationally: The higher education outfit has begun constructing a second campus for NUB, and will soon begin working on buildings to house new departments at the original campus, according to the release. Design plans for its second higher education institution, Badya University, developed in partnership with Palm Hills Development and set to start offering classes in September 2022, are also complete.

Mostafa Ibrahim Fawzy has been tapped as managing director of Aspire Capital Holding for Financial Investments, according to a disclosure (pdf). Fawzy is taking over from Waleed Zaki (LinkedIn), who is now non-executive chairman of the board of directors. Zaki was founder and managing director of Pioneers Holding for Financial Investments.

It was a quiet night on the airwaves last night: A montage of President Abdel Fattah El Sisi’s arrival in Scotland to attend the COP26 summit made the rounds (1:41 | 1:36), showing Egyptian embassy members and a number of UK officials welcoming the president upon his arrival.

Elsewhere: Ala Mas’ouleety noted the new legislation granting the military the power to secure public facilities, which was greenlit by the House of Representatives yesterday (watch, runtime, 9:48).

Leading the conversation on Egypt in the foreign press this morning: *crickets.*

Saudi Arabia’s Al Muhaidib Company is in the midst of international arbitration case and two administrative cases against LSE- and EGX-listed Integrated Diagnostics Holding (IDH), IDH CEO Hend El Sherbini, and Al Mokhtabar Chair Moamena Kamel, IDH said in a disclosure. The claim pertains to a 2007 MoU to sell 49% of Al Mokhtabar — which is now under IDH’s umbrella — to Al Muhaidib.

Oil Minister Tarek El Molla yesterday broke ground on a USD 1.8 bn coal and diesel production complex in Suez, according to a ministry statement. The plant will produce high-value petroleum products — particularly butane and diesel — geared towards use in newer car models in an attempt to reduce imports. Ministry-affiliated firms Enppi and Petrojet are implementing the project, according to the statement. No details were provided on when the plant is expected to come online.

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

• MoneyFellows customers will be able to receive their funds through MasterCard prepaid cards, under a partnership (pdf) between the two through which users will be able to make their monthly “gameya” payments and collect their share.
• A signalling upgrade completed by Alstom to the 20-km El Fashn section of the Beni Suef-Assiut railway line started operating yesterday, a company statement (pdf) said. The French company completed a similar project on the 15-km Quseia section of the line over the summer.

Moderna jabs make their Egypt debut: 784k doses of Moderna vaccines arrived at Cairo Airport yesterday, according to a Health Ministry statement, marking the first Moderna doses to arrive in Egypt. The vaccines were donated by Canada through the GAVI/Covax program, according to Higher Education and Acting Health Minister Khaled Abdel Ghaffar, who added that Egypt now offers Sinovac, Sinopharm, AstraZeneca, Sputnik, Johnson & Johnson, Pfizer, and Moderna vaccines.

We’ve been looking out for Moderna shots for some time: The Health Ministry first told us to expect the first Moderna jabs sometime in September, then in October as part of a total of 8 mn doses of Pfizer and Moderna vaccines donated from the US, though we only seem to have received successive Pfizer doses from the US to date.

The ministry has administered 38 mn vaccines since it began its rollout in January, interim health minister Khaled Abdel Ghaffar said yesterday. It did not disclose how many people have been fully vaccinated against the virus. It has received a total of 72 mn doses, giving it a supply of 34 mn spare doses. The ministry is expecting to up its supply by an additional 26 mn doses of Pfizer, Moderna, Sinovac, Johnson & Johnson and AstraZeneca vaccines, the statement said, without providing a timetable.

Over 1.5 mn university employees have received their covid vaccines, Abdel Gaffar said.

The Health Ministry reported 933 new covid-19 infections yesterday, down from 948 the day before. Egypt has now disclosed a total of 331,017 confirmed cases of covid-19. The ministry also reported 59 new deaths, bringing the country’s total death toll to 18,651.

Egypt hosts Libya peace talks: Egypt has hosted a two-day meeting of the 5+5 Libyan Joint Military Commission to continue talks to withdraw foreign forces from the North African country ahead of national elections next month, according to Sky News Arabia. The meeting, which ended yesterday, brought together representatives from Sudan, Chad and Niger to discuss the troop withdrawal. This comes a day after Foreign Minister Sameh Shoukry met up with the UN Special Envoy to Libya, Jan Kubis, in Cairo.

In other diplomatic news: Prime Minister Moustafa Madbouly sat down with Ruler of Dubai Mohammed bin Rashed Al Maktoum on Saturday on the sidelines of Expo 2020 to discuss bilateral ties, according to Sharjah 24.

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

31 October -12 November (Sunday-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.