AM — SODIC board gives nod to Aldar / ADQ acquisition bid

Good morning, friends, and welcome to the last day of November. We hope the penultimate month of the year has been kind to you — and that you’re looking forward to the end of 2021 as much as we are. The past eleven months (heck, the past 91 weeks…) have, in news terms, been like drinking from a firehose.

Because there is often no justice in the world: Liverpool icon Mohamed Salah came in seventh in voting for France Football’s 2021 Ballon d’Or. The closely watched vote on the best men’s football player in the world saw Lionel Messi take the top spot, while Salah (with 121 votes) came in behind Cristiano Ronaldo (178) and ahead of #8 Kevin De Bruyne of Manchester City (73 votes). The France Football poll is voted on by sports journalists from around the world; Salah is the top goal-scorer this season in the English Premier League.

PSA #1- It looks like we’re starting the final day of this heat wave, with the mercury due to ease to 29°C today. Let’s hope the falling temperature takes with it the pollution that has blanketed our fair city since the start of the week. Look for daytime highs of 22°C from Wednesday through to the end of next week, our favourite weather app tells us.

PSA #2- A reminder that you won’t be able to get into a bank, post office branch or government facility from Wednesday onward without proof of vaccination or a negative PCR test. Unvaccinated students will also be prevented from accessing university campuses.

OMICRON WATCH- Biden is trying to un-break the glass: The US president yesterday tried to temper fears of the new covid variant, telling the country that the mutation is a “cause for concern, not a cause for panic.” (Politico | NYT | AP)

A new warning from the WHO might make his job harder: The World Health Organization is warning that the threat posed by the Omicron covid variant is “very high” and that the mutation could have “severe consequences” if it spreads. (AP | Reuters | Washington Post)

As is Fed chief Jerome Powell, who will today warn US lawmakers that the new variant poses a major threat to the American economy. “The recent rise in covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” he will tell the Senate banking committee. (Bloomberg | CNN | WSJ)

TAKE THIS WITH A GRAIN OF SALT, but … the doc who first alerted authorities to Omicron thinks the bug may be a “mild” strain based on the symptoms she is seeing her patients.

That emergency G7 meeting yesterday doesn’t seem to have achieved much: No new vaccine commitments to the developing world, no containment strategy. There are some words in the joint statement.

You can’t say the same thing about China, which yesterday pledged to donate another 1 bn vaccines to Africa to help it fight the virus. (AFP)

Still: Volatility in global markets eased yesterday as investor concerns about the economic consequences of Omicron seemed to ease. Stocks in Europe, the US and the Middle East all rebounded following last week’s sell-off, while oil prices steadied from the 11% plunge on Friday.

Asian markets are continuing where the US left off this morning, with stocks across the region in the green. Shares in the US and Europe will see early gains when the markets open later today, according to the futures markets.

ALSO MAKING NEWS ABROAD- Jack Dorsey has stepped down as the head of Twitter and is being replaced by CTO Parag Agrawal. Jack is complicated, and the share has underperformed relative to its tech peers. But still: Investors booting out a founder feels an awful lot like the state taking away your kid. The global press is all over this: Bloomberg | CNBC | FT | BBC.

WHAT’S HAPPENING TODAY-

You won’t need to quarantine before Umrah if your jab is Saudi-approved: Travelers from Egypt who are fully vaccinated with a Saudi-approved vaccine can begin their pilgrimage right away without needing to quarantine, the Saudi Embassy in Cairo said. The kingdom-approved vaccines are the Pfizer, AstraZeneca, Moderna, and J&J jabs. Sinopharm and Sinovac vaccines — which are cleared by the WHO — are only approved for entry into Saudi if you’ve had a booster shot. Travelers who haven’t received boosters for Sinopharm or Sinovac will need to quarantine for three days and present a negative PCR test after 48 hours.

Germany’s KfW Development Bank is launching today its open call for (largely green) project proposals in Egypt as part of their investing for employment facility (pdf), which will give grants to projects that drive job creation. You can learn how to apply here.

The Egypt Defense Expo (EDEX) continues today and runs until this Thursday, 2 December. Some 400 international manufacturers and suppliers are showcasing military equipment and defense technologies at New Cairo’s International Exhibition Center.

TOMORROW- It’s a new month. The key news triggers to keep your eye on at the start of December:

• PMI: Purchasing managers’ index figures for November for Egypt, Saudi Arabia, and Qatar will be released on Sunday, 5 December. Figures for the UAE, which normally come out on the same day as Egypt and Saudi, will be released two days later on Tuesday, 7 December.
• Foreign reserves: November’s foreign reserves figures will be released during the first week of the month.
• Inflation: Inflation figures for November will be released on Thursday, 9 December. Data for inflation typically appears on the 10th of every month, but is moved up one day if that falls on a Friday.
• Interest rates: The Central Bank of Egypt’s Monetary Policy Committee will hold its final meeting for the year to review interest rates on Thursday, 16 December.

CIRCLE YOUR CALENDAR-

Young professionals can now apply for the recently-launched McKinsey Forward program which focuses on leadership, business, and the transition to digital, McKinsey announced in a press release (pdf). The six-month program aims to teach participants how their business can combat challenges and use them to their advantage, integrate tech, and be adaptable and resilient during times of change. Forward will be available without charge to those eligible to apply, and one of the requirements is having less than five years of work experience. You can apply via this link before the 12 December deadline.

The new round of Silicon Waha’s Startup Factory will kick off on 10 December at the Assiut Technology Zone. The program will offer marketing tips and tricks for startup founders, who can apply here.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: There’s a massive data gap when it comes to reporting global emissions, which could severely undermine efforts to address climate change by reducing net emissions, a Washington Post investigation has found. In addition to only a fraction of the world’s nations reporting their emissions to COP, many of the measurements and figures that are being reported are less than accurate.

SODIC’s board of directors has approved a bid from Aldar Properties and ADQ despite the offer price falling short of the benchmark set in a fair value report, according to an EGX filing (pdf). The Emirati consortium has offered to purchase 90% of the company at EGP 20.00 per share, valuing the company at EGP 7.1 bn. That’s almost 20% below the EGP 23.42 share price the upmarket developer’s financial advisor BDO had set in its fair value study. SODIC declined to comment further on the statement when we asked yesterday.

The rationale: The developer cited the “current global economic conditions and the effect of the covid-19 pandemic” as well as the consortium’s “economically strong” positions as reasons for backing the transaction at the current price. The consortium is also reportedly not planning to up its bid if shareholders reject the price, after having raised its bid once before from EGP 18-19.

There’s also the fact that Aldar would be a heck of boost for the domestic real estate industry, bringing know-how and a competitive metabolism honed in the ultra-competitive Emirati market. (The transaction going through would also be also a great sign for other foreign investors watching the transaction, but that’s another issue.)

Where does that leave the shareholders? It appears that SODIC’s single largest shareholder — a consortium made up of Act Financial, Hassan Allam Properties and Concrete Plus Engineering and Construction, who together own a 15% stake — has yet to make a decision. Act had been waiting on SODIC to make public the results of the fair value assessment to help “guide minority shareholders on the real value of the company,” CEO Bassem Azab previously told Enterprise. The shareholders now have until 7 December to make a decision. Shareholders need to agree to sell at least 51% of SODIC’s shares for the MTO to be successful. Act Financial did not return a call yesterday requesting comment.

SODIC’s shares closed yesterday at EGP 19.60 each, surpassing the upper end of the EGP 13.95-19.50 band in which they’ve been trading for the past 52 weeks, according to market data from the EGX.

FOLLOW UP- A story we picked up from Al Shorouk earlier this week incorrectly reported that EFG Hermes had decided to respond to the MTO by selling its 2.4% stake in SODIC. A source with direct knowledge of the matter has informed us that EFG offloaded its stake long before the Aldar-ADQ bid.

The PM now has emergency pandemic powers: A law handing the prime minister extraordinary powers to respond to pandemics and public health crises was ratified by President Abdel Fattah El Sisi yesterday, according to the Official Gazette. The PM will now have authority to impose a wide range of restrictions on movement to contain virual outbreaks and use a raft of emergency powers to stabilize the economy. Fines and jail sentences will be handed out to people guilty of spreading disinformation and those who violate pandemic measures. You can find the full text of the law here.

Restrictions on movement: Madbouly and future PMs will now have the power to lock down areas of the country or impose a nationwide curfew in response to public health crises. The PM now has the power to close and change the opening hours of stores, and shutter schools and universities, public and private organizations, places of worship, and sports clubs. Both public and private meetings can now be banned, and public transport, as well as private mass transportation, may be suspended. Sound familiar? These are all measures the government has imposed at various times since the pandemic began.

Emergency economic powers: The PM’s office can introduce export and import controls on certain goods and commodities and can weigh in on market prices, setting prices for goods, services and commodities. This extends to prices charged by private health providers, a measure imposed by the Health Ministry during the initial covid outbreak in 2020. Deadlines for filing and paying taxes can be extended for up to three months while electricity, gas and water bills may be postponed — again, all measures to which the state has resorted a various times during the pandemic.

Caught breaking the rules? You could face a fine of up to EGP 20k as well as prison time. The bill does not specify a maximum or minimum prison sentence. Authorities will also be able to close down for six months any establishment found in violation of the rules. There does seem to be a get-out clause though: Pay a third of the maximum fine immediately and the case will be dropped.

Controlling information: Anyone who publishes information about the epidemic that is deemed false and “harms the public interest” can be handed a fine of up to EGP 10k and a spell in prison of up to one year.

More African exports ahead: The government wants to increase the value of exports to Africa to USD 7 bn in 2022 as part of a broader plan to boost trade with the continent, cabinet said in a statement yesterday.

The master plan: The three-phase strategy aims to boost our exports to Africa to USD 10 bn by the middle of the decade. The government is trying to hit USD 7 bn within the first phase, which will start in January 2022 and target 10 countries.

They’re going to have their work cut out, as exports to sub-Saharan Africa are seriously lagging: During the last fiscal year, Egypt exported only USD 606.6 mn of goods to Africa (excluding Arab countries), totalling just USD 607 mn and accounting for only 2.1% of our total exports, according to Central Bank of Egypt data. Arab countries bought c. USD 6.7 bn worth of goods and services, or about a quarter of our total exports.

That’s not to take away from the impressive export growth seen during the covid recovery: Exports hit a near-13-year high in the final quarter of the state’s 2020-2021 fiscal year, reaching more than USD 8.1 bn during the three-month period ending June 2021, central bank data shows. After falling by almost a quarter in 2H2019-2020 due mainly to the covid-induced turmoil in the energy markets, exports expanded by almost 50% by the end of 2020-2021.

The breakdown: Finished goods made up the biggest percentage of global exports last year, valued at USD 11.3 bn, with fertilizers, clothing and household electrical appliances accounting for a quarter of this. Petroleum exports came in second at USD 8.8 bn.

Increasing exports is one of the key targets of the government’s new structural reform program. The government hopes that the new round of reforms designed to ramp up in manufacturing, telecoms and IT, and agricultural exports, as well as a new export subsidy program, will eventually raise exports to USD 100 bn a year.

Actis-backed Lekela’s West Bakr wind farm became fully operational yesterday: Renewable power generation company Lekela Power announced yesterday (pdf) that its 250 MW wind farm in West Bakr is live after less than two years of construction. Built under a build-own-operate (BOO) framework, the USD 350 mn project will increase Egypt’s wind energy capacity by 18% and prevent more than 550k tonnes of CO2 emissions each year.

West Bakr is targeting energy production of over 1k GWh every year for 20 years. Siemens Gamesa installed and connected 96 turbines for the project, after completing the installation of the first 20 turbines over the summer. The Actis-backed power company had previously said it plans to direct most of its investments towards Egypt in the coming years, and to implement projects with a combined capacity of 500 MW in the country.

Footing the bill: The wind farm was financed by the European Bank for Reconstruction and Development, the International Finance Corporation, and the US International Development Finance Corporation.

Lekela is also launching two sustainable development programs in West Bakr that will see the company provide women in the area with vocational training as well as help protect local biodiversity such as migratory birds.

An ambitious national target: Egypt is aiming to produce 42% of its energy from renewable sources by the end of the decade, a target announced during the COP26 climate summit earlier this month. This is five years quicker than its previous target.

A draft law that would regulate the fintech space received a preliminary nod from the House of Representatives during its plenary session yesterday, according to Al Borsa. The new law would, if passed, regulate the use of fintech to deliver non-banking financial services (NBFS) in a bid to promote financial inclusion and expand the number of beneficiaries.

FRA to take the lead on regulating the fintech space: Under the bill, the Financial Regulatory Authority (FRA) would be the only entity in charge of licensing and regulating fintech companies. It would also set transparency and governance standards and be charged with protecting consumer rights.

Background: The FRA completed the first draft of the bill in July before approving and shipping it off to the House in September. The new regulation covers crowdfunding, robo-advisory, nano-finance and insurtech, and introduces penalties for regulatory breaches including imprisonment or fines of EGP 200k-1 mn.

The Health Ministry is denying claims that the newly-discovered Omicron covid variant has entered Egypt. Claims that the variant entered the country via an Ethiopian flight are untrue, Health Ministry spokesperson Hossam Abdel Ghaffar told Kelma Akhira last night (watch, runtime: 3:05).

Still, it’s only a matter of time before it gets here, he said, adding that precautions being taken are to limit its spread and delay its entrance into the country.

Omicron isn’t a reason not to take the vaccine: The ministry is downplaying fears that Omicron could sidestep today’s covid-19 vaccines. Abdel Ghaffar said in a separate interview on Al Hayah Al Youm (watch, runtime: 9:41) that while the mutations could reduce the effectiveness of vaccines against Omicron, it won’t render them useless against the virus. He repeated the state’s call for folks to continue to signing up for the jabs.

The Health Ministry reported 911 new covid-19 infections yesterday, down from 951 the day before. Egypt has now disclosed a total of 357,629 confirmed cases of covid-19. The ministry also reported 65 new deaths, bringing the country’s total death toll to 20,142.

Orascom Financial Holding reported EGP 17.9 mn in net income in 3Q2021, raising total income since its inception in December last year to EGP 54.6 mn, according to the company’s financials (pdf). The company, which was formed last year after Orascom Investment Holding spun off its financial services business, reported EGP 107.6 mn in operating revenues for the quarter. Revenues since the demerger are now at EGP 268.9 mn.

Covid continued to dominate the airwaves for the third night this week: The Health Ministry spokesperson was on the talk shows to talk Omicron and respond to claims that it has already made its way to Egypt, while the World Health Organization’s Egypt representative joined Kelma Akhira’s Lamees El Hadidi to discuss the latest developments (watch, runtime: 21:14). For more on what the talk shows had to say about Omicron, head to this morning’s Covid Watch, above.

Also on the airwaves last night:

• The state has upped its basic commodities reserves: The state has five months of wheat, 3.5 months of sugar and has achieved self-sufficiency in rice, Supply Minister Ali El Moselhy told El Hekaya’s Amr Adib (watch, runtime: 5:21).
• EDEX kicked off yesterday and President Abdel Fattah El Sisi’s speech at the opening of Egypt Defense Expo also made it to last night’s talk shows. (Al Hayah Al Youm | watch, runtime: 1:08).

Hossam Bahgat’s conviction yesterday is the top story in the foreign press this morning: The Associated Press and AFP both have coverage of Egyptian Initiative for Personal Rights (EIPR) founder Hossam Bahgat being fined EGP 10k after a court found him guilty of spreading false news and insulting the National Election Authority. The charges were based on a 2020 tweet in which he accused the authority of fraud during that year’s parliamentary election. The AP notes that the case “has drawn international condemnation, including by the US State Department.”

Also making headlines: Mohamed Ali Palace soon to open its doors: Egyptian authorities are preparing to reopen Shubra’s Mohamed Ali Palace, which had been under restoration since 2017. (Al Monitor)

Arms talks at the EDEX: The heads of French defense firm Dassault Aviation and South Korea’s Hanwha — two companies that are negotiating arms sales with the Egyptian government — held talks with President Abdel Fattah El Sisi at the Egypt Defense Expo (EDEX) yesterday, Ittihadiya said.

Egypt has ongoing relationships with both these companies: The government earlier this year finalized a USD 4.8 bn contract with Dassault to purchase 30 Rafale fighter jets, the deliveries of which should start in 2024. Meanwhile, the military is currently in talks with Hanwha to purchase a number of K9 Thunder howitzers for USD 2 bn, South Korean media reported last month.

Also taking place yesterday:

• President Abdel Fattah El Sisi virtually attended the Forum on China–Africa Cooperation yesterday, according to an Ittihadiya statement. The forum was attended by Chinese President Xi Jinping and a number of African leaders and witnessed discussions on ways to consolidate the constructive partnership between the African continent and China.
• Foreign Minister Sameh Shoukry attended the forum for the Union for the Mediterranean (UfM) in Barcelona yesterday, during which he held talks with a number of European foreign ministers — including Spain, Luxembourg and Hungary — Jordanian foreign minister Ayman Safadi, and EU foreign policy chief Josep Borrell.
• More Egypt-Jordan-Iraq cooperation: Egypt’s Communication Ministry, its Iraqi counterpart and the Jordanian Digital Economy And Entrepreneurship Ministry signed a letter of intent to cooperate on AI and capacity building, according to a cabinet statement.