AM — Gov’t signals it could bring the private sector in from the cold

Happy hump day, wonderful people. We have a huge issue this morning, and no story has piqued our interest as much as a statement from the Cabinet economic group last night that suggests the state is looking to back out of select sectors of the economy in an orderly way.

Sensitive to the notion of “crowding out”? The ministers are mulling the results of a recent study that will guide cabinet as it decides (a) which “priority areas for structural reform” will open the door for “more private sector involvement” in the economy, (b) identify industries from which the state will exit and hand the reins to private business, and (c) which industries are sufficiently strategic for the state to need at least a foothold.

THE KEY QUOTE is right up top: “Our goal is to make it possible for the private sector to participate more in the implementation of many [national] development and service projects.” The study, it says, “confirms the government's full awareness of the importance of a real partnership with the private sector” and the need for the state to “create an enabling and stimulating environment for the private sector.”

THE KICKER- Cabinet is committing to a review every two years of which state-owned enterprises it needs to keep in the government’s portfolio as well as to an annual “dialogue” with private business on the state of play. Ministers are also looking into the possible setup of a body that will “supervise and manage” the companies of which the state retains ownership.

What’s the economic group? Members include the PM — who heads the committee — as well as the ministers of planning, finance and public enterprises and a number of key direct reports, among them our friends Vice Minister of Finance Ahmed Kouchouk and top Planning Minister advisor Nada Massoud as well as and GAFI boss Mohamed Abdelwahab.

The statement should be good news for capital markets, as ministers nodded to the privatization of state assets through both sale to strategics and via offerings on the EGX. Sales through IPO have proven compelling for investors this year in Egypt (e-Finance) as well as in Saudi and UAE. There’s sufficient hunger for new paper on the EGX that we see little room for state offerings to “crowd out” private-sector companies looking to offer shares. Abu Auf, Macro Group and Ebtikar are all on deck right now eyeing sales as early as 2022, and others have suggested recently they’re keeping an eye on market conditions.

IN THE SAME VEIN- Lawmakers in the House gave approval yesterday to a bill that would make it easier for the private sector to bid for public infrastructure projects in a range of industries. We have the full rundown in the news well, below.

HAPPENING TODAY-

The two-day Africa Fintech summit kicks off today. The summit looks at innovation in the fintech ecosystem, venture capital and other forms of investing, and will also discuss the rise of healthtech.

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THE BIG STORY ABROAD- Biden’s bumper infrastructure bill is everywhere in the foreign press this morning. The US president signed into law yesterday the USD 1.2 tn bill, which will enable the biggest upgrade to America’s roads, bridges, railways and internet infrastructure in more than a decade. The story is everywhere from AP and Reuters to the FT and CNN.

MARKET WATCH-

El Erian’s crystal ball doesn’t see oil hitting USD 100 / bbl: Forecasts that rallying oil prices will break the USD 100 mark are overlooking key demand factors, markets guru Mohamed El Erian told CNBC’s Dan Murphy on the sidelines of the Adipec conference in Abu Dhabi. His comments come as Brent and US crude surged past USD 80 per barrel in recent weeks, thanks to post-pandemic demand outstrippng supply. “If you look at what is happening on the demand side, there you get some questions. Demand is robust today but will it be robust in six months’ time?” El Erian says.

Abu Dhabi’s Adipec will keep energy in the headlines this week, bringing together CEOs for in-person events with ministers from countries that form the OPEC+ oil alliance, according to Bloomberg. The event kicked off yesterday and runs through to Friday.

CIRCLE YOUR CALENDAR-

We’re getting a royal visit this week: British royal family members Prince Charles and the Duchess of Cornwall will be in Cairo on Thursday and Friday (18-19 November).

*** 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: Green finance has been gaining speed in Egypt and a main contributor to this movement is programs implemented by the European Bank for Reconstruction and Development that provide both funding and technical knowledge. We went down the food chain to talk to all the parties involved, from the EBRD’s independent consultants and the local banks which are doing the on-lending, to the private-sector firms which are receiving the finance.

It’s about to get easier for the private sector to bid for public infrastructure projects after lawmakers yesterday gave final approval to amendments designed to encourage more public-private partnerships (PPP). Changes to the PPP Act passed by the House yesterday explicitly allow public entities to partner with private companies on transport, energy, communications and healthcare projects, and introduce new mechanisms to simplify the process.

What does the bill entail? Companies are now allowed to submit unsolicited proposals and negotiate directly with public sector entities for contracts, circumventing the traditional competitive bidding process, according to a House committee report containing a draft of the law (pdf). The use of PPPs will be expanded to include everything from designing and financing to operations and maintenance, while a previous requirement that was known to slow down the time it takes for the government to enter into contracts has been scrapped. PPP projects will also be made part of the Planning Ministry’s development strategy, while changes will be made to rules governing the post-project engagement period to ensure higher quality standards.

Why is this important? Mobilizing private sector investment through PPPs could go a long way to helping Egypt close its huge infrastructure funding gap, which the World Bank has estimated sits at around USD 230 bn. It would also help address the notion that the state’s growing involvement in the economy, especially through mega-projects, is crowding out parts of the private sector.

BACKGROUND- Passed in 2010, the legislation sought to put in place a regulatory framework to attract more private investment into government projects. Within a year of passing, the government awarded Orascom Construction and Spanish firm Fomento de Construcciones y Contratas a USD 475 mn contract to build the New Cairo wastewater treatment plant.

But since then the model hasn’t caught on in a big way, with few large-scale projects being tendered through PPPs in recent years. Things have picked up in recent months though, with Bombardier, Orascom and Arab Contractors being handed the reins to the Cairo monorail, a number of logistics projects — including the Sixth of October and Tenth of Ramadan dry ports — getting initial approval, and the government turning to the private sector for its USD 2.5 bn desalination plan.

Why the slow progress? Regulatory uncertainties stemming from overlapping legislation, a lack of transparency over how contracts are awarded, an absence of incentives for ministries to turn to the private sector, and unclear dispute resolution mechanisms have all been cited as reasons for why PPPs have not become more common in Egypt.

What’s next? The bill will now make its way to President Abdel Fattah El Sisi to be signed into law before its executive regulations are published in the coming months.

What’s next for e-Finance as a public company? Following its blockbuster debut on the EGX as part of the state privatization program last month, e-payments firm e-Finance is focused on the build-out of new lines of business and expanding its regional footprint. The company had said earlier this year that it will use the funds raised through its IPO to invest in growth. Among the priorities: A taxation and B2C receipts platform it’s launching with the Finance Ministry and a digital health services platform with the Universal Health Ins. Authority.

e-Finance is also pursuing a number of non-bank financial services licenses, which it says will “allow the group to provide the full payment value chain” for 22 mn current customers are well as newcomers to its platforms.

Particularly interesting is e-Aswaaq, the company’s new e-commerce platform. Here’s the rundown:

e-Aswaaq, which was launched in 1Q2021, aims to become the first and largest full-fledged, homegrown B2B e-commerce platform in Egypt, e-Aswaaq CEO Islam Mamoun tells us. The platform will source goods from both Egyptian and foreign vendors, giving customers a wide range of products to choose from — and setting itself up as a competitor for other major B2B e-commerce players such as Alibaba.

e-Aswaaq is also getting in on tourist site ticketing management: Apart from its e-commerce activities, e-Aswaaq also has a tourism platform operating under its umbrella to manage EgyMonuments, the government’s online booking and on-site ticketing platform.

e-Aswaaq Misr has contracted with the Ministry of Tourism to build a full portal that kicked off operations with ticketing and booking services at the Egyptian Museum in Tahrir a month and a half ago, followed by the Giza Pyramids, where EgyMonuments began offering its services a little over two weeks ago. e-Aswaaq plans to toll out the platform across Luxor by the end of December, with an eye to be covering the country’s 30 most-visited attractions by H1 2022.

Revenues coming in from the project are already much higher than expected, Mamoun told us. Since launching at the museum in downtown Cairo, it has processed 16 mn transactions, and at the pyramids, it has processed 17 mn transactions.

MEANWHILE- eHealth is launching its services next year: eHealth, the digital healthcare service platform e-Finance launched with the Universal Health Ins. Authority last month ahead of its IPO, is set to begin its service rollout in 1H2022, Executive Chairman and CEO Ibrahim Sarhan confirmed to us. e-Finance is currently hiring talent for the platform, which will manage and operate the tech backbone of the government’s universal health ins. scheme.

AND- e-Tax is will begin offering services next April: Among the new lines of business e-Finance announced previously is E-Tax, its EGP 100 mn joint venture with the Finance Ministry to provide companies and authorities with tech solutions. The now EGX-listed firm said back in April it is ramping up investments in the JV, among other core projects. E-Tax is set to be involved in the nationwide rollout of a digital system through which tourists will be able to claim VAT drawbacks prior to departing from the country.

Edtech startup Career 180 scored a USD 200k investment from EdVentures to develop a new employment platform, the VC firm said in a press release (pdf). The site would be merged with freelance job site Freelance Yard to create a platform that provides employment services to young people across a range of industries.

This marks the second investment by Nahdet Misr Publishing’s VC arm in the startup, bringing its total investments to date to USD 300k. EdVentures invested an initial USD 100k in the business back in 2019.

The new platform is set to launch in two months, and will involve providing job seekers with qualifications through live courses that provide them with badges upon completion, and supporting them through training throughout their application process, co-founder Shorouk Alaa El Din told Enterprise. The startup plans to provide training to up to 1 mn people, and connect 300k users with jobs, according to the press release.

A platform for freelancers: The merger with Freelance Yard, which was already a partner working in collaboration with Career 180, will allow the startup to venture into freelance work and contracting, rather than full-time gigs alone, explained Shorouk. Legal proceedings for the merger are currently underway, she confirmed.

What does Career 180 do? The online platform allows users to connect with career experts in virtual one-to-one sessions, and provides them with resources like career counselling videos to help equip them with skills for the job market. The startup also hosts various workshops, training programs, and the annual Egypt Career Summit.

This marks EdVentures’ fourth investment this year, by our count. Last week, the company announced it had invested USD 400k in OTO Courses. Earlier in the year, it made a USD 160k investment in edtech platform iSchool, and another a six-figure investment in book summary platform Akhdar. We can expect at least one more edtech investment round from the investor before the end of the year, EdVentures’ General Manager Maged Harby told us, saying the average ticket size for remaining investments will range between USD 100k-300k.

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ALSO IN EDTECH- Tyro is acquiring crowdsourced educational content platform Nafham, the company announced in a press release (pdf). The transaction will be executed by share swap and will see Tyro’s leadership take over Nafham’s management and operations. Tyro has already secured funding from Flat6Labs and NXL Partners for the new entity, it said without disclosing further details.

What are these two platforms? Tyro connects students and instructors in one-to-one and group sessions and boasts 50k paid sessions since 2017, while Nafham, which has 6 mn users annually, offers recorded educational video content covering national school curriculums in Egypt, Kuwait, Syria, Saudi Arabia, the UAE, and Algeria.

Investors have put almost USD 2 bn into startups in MENA, Pakistan and Turkey so far this year, with USD 150 mn being deployed in October alone, according to Magnitt.

Putting this in perspective: Less than USD 1.5 bn was invested in MENAPT startups through the whole of 2020.

Fintech + e-commerce continue to dominate: Investments grew 10% m-o-m compared to September, with the bulk of the funding going to companies in the fintech and e-commerce sectors.

Healthcare + transport and logistics also hot: Of the big five sectors, only healthcare and transport saw a y-o-y increase in transaction number during the month, growing by 50% and 300% respectively, according to the report.

The biggest transaction of the month came in the agriculture sector: Emirati agritech firm Pure Harvest raised USD 64.5 mn from a Korean investment firm at the end of October, accounting for almost half of the funding raised by all MENAPT startups during the month.

November seems to be continuing the trend, with Egyptian startups Rabbit and Breadfast both closing multi-mn USD rounds.

A pipeline still backed up from 2020: Magnitt a slowdown in investment activity last year thanks to the pandemic. That said, 2020 was also a good year for MENA startups, with capital inflows climbing to USD 1 bn in 2020, up from USD 700 mn the year before, despite the economic damage and market volatility caused by the pandemic.

Egyptian startups landed some 26% of VC funding deployed to MENA in 1H2021, with a total of USD 194 mn pouring into startups in the country, a 30% year-on-year increase from the same period in 2020.

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PAYMENTS NEWS- E-payments app Kiwe closed its first investment round, led by Digital Finance Holding (DFin), with participation from our friends from EFG Hermes, Marakez and other angel investors, according to a press release (pdf). The value of the round was undisclosed.

Kiwe will use the investment to expand its platform, CEO and co-founder of the startup Fatma Khalifa told Enterprise. The platform provides money pooling, transfer, and payment features that can be used across their portfolio of merchants, which include F&B players, retail and furniture stores, and social commerce platforms, she said.

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ALSO- MNT-Halan has successfully rolled out its Neuron banking software, which will enable it to scale up and handle mns of customers transacting in multiple currencies, the company announced in a press release. Launched earlier this year, the core banking software was developed in house, making it the first of its kind in the Middle East and Africa. “We built this technology to accelerate our trajectory and ability to scale, ensure frictionless transactions, predict customer behavior, and maintain the security of our customers’ data,” said co-founder and CTO Ahmed Mohsen, calling the software a “game changer.”

E-payments giant Fawry saw its bottom line ease 26% to EGP 36.1 mn in 3Q2021, according to its earnings release (pdf). Revenues rose 31% y-o-y during the quarter to EGP 448.3 mn.

On a nine-month basis, Fawry’s net income is nevertheless up 25% over the same period last year at EGP 149.4 mn on revenues of EGP 1.2 bn (+33%).

Banking + microfinance segments underpin revenue growth: The strong performance was driven by the company’s banking segment, which saw revenues more than double to EGP 118.3 mn in 3Q. Its microfinance services also performed well, bringing in EGP 35.6 mn, up almost 90% from 3Q2020.

Why the dip in the bottom line in 3Q? Fawry’s bottom line remains “solid” despite “aggressive spending” on marketing and human resources, it said in the release, noting that its gross and EBITDA margins improved significantly during 3Q2021 compared to the same period last year.

Fawry is getting into the BNPL game: The company’s buy now pay later platform, Fawry Consumer Finance, will launch next year and will “strengthen Fawry’s growing presence in the financial services space” and “drive further business at our acceptance segment,” CEO Ashraf Sabry said. The Central Bank of Egypt has also approved the company’s myFawry card, which it hopes to launch before the end of the year, he said. The service allows consumers to deposit and withdraw funds from anywhere across the country and it is expected to fuel the use of P2P and payout services, yielding new revenue streams for Fawry, Sabry added.

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Elsewedy Electric’s net income fell 14% y-o-y to EGP 703.9 mn in 3Q2021, according to the company’s earnings release (pdf). Revenues for the quarter came in at EGP 14.9 bn, up 31% y-o-y. The company booked EGP 2.3 bn in net income in 9M2021, up 32% y-o-y, while net revenues for the nine-month period came in at EGP 40.9 bn, up 30%.

Wires + turnkey projects drive top line growth: The company’s quarterly performance was underpinned by its wires and cables segment, whose sales grew 57% to EGP 7.4 bn. Turnkey projects also saw significant growth, rising 14% to EGP 5.9 bn.

Looking forward: “Management is encouraged by the solid performance we have

delivered across our business lines … and is optimistic about Elsewedy’s growth prospects and its ability to sustain strong performance,” said CEO Ahmed El Sewedy.

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GB Auto’s net income dipped 11% y-o-y to EGP 332.3 mn in 3Q2021, the company said in its earnings release (pdf). Revenues rose 34% y-o-y to EGP 8.3 bn during the quarter. GB Auto reported a 39% y-o-y increase in 9M2021 revenues on the back of “overall improved demand,” with net income for the period soaring 60% y-o-y to EGP 1 bn.

In detail: Revenues from the auto and auto-related segment grew 35% y-o-y to EGP 6.5 bn in 3Q2021, “driven primarily by healthy demand and increasing consumer purchasing power,” the company said. Despite rising sales, the segment’s bottom line dipped 21% y-o-y to EGP 185.6 mn which the company attributed to the “high base effect of capital gains in the comparable period.” GB Capital delivered 26% y-o-y revenue growth to EGP 2.1 bn, while net income inched up 4.4% y-o-y to EGP 146.3 mn.

Looking forward: GB Auto also sees strong demand in the auto sector continuing to drive its performance through the end of the year and “offset the impacts of anticipated supply chain disruptions,” said CEO Nader Ghabbour. The company plans to continue expanding its fintech product offerings through GB Capital to capitalize on Egypt’s “thriving” fintech market, he said. The company is also working on finding substitutes to tuk-tuks following the Madbouly government’s decision to ban imports of the three wheelers’ components, Ghabbour said. GB Auto currently has 3-6 months of tuk-tuk inventory to clear out, giving it some breathing room while it searches for substitutes, board member Mansour Kabbani told us earlier.

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Tenth of Ramadan for Pharma Industries and Diagnostic Reagents (Rameda) reported an 82% y-o-y increase in 3Q2021 net income to EGP 45.3 mn, according to the company’s earnings release (pdf). Revenues for the quarter grew 34% to EGP 314.7 mn, buoyed by sales growth across all of Rameda’s segments. Net income in the first nine months of the year rose 56% to EGP 107.1 mn on revenues of EGP 852.5 mn, up 27% from the same period in 2020.

What’s driving growth? Private sales accounted for more than two-thirds of the company’s overall revenues, rising 26% to hit EGP 587.2 mn on the back of heightened demand for antivirals and antibiotics as well as the continued normalization of the market post-covid. Tender volumes fell by almost a quarter in line as Rameda reduced their contribution to sales but revenues still managed to increase 3%, accounting for 18% of its top line.

Rameda’s growing nutraceuticals portfolio is expected to drive short- and long-term growth, CEO Amr Morsy said, pointing to “the spread of covid-19 and its various strains, the MENA region’s high prevalence of lifestyle diseases and the general increase in consumption of natural health and wellbeing products by more health-conscious consumers.” The company is expecting to launch another four products before the year is out, three of which fall under the “lucrative” nutraceutical sub-segment, according to Morsy.

EGX-listed education outfit CIRA is borrowing EGP 375 mn from Ahli United Bank to finance fresh investments, the company said in a regulatory filing (pdf) yesterday. The company’s board greenlit the decision earlier this week, the disclosure says. No further details or information were provided in the disclosure and a company spokesperson was not immediately available for comment.

This is the latest loan CIRA is taking on to fund its investment plans: The company had said in September that it’s planning to borrow EGP 260 mn from an unnamed Egyptian bank to fund unspecified new projects. CIRA also said earlier this year that it was in talks with a syndicate of three international banks for a credit facility to finance around 40-50% of its planned EGP 2 bn applied tech university.

MEANWHILE- Financial leasing company EgyLease closed a EGP 749.8 mn securitized bond issuance, according to a statement (pdf) from Misr Capital, which acted as co-lead on the transaction alongside state-affiliated securitization firm Al Taamir.

The securitized bond market has been on a roll these past few months, with Raya subsidiary Aman completing the issuance of EGP 585 mn in securitized bonds, while upmarket developer SODIC closed an EGP 343 mn securitized bond sale. Palm Hills Development, Premium International, and Arabia Investment Holdings subsidiary Rawaj also took sales of the asset-backed securities to market earlier this year.

Unclear about how securitized bonds work? We’ve got you covered right here.

It was a mixed bag on the airwaves yesterday: The nation’s talking heads covered the first day of the workplace ban on unvaccinated public sector workers, aid to Aswan (which is still reeling from last week’s storms), and the return of the World Youth Forum.

Happy first day of no vaccine, no work: Hossam Abdel Ghaffar made his debut as the Health Ministry’s spokesperson last night, telling Kelma Akhira’s Lamees El Hadidi that things went fairly smoothly as the new workplace policy was introduced (watch, runtime: 3:16). Al Hayah Al Youm (watch, runtime: 1:30) and Masaa DMC (watch, runtime: 15:33) also had the story.

The workplace ban leads coverage of Egypt in the international press this morning with Reuters, AFP, CNN and Sky News all taking note.

Eyes are still on Aswan, following up on the heavy rains that swept over the southern city last week. A number of trucks loaded with aid are on their way to Aswan and should arrive by 9am this morning, Mohamed Mokhtar, spokesman for the Tahya Misr Fund, told El Hekaya’s Amr Adib (watch, runtime: 6:29), adding that some 2k people are in need of aid after the destructive rains. The aid will also help to rebuild homes, 500 of which were damaged. Ala Mas’ouleety (watch, runtime: 2:18) and Masaa DMC (watch, runtime: 3:20) also covered the story.

The New York Times and Washington Post have both taken note of the story.

The World Youth Forum is back for its fourth run: After last year’s covid-imposed hiatus, the World Youth Forum will return to Sharm El Sheikh for its fourth iteration on 10-13 January. The story was all over the airwaves: Al Hayah Al Youm (watch, runtime: 4:00), Hadeeth Al Kahira (watch, runtime: 0:43), Kelma Akheera (watch, runtime: 1:13) and Ala Mas’ouleety (watch, runtime: 8:09).

If you’re not vaccinated, the gov’t isn’t going to deny you access to hospital: Unvaccinated patients seeking treatment at a state hospital are exempt from the decision prohibiting the unjabbed from accessing government facilities, Health Ministry spokesperson Hossam Abdel Ghaffar told Youm7. Starting 1 December, members of the public will need to show proof that they have received at least one dose of covid-19 vaccine to enter government facilities.

The Health Ministry reported 946 new covid-19 infections yesterday, up from 935 the day before. Egypt has now disclosed a total of 344,907 confirmed cases of covid-19. The ministry also reported 68 new deaths, bringing the country’s total death toll to 19,567.

We have a new ambassador in Qatar: Egypt’s new ambassador to Qatar, Amr El Sherbini (LinkedIn), presented his credentials to Qatar’s Emir Tamim bin Hamed Al Thani, the Egyptian Foreign Ministry said yesterday. Tensions between the countries are thawing following the January agreement to end the GCC’s four-year blockade of Qatar and restore diplomatic ties.

Other items on the Diplo front:

• President Abdel Fattah El Sisi discussed joint projects with Russian President Vladimir Putin yesterday, Ittihadiya said in a statement. They focused on Egypt’s first nuclear power plant, Dabaa, and creating the Russian industrial zone in the Suez Canal area.
• An Israeli delegation headed by national security chief Eyal Holata landed in Cairo on Sunday for talks with intelligence chief Abbas Kamel about the Gaza ceasefire and other bilateral issues, according to Israeli news reports (here and here).