Sunday, 12 December 2021

AM — It’s the final interest rate week of 2021, and our poll sees the CBE leaving rates on hold this Thursday



Good morning, friends. Only three weeks to go until the end of the year, and we’re marking the occasion with a super-heavy news day as we kick off the final interest rate week of 2021.

All 11 economists and analysts we surveyed in our Enterprise Rate Poll expect the Central Bank of Egypt to leave interest rates unchanged when its Monetary Policy Committee sits down this Thursday for its final meeting of the year. The still-unfolding situation with the Omicron variant is giving policymakers everywhere pause and a lower-than-expected November inflation reading is seen giving the MPC some breathing room. We have chapter and verse in this morning’s news well, below.


Booster shots, get your booster shots: The Health Ministry will begin today allowing senior citizens with chronic medical conditions, as well as all medical staff, to register online for a covid-19 vaccine booster shot. The new link was not yet up at dispatch time.

PSA #1- You may want to wait on getting your Sinovac boosters. A study published in the medical journal Lancet (pdf) found that a longer waiting period between the second and third Sinovac shots provides better protection against covid. The study showed that getting a booster shot eight months after the second dose resulted in a “remarkable increase in the concentration of antibodies” compared to getting the booster six months after the second dose.

PSA #2- Today is the last day for young professionals to apply to the 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 deadline.

The Food Africa expo opens this morning at the Egypt International Exhibition Center and runs through Tuesday.


M&A WATCH- There are also a couple of big M&A milestones to look out for this week:

  • Snackmaker Edita is due to wrap up due diligence on its acquisition of Ole brand owner Egyptian Belgian Company on Wednesday, 15 December;
  • SODIC shares will be transferred to the Aldar Properties / ADQ consortium by Thursday, 16 December after last week’s takeover.

US envoy for the Horn of Africa Jeffrey Feltman is expected in Cairo to discuss the ongoing conflict in Ethiopia, according to remarks made by State Department spokesperson Ned Price on Wednesday. Feltman’s visit comes as part of a short regional tour to rally diplomatic support to bring an end to the fighting, which will see him visit the UAE and Turkey between 10-15 December. The US embassy declined to say when Feltman is expected in town.

PSA #3- Attention joint stock and investment companies in Cairo: You have four days left to register for the government’s e-invoicing platform. As of this Wednesday, 15 December, more than 3.7k companies in the capital will be required to be on the system and start issuing electronic invoices for B2B transactions. Some 2.8k large taxpayers have signed up to the Finance Ministry’s new digital platform over several phases going back to November 2020.

PSA #4- EgyptAir will resume weekly flights between Cairo and Johannesburg on Thursday, 16 December, the airline said Thursday. Flights were suspended from South Africa and six other countries at the end of November to prevent the Omicron covid-19 variant from entering Egypt. Current precautionary measures for travelers entering Egypt from South Africa will remain in place.

The Egyptian Economic Summit is taking place on Tuesday at the St. Regis Hotel. The one-day event will feature a range of bold-name panelists from institutions including CIB, EFG Hermes, the Sovereign Fund of Egypt, Eastern Company, Oriental Weavers, Microsoft and Danone, among others. The full agenda is here (pdf).

THE BIG STORY ABROAD this morning- No single story has captured the imagination of the global business press. Though both the FT and the WSJ are making a big (front page) fuss of inflation and what it could mean for the 2022 midterm elections in the United States. The big story in the US, though, is a swarm of tornadoes that have left at least 100 people dead across six states.

SIGN OF THE TIMES- A popular supporting character on the [Seekoseeko] in the City Reboot “And Just Like That” died of a heart attack. On a Peloton. As if in response, the exercise gear maker’s share price tanked IRL. Also: Credit Suisse had just cut the company’s target price and rating. Peloton shares are down about 75% this year.

CORRECTION- In our coverage of the tobacco license tender last week, we suggested that the new company would be able to produce the same low-tax cigarettes as Eastern Company for the local market. That was incorrect: The latest iteration of the tender would allow the second company to contract with Eastern Company to produce low-tax cigarettes at Eastern’s facilities — subject to both the new license holder and Eastern Company coming to an agreement on commercial terms. We have updated the story on our website.


*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: Leveling up your family business II. Last week we took a deep dive into a study into what family businesses need to do to thrive post-pandemic, finding that firms with medium-term strategic plans fared best during covid, but that a significant number of them don’t have the governance structures and basic paperwork — like shareholder agreements — to formalize the positions of family members in the business. This week, we check in with senior folks at international financial institutions that help family businesses institutionalize.



ENTERPRISE POLL- CBE to keep rates steady

ENTERPRISE POLL- The Central Bank of Egypt (CBE) will likely leave interest rates on hold when it meets this Thursday as the bank looks to protect the economic recovery and maintain attractive real rates for the carry trade — while continuing to keep an eye on inflation. All 11 economists and analysts we surveyed in our regular interest rate poll expect the CBE’s Monetary Policy Committee to maintain rates as lower-than-expected November inflation figures give it breathing room to hold off any changes. Meanwhile, the current economic outlook is somewhat uncertain amid the spread of the new Omicron variant, whose severity and risk level remain unclear.

Where rates stand now: The overnight deposit rate is at 8.25%, the lending rate at 9.25% and the main operation and discount rates are at 8.75%. The central bank slashed rates by 400 bps last year, including an emergency 300 bps cut in March, to protect the economy from the fallout from covid-19. It has since maintained rates for eight consecutive meetings, including its most recent in October, amid concerns about an increase in inflation.

Inflationary pressures have cooled off here at home: Annual urban inflation slowed for the second month running in November as pressure on food prices continued to ease, with the headline rate falling to 5.6% last month from 6.3% in October, the lowest rate since July and within the lower end of the central bank’s target range of 5-9% for 4Q2022.

The unexpected curb on price rises “gives a breather from the inflation tensions caused by global chaos,” according to Al Ahly Pharos’ Israa Ahmed, who joined most analysts in expecting inflation to remain within the CBE’s target of 7% (+/-2%) in the coming months. The headline urban rate “might hover around 6% YoY in December,” according to Ahmed, while HC Securities’ Monette Doss said the firm expects inflation to average 5.8% in the fourth quarter of 2021.

Keeping rates steady also takes consumer-led economic recovery into consideration: Egypt’s still-high real interest rate could have given the CBE room to enact a cut, but protecting consumer appetite is also likely to play into the MPC’s decision to keep rates on hold, said Suez Canal Bank’s Mohamed Abdel Aal. Maintaining rates would also help maintain remittance inflows and protect portfolio investments, Abdel Aal said.

But it’s not time to drop the ball: Global inflationary pressures will continue to drive CBE policy decisions going into the new year, despite the slight cooling-off in domestic prices in recent months, according to analysts. The CBE will likely continue to keep a close eye on price rises amid a murky picture globally, which Arqaam Capital’s Noaman Khalid suggests is giving the CBE “more reason than ever” to keep rates on hold.

“The CBE’s task of keeping inflation expectations within its target will face increasing challenges in 2022. Thus, we do not expect any shift in its monetary stance until it gets a clearer picture of the outlook of global inflation drivers and its spill-over effect on the country,” said Prime Holding’s Mona Bedeir. Mubasher’s Mohamed Magdy, meanwhile, expects inflation to rise to hit 7% in 2H2021-2022, averaging 6.7% over FY2021-2022. Capital Economics also expects the headline inflation rate will “remain elevated over the rest of this year and into 2022.”

Hiking rates could affect the recovery amid Omicron: While current high rates help protect foreign inflows, any further hike would add a significant burden on the economy by raising the cost of the debt-servicing burden as well as private-sector borrowing, potentially denting growth, Magdy said.

Although GDP projections for the coming year are strong, they are also “subject to risks arising from the uncertainties surrounding the severity of the new coronavirus variant Omicron,” according to Magdy, who noted that relatively low vaccination rates put the recovery at greater risk of being thrown off course by Omicron. This uncertainty gives further impetus for the CBE to adopt a wait-and-see approach, said EFG Hermes’ Mohamed Abu Basha.

While global economic forces make a rate cut out of the question: Protecting real rates — which count among the highest in the world and ensure that our carry trade remains attractive to foreign investors — remains key, especially considering the morse hawkish turn from the US Federal Reserve in recent weeks. On the flipside, Arqaam’s Khalid suggests that even a more hawkish Fed isn’t reason enough to move interest rates here at home, saying that the CBE can counteract the effects of slightly higher US rates through open market operations.

With all this in mind, interest rates could stay where they are for the foreseeable future: The CBE is unlikely to make any changes to interest rates as long as inflation remains below the midpoint of its target range, CI Capital’s Sara Saada said. Capital Economics also doesn’t expect any monetary easing before “later next year,” while Al Ahly Pharos’ Ahmed sees the CBE maintaining rates “for as long as possible.”


Urban inflation dips to lowest level since July

Annual urban inflation slowed for the second month running in November as pressure on food prices continued to ease, according to official figures released on Thursday. The headline rate fell to 5.6% last month from 6.3% in October, the lowest rate since July and within the lower end of the central bank’s target range of 5-9% for 4Q2022. On a monthly basis, consumer prices rose ever-so-slightly by 0.1%, following October’s 1.1% rise.

Behind the dip: A softening of food and beverage prices, mostly, as well as a base effect from last year’s figures, Al Ahly Pharos’ head of research Radwa El Swaify told us. Food and beverage price inflation, which makes up the largest component of the basket of goods used to measure prices, slowed to 8.1% on an annual basis from 11.5% in October, and fell 0.5% m-o-m from October.

Tempering food prices masked inflation in other areas of the economy: Annual core inflation — which strips out volatile items such as food and fuel — hit a new 28-month high in November, reaching 5.8% from 5.2% in October, according to central bank figures (pdf).

Also getting pricier last month: Housing utilities and gas prices rose 3.7%, up from 3.1% the previous month. Clothing and footwear prices inched up by an annual rate of 1.2% in November, up from 1.9% in October, while recreation and culture increased notably by 14.8%. Education rose 12.7% mainly due to an increase in preschool and primary education fees, which jumped at the annual rate of 19.5%.

Inflationary pressures could ease in the coming months with a slump in international oil prices, HC Securities wrote in an emailed note. The firm expects inflation to average 5.8% in the last quarter of the year.


Abu Qir raises EGP 2.25 bn in secondary offering

Abu Qir Fertilizers completed the sale of 10% of its shares for EGP 2.25 bn (c. USD 143 mn), according to a statement published on the bourse (pdf) on Thursday. The company’s long-awaited secondary offering on the EGX was priced at EGP 17.80 per share, valuing Abu Qir at EGP 22.47 bn.

Abu Qir’s stock price surged on news of the sale, rising by the maximum 20% during a single trading session on Thursday to close at EGP 22.11. The company is now the second-biggest listed company by market cap, valued at EGP 27.9 bn.

Who sold? The National Investment Bank, the largest shareholder, reduced its stake from 24.9% to 21.5%, selling 42.4 mn shares (disclosure, pdf). The Industrial Development Authority’s stake went down from 12.7% to 10.1%, after it sold 32.7 mn shares (disclosure, pdf), Al Ahly Capital Holding’s shares went from 7.2% to 4.2%, after it sold 37.9 mn shares (disclosure — pdf), and the Chemical Industries Holding Company sold down its stake in the company to 5.5% from 6.5%, selling 13.2 mn shares (disclosure, pdf).

Who bought? Local institutional players as well as regional and international frontier emerging markets specialists, joint financial advisor and bookrunner on the issuance Renaissance Capital said in a statement.

Solid earnings: Abu Qir reported a 30% rise in net income during FY2020-2021, and saw its quarterly earnings almost double to EGP 1.3 bn in 1Q2021-2022, which it attributed to higher international prices and strong demand.

More to come: State-owned Ghazl El Mahalla FC is also set to become the first publicly-traded Egyptian football club on the EGX in a “micro-IPO” within two weeks, according to Public Enterprises Minister Hisham Tawfik. The club expects to raise EGP 135 mn from the sale, which will see it list up to two-thirds of its shares on the bourse.

BACKGROUND: Abu Qir had pushed back the secondary stake sale several times since first announcing it in 2018. The offering suggests the long-dormant state privatization program is in full swing after state-owned E-Finance concluded one of the EGX’s biggest IPOs in years in October.

ADVISORS: EFG Hermes, CI Capital, Al Ahly Pharos and Renaissance Capital acted as joint financial advisors and bookrunners on behalf of Abu Qir’s selling shareholders, with NI Capital acting as program consultant.


CI Capital’s Cleopatra bid gets regulatory approval

CI Capital’s bid to acquire 26.2% of Cleopatra Hospitals Group has received the greenlight from the Financial Regulatory Authority (FRA), the regulator said in a statement (pdf) to the EGX on Thursday. MCI Capital Healthcare Partners, the CI Capital subsidiary that’s executing the acquisition, submitted a voluntary tender offer last week to purchase the shares at EGP 5 apiece, valuing the company at EGP 8 bn.

The fair value of the company has not been assessed by an independent financial advisor, a source familiar with the matter told Enterprise. MCI’s offer is slightly higher than the company’s current share price, which eased 1% to EGP 4.65 on Thursday, according to market data.

The company’s biggest shareholder also gave a nod of approval: Creed Healthcare, which owns 37.9% of CHG through its subsidiary Care Healthcare, has agreed to sell an 8-12% stake in the company from its holdings (126 mn-192 mn shares). MCI will likely acquire the rest of the shares through the EGX.

The acquisition bid comes on the back of strong 2021 earnings for the healthcare company, which reported 58% y-o-y growth in net income during the first nine months of the year on the back of a 38% y-o-y rise in revenues.

BACKGROUND: CHG has been eyeing geographical expansion across Cairo: The EGX-listed healthcare company — one of the two largest in the private sector — recently purchased a brownfield project in East Cairo to develop into a 400-bed medical facility. CHG recently sought to expand its footprint through a mega-merger with private healthcare group Alameda, but the transaction fell through earlier this year. Cleopatra also acquired a 60% stake in Bedaya Hospital last year.

ADVISORS: Zulficar & Partners is acting as legal advisor to MCI Capital.


Abu Auf to step up international sales drive

EGX-bound healthy foods brand Abu Auf is looking to grow its export volume 30% in 2022, aiming to ramp up sales of nuts, coffee and healthy foodstuffs to new foreign markets including Kuwait, Bahrain, Morocco, France, Germany, and several African countries, according to Ahmed Auf, CEO of parent company AUF.

It’s the second big foreign push for Abu Auf, which is opening five branches in the UAE through a wholly owned subsidiary. The company is now looking for new foreign markets for as many as 65 of its products, including spices and dates, Auf said in a statement out overnight (pdf) ahead of the opening this morning of the Food Africa expo at the Egypt International Exhibition Center. The event runs through Tuesday.

BACKGROUND: AUF aims to sell up to 49% of its shares in an offering on the Egyptian Exchange in 2Q2022. EFG Hermes is quarterbacking the transaction.


Egypt becomes a key LNG supplier to Turkey

Egypt has emerged as one of Turkey’s most important LNG suppliers so far in 4Q2021, shipping seven cargoes since the beginning of October, according to S&P Global Platts data. Turkish demand for gas is set to hit record levels this year due to rising consumption in the power sector.

Turkish-Egyptian relations are on the up: Most of Turkey’s supplies are coming from Algeria, the US, and Qatar but warming ties with its regional rival Egypt appear to be opening the door for greater energy cooperation. The two countries have held several rounds of talks this year with the aim of mending an eight-year rift, and there have been signs of progress towards a normalization of diplomatic ties.

Egyptian gas is also heading to Asia as LNG prices in the east soar. Sources tell Reuters that EGAS has offered one cargo for shipping in December.

Egypt’s LNG terminals are running at full capacity as the country tries to capitalize on the surge in natural gas prices overseas. The country is currently exporting the equivalent of around 1.6 bcf/d, helped by the resumption of operations at the Damietta LNG plant in February and rising gas prices in Europe.


Russia will start pouring money into RIZ buildout

Russia will start financing the construction of its Russian Industrial Zone (RIZ) next year, First Deputy Minister of Industry and Trade Vasily Osmakov said at a Russian trade forum over the weekend, Russian news agency Tass reports. Construction was originally expected to begin in 2020 but was delayed by the covid-19 pandemic. Osmakov did not provide details on how much financing is in the pipeline.

About the RIZ: The industrial zone will be implemented over the next 13 years but some companies are expected to start manufacturing products in 2022. As many as 32 Russian companies are interested in setting up shop in the zone, and are being lured by rental holidays, preferential tax rates, and lower energy tariffs.


Sympl raises USD 6 mn seed round

Sympl raises USD 6 mn from Beco, A15, GV: Buy-now-pay-later platform Sympl has raised a USD 6 mn seed round led by VC outfit Beco Capital, with participation from A15 and Global Ventures, according to a statement (pdf). The startup, which made its soft launch in October, will use the proceeds to add new merchants and products to its network.

Simply what does Sympl do? The platform allows debit card holders to buy products and services through its deferred, short-term, no-interest payment plans, helping merchants increase conversion rates.

The startup plans to be accepted at more than 1k stores by mid-2022, up from a current 240 retail and online stores, including Apple reseller Tradeline, hypermarket HyperOne, and jewelry-maker Damas, according to the statement.


Patients of EGX-listed Integrated Diagnostics Holdings’ Al Mokhtabar can now access around-the-clock virtual medical advice from medical consultation startup Estshara, according to a statement (pdf). Al Mokhtabar is integrating its services with Estshara under the agreement, said Al Mokhtabar’s operations manager, Manal Abdel Aziz. Patients of the medical diagnostics service will be able to upload their scans and test results on the Estshara and Al Mokhtabar platforms to connect with physicians, the statement read. Estshara raised USD 500k from Egypt Ventures earlier this year.


Zoomcar to invest USD 50 mn in three years

Car rental company Zoomcar is looking to double its investments in Egypt to USD 50 mn in the coming three years, VP and Egypt head Hany Olama told Al Borsa. The India-based firm initially said it would spend USD 25 mn over a three-year period when it launched in Cairo in October.

Ambitious plans: The car rental startup wants to significantly ramp up its customer base by the end of 2022, reaching 100k from 3.5k currently. It is planning to expand its services to Alexandria in May, before rolling out in South Sinai, the Red Sea, Dakahlia and Gharbia by the end of 2022, Olama said.

What’s Zoomcar? Launched in 2013, Zoomcar operates in India, the Philippines, Vietnam, Indonesia and now Egypt. The app provides authorization and ins. for car owners to rent out their vehicles, calculates the cost of rental according to duration and distance of the trip as well as the model and condition of the rental car, and processes payments electronically.



It was a relatively low-key evening on the airwaves last night, with Egypt’s ascent to the Arab Cup semis and a fatal car crash in Sheikh Zayed over the weekend leading coverage.

Egypt reached the Arab Cup semi-finals with a qualifying 3-1 victory against Jordan after a heated match. El Hekaya’s Amr Adib gave a shout out to the support of Egyptians in the audience at the stadium (watch, runtime: 00:36), while Kelma Akhira’s Lamees El Hadidi gave a nod to the Jordanian team’s efforts (watch, runtime: 2:00). Al Hayah Al Youm’s Lobna Assal also took note of the victory (watch, runtime: 00:46).

An individual suspected of having caused the fatal car crash in Sheikh Zayed that led to the deaths of four people has undergone illicit substance testing pending further investigation of the incident, Kelma Akhira (watch, runtime: 13:42) and El Hekaya (watch, runtime: 5:35) reported. Footage of the accident, captured through a security camera on the road, went viral on social media over the past several days.


Egyptian director Mohamed Diab’s Amira made headlines over the weekend after the Jordnanian Royal Film Commission pulled the film as its Oscar submission after being met with “great controversy.” The film aims to highlight the struggles of the Palestinian people but instead tells the story of children conceived by smuggling sperm from Palestinian prisoners in Israeli jails. The story is getting ink everywhere from Variety to Hollywood Reporter.

Also making headlines:


More AstraZeneca jabs from Spain

The Health Ministry reported 879 new covid-19 infections yesterday, up from 822 the day before. Egypt has now disclosed a total of 368,335 confirmed cases of covid-19. The ministry also reported 49 new deaths, bringing the country’s total death toll to 21,015.

We’ve received 1.3 mn AstraZeneca shots from Spain through the Gavi / Covax program, Youm7 reported. Spanish Prime Minister Pedro Sanchez had announced during his visit to Cairo earlier this month that Spain would send Egypt a total of 4.48 mn vaccine doses.


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The last time US inflation was this high, Mubarak hadn’t completed the first year of his presidency: Consumer prices in the US rose to 6.8% in November from last year — the quickest annual pace since 1982, according to official figures released Friday.

The figures gave more fodder to the bulls, if only because the figures were slightly less bad than they could have been: Analysts attributed gains on the S&P 500 and the Nasdaq, which both rose 1% on the news, to poor inflation data already being priced into the market, and hopes that the figures won’t push the Fed to accelerate the taper or hike interest rates earlier than expected.

Any action from the Fed is going to be “constrained” by a flattening yield curve: The treasuries yield curve — the spread between returns on short- and long-term government bonds — “looks set to be the flattest at the beginning of a Fed tightening cycle in a generation” if the Fed follows expectations to begin raising interest rates around mid-next year, Bloomberg says. The curve could invert — widely considered a sign of impending recession — if we see a series of interest rate hikes from the central bank in 2022, unless inflation proves to be transient and cools next year. The Fed’s Open Market Committee is set to meet this week on Tuesday and Wednesday.

Time for talk: G7 finance ministers will jump on a Zoom call tomorrow to try and find a solution to the surge in inflation around the world, Bloomberg reports, citing people with knowledge of the matter.

But expect more optics than action: “There’s not much governments can do to impose a solution,” said one economist. “The most urgent task for public officials is to show they’re concerned for their citizens’ welfare and at least look like they’re trying to do something.”

Inflows to EM stocks and bonds slowed abruptly in November, as investors fretted over the Omicron variant and the possibility of higher US interest rates come 2022. Foreign flows to EM assets outside of China turned negative at the end of November for the first time since March 2020’s pandemic-induced panic selloff, the Financial Times reports, citing data from the Institute of International Finance (IIF). Slow vaccination rates in EMs and the increasing strength of the greenback as the US eyes raising interest rates next year have seen “the willingness of investors to engage with emerging markets dry up,” the IFF’s chief economist told the paper.

Stuttering bond inflows could mark an end to the pandemic-fuelled EM “debt party,” Bloomberg reports, with strategists predicting record inflows over 2020 and 2021 to stabilize or begin falling in the new year. Some analyst analysts say the boom in EM debt may be cooling off, pointing to signs that the Federal Reserve could tighten policy sooner than expected in response to persistent inflationary pressures, threats to global growth including the emergence of Omicron, and weaker risk sentiment among borrowers. EM debt issuance for this year likely won’t match 2020’s peak of USD 771 bn, which came as developing countries’ governments sought to raise funds for stimulus measures in response to the pandemic.




+0.7% (YTD: +6.4%)



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Sell 15.76



Buy 15.66

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Interest rates CBE

8.25% deposit

9.25% lending




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S&P 500


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FTSE 100


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Brent crude

USD 75.15



Natural gas (Nymex)

USD 3.93




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USD 49,500.00



The EGX30 rose 0.7% at Thursday’s close on turnover of EGP 2.06 bn (31.9% above the 90-day average). Local investors were net sellers. The index is up 6.4% YTD.

In the green: Abu Qir Fertilizers (+20.0%), Heliopolis Housing (+7.5%) and Orascom Development Egypt (+5.1%).

In the red: Egyptian Resorts Company (-1.1%), Cleopatra Hospital (-1.1%) and CIB (-0.8%).


Lebanon requests a helping hand from Egypt: Lebanese Prime Minister Najib Mikati asked for Egypt to support it with natural gas so it can “urgently” generate electricity during his one-day visit to Egypt over the weekend. Egypt is expected to begin exporting 60-65 mn cbf/d of natural gas to Lebanon by early next year through a pipeline that connects Egypt to Lebanon via Jordan and Syria.


Institutionalization is to family-owned businesses what getting ready to raise a first series “A” is for a startup: A rite of passage that also says a hell of a lot about the health of your business. Last week, we took a deep dive into a recent study (pdf) by PricewaterhouseCoopers (PwC) on what family businesses need to do to thrive post-pandemic. We found that family businesses with medium-term strategic plans fared best during covid, but that a significant number of them don’t have the governance structures and basic paperwork — like shareholder agreements — to formalize the positions of family members in the business. In too many cases, those gaps will come back to haunt them in the years ahead.

To be ready for What’s Next, PwC joins a chorus of lenders, development finance institutions and advisors who are beating a drum that plays just one beat: Institutionalization. That’s fancy-speak for touchstones including the separation of ownership from management, hiring independent board members, succession planning, and creating a reporting framework that ensures management communicates to the board everything from strategy to results. Naturally enough, digitalisation should be at the heart of strategic plans.

In part two of a three-part series, we check in this week with senior folks at international financial institutions that help family businesses institutionalize. It’s not an easy road, it will result in some tough choices (and maybe a clash or two) — but the product on the other side is an investable business. Don’t care to raise investment? Cool. But consider this: An investable business is, by definition, one that would survive your absence — opening the door to retirement (or at least stepping back a step) one day.

And institutionalization isn’t only for family-owned companies: Every bootstrapped business will have to go through it one day.

“Institutionalization is the main enabler for growth,” principal equity lead for Egypt and the Southern Mediterranean at the European Bank for Reconstruction and Development (EBRD) Hassan Massoud tells us. It doesn’t just build a more robust business able to survive challenges: Institutionalization gives companies access to capital that allow them to grow faster, unconstrained by family finances, as well as access to expertise. It also makes it easier to find and retain top talent and forces a business to properly structure the ownership and intrafamily finances.

Just as every company is different, so too will be its priorities when it comes time to institutionalize, says Amira Agag, MENA corporate governance officer at the International Finance Corporation (IFC). Family businesses tend to have similar “constellations” of problems, but institutionalization starts with a diagnosis phase unique to your business. The IFC provides tools, consultation, and training that focus on the corporate governance challenges that family businesses face. The EBRD’s Massoud agrees, saying there’s no one-size-fits-all approach to becoming a corporation: Every company starts from a different point and has different goals.

The biggest challenge in corporatizing family businesses tends to be the unwillingness of members to bring in a professional board and outside management. Bringing on professional directors or senior managers is tough for family members used to (a) unchecked authority, (b) not being questioned, and (c) being able to dip into corporate coffers as if it’s the petty cashbox at the corner store. At some stage, the business will grow to a point where family members need outside skills and experience to manage the additional complexity and take the business to the next level, Agag says.

STEP 1- A good starting point is to look at the roles and responsibilities of any family members who work in the business. Who has what decision-making power? To whom are they accountable? Sorting that out can be a significant challenge if you’ve faced (or currently face) pressure to hire unskilled or inexperienced family members. A good institutionalization process can help attract the right caliber of family members to work in the business, according to Massoud — and identify paths to upgrade skills at the same time.

STEP 2- Make the (often gut-wrenching) decision to establish a professional board to separate ownership / governance from management. This will ideally involve separating the roles and responsibilities of “chairman” from “CEO” — and force you to bring in independent directors who should have skills that (a) your company needs and (b) that are not on offer from family members. In a situation like this, a management team can focus on operations, while the owner dedicates himself or herself to business strategy and managing risk, Agag suggests.

That process begins with identifying who has what stakes today — and who will be inheriting in the next generation. Look at who is best-suited to join a board (which provides oversight) and then who has the skills to be a member of a management team, Massoud tells us. After that, companies can identify their challenges and move towards solving them, he adds. This will put solid governance structures and foundations in place, Agag says.

Nomination to the board should be a structured competitive process, Agag says. This includes selecting members who can challenge and contribute to the development of strategy. Boards will be involved in overseeing management performance, creating institutionalized board policies and operations, and serving as a steady hand for the company. Members should be highly experienced outsiders who can offer the firm fresh perspectives. This eliminates the “rubber stamping” or duplication of skills, as Agag puts it.

What skills should you look for in an outside board member? One option is to choose someone with experience in a segment, country or industry in which the company isn’t active, but into which it wants to expand, Massoud says. He also says families should look for people who have been through similar challenges in the past. This person does not necessarily have to be in the same industry, but should have been intimately involved in an institutionalization path before, he adds.

STEP 3- Succession planning is also important, as the family grows and potential senior management candidates from the family become available. “We have seen many family businesses delay succession planning until the last minute, putting the company at risk,” Agag tells us. If left unaddressed, these issues can leave the company significantly exposed, she adds. The biggest challenge is in getting the older/current generation to acknowledge that the next generation has the ability to take over. Gaining external work experience to prove themselves is one solution to this, Agag says.

Yes, Junior is going to make mistakes, Mrs or Mr Founder — or (perfidy) not make the same decision you would have. But the business survived your learning on the job, didn’t it?

Institutionalization is a great way to attract future generations, but prior experience is advisable. “From our experience, we have noticed that future generations are ready to join and lead their family business when good governance is introduced,” Agag tells us. But the IFC always advises the next generation of family business leaders to gain work experience outside their company, as well as to work within different parts of their family business to be better prepared.

And remember: The process of implementing governance is an ongoing journey, Agag says. The system needs to be embedded into the business culture and keep moving.

For investors, bad governance practices, structures, and informality can be a serious issue. Investors look for a company that is sustainable and has growth potential, Agag says. Successful family firms exhibit sustainable levels of growth and commitment that are a direct result of being well governed. Family-owned firms also inspire a level of commitment that other companies can find difficult to achieve, Agag says.

And each step in the process speaks to a certain type of investor. “Every step of the institutionalization process has a certain type of investor that understands how to manage its risks, ranging from seed, to VC, to SME PE, to growth equity, to buyout equity — all the way to public market investors,” Massoud says.

WHAT’S NEXT in this story? In the third and final installment next week, we’ll look at bold-name case studies of how businesses institutionalized and attracted the outside expertise and capital they needed to get to the next stage of their journey.

Your top stories on future trends for the week:

  • Cashback services startup WaffarX closed a multi-mn USD funding round from Silicon Valley VC firm Lobby Capital, marking Lobby’s inaugural investment in the MENA region.
  • Minly taps into the Gulf: Egypt-based customized celeb video platform Minly acquired Emirati celebrity shout-out platform Oulo for an undisclosed amount.
  • Home services marketplace Filkhedma raised an undisclosed amount in a fresh investment round from The Cairo Angels, without providing further details on the milestone or what the investment will be used for.
  • Cleantech startup Plstka has raised an undisclosed amount of capital from Alexandria Angels Network and a matching fund from Hivos.
  • Angel investment group Cairo Angels has announced it has reached first close on its USD 5 mn micro-VC fund, Cairo Angels Syndicate Fund (CASF), without disclosing how much it raised.


9-12 December (Thursday-Sunday): The 6th Edition of Cairo Woodshow, Cairo International Convention Center, Cairo, Egypt.

12 December (Sunday): Booster shot appointments for those eligible will roll in on the Health Ministry’s website.

12 December (Sunday): Raya Holding’s Ordinary General Assembly meeting.

12 December (Sunday): Deadline to apply to the McKinsey Forward program for young professionals.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

14-15 December (Tuesday-Wednesday): Federal Open Market Committee meeting.

13-17 December (Monday-Friday): United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

14 December (Tuesday): Inquiry session for the Industrial Development Authority’s licenses to manufacture steel products.

14 December (Tuesday): CDC event to announce the details of its 2022-2026 strategy period.

14 December (Tuesday): The Egyptian Economic Summit, The St. Regis Hotel, Cairo.

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.

15 December (Wednesday): Target date for snackmaker Edita to wrap up due diligence on its acquisition of the Ole brand owner Egyptian Belgian Company.

15 December (Wednesday): The European Bank for Reconstruction and Development will give its final approval for a USD 100 mn facility to state-owned Banque Misr to finance local SMEs working on green projects.

16 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

16 December (Thursday): SODIC shares will be transferred to Aldar Properties / ADQ consortium by this date.

16 December (Thursday): Inquiry session for the Industrial Development Authority’s licenses to manufacture tobacco products.

End of December: El Nasr Automotive plans to sign contracts with a new partner to locally assemble EVs.

End of 4Q2021: EdVentures plans to have closed at least one more edtech investment round.

End of 4Q2021: Fawry plans to have launched its MyFawry card.

1H2022: The World Economic Forum annual meeting, location TBD.

1H2022: e-Aswaaq’s tourism platform will roll out its ticketing and online booking portal across Egypt.

1H2022: e-Finance’s digital healthcare service platform, eHealth, will launch its services.

1Q2022: Launch of the Egyptian Commodities Exchange.

1Q2022: Swvl acquisition of Viapool expected to close.

Second Half of January: Egypt will host the Egyptian-Bahraini Joint Committee.

The end of January: The Egyptian-Romanian business forum will take place with the aim of strengthening joint investment relations.

January 2022: Tenth of Ramadan dry port tender to be launched.

1 January 2022 (Saturday): Capital gains tax comes into effect on the EGX for local investors.

1 January 2022 (Saturday): Private sector minimum wage introduced.

1-15 January 2022 (Saturday-Saturday): Qualified Industrial Zones (QIZ) Joint Committee.

4 January 2022 (Tuesday): OPEC+ ministerial meeting.

7 January 2022 (Friday): Coptic Christmas.

10-13 January 2022 (Monday-Thursday): World Youth Forum, Sharm El Sheikh.

15 January (Saturday): Target date for the finalization of snackfood giant Edita’s acquisition of the Egyptian Belgian Company, owner of the Ole brand.

17-19 January 2022 (Monday-Wednesday): World Future Energy Summit, Abu Dhabi.

20 January 2022 (Thursday): Kadmar Shipping’s new line transporting agricultural crops between Alexandria and Russia begins its operations.

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

February 2022: Hassan Allam Construction’s new construction firm established with Russia’s Titan-2 to handle construction work on the Dabaa nuclear power plant begins its operations.

11 February 2022 (Friday): Deadline for Anghami SPAC merger.

11-13 February (Friday-Sunday) FIBA Intercontinental Cup, Cairo.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

15 February 2022 (Tuesday): The Industrial Development Authority’s deadline for receiving offers from companies for licenses to manufacture steel products.

19 February 2022 (Saturday): Public universities begin the second term of the 2021-2022 academic year.

March 2022: 4Q2021 earnings season.

March 2022: Deadline for the World Health Organization’s intergovernmental negotiating body to meet to discuss binding treaty on future pandemic cooperation.

March 2022: World Cup playoffs.

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

3 April 2022 (Sunday): Bidding begins on the Industrial Development Authority’s license to manufacture tobacco products.

4 April 2022 (Monday): CDC Group will formally change its name to British International Investment.

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.

Late April – 15 May 2022: 1Q2022 earnings season

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.

July 2022: A law governing ins. for seasonal contractors will come into effect.

8 July 2022 (Friday): Arafat Day.

9-13 July 2022 (Saturday-Wednesday): Eid Al Adha, national holiday.

30 July 2022 (Saturday): Islamic New Year.

Late July – 14 August 2022: 2Q2022 earnings season.

September 2022: Egypt will display its first naval exhibition with the title Naval Power.

6 October 2022 (Thursday): Armed Forces Day, national holiday.

8 October 2022 (Saturday): Prophet Muhammad’s birthday.

18-20 October 2022 (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

Late October – 14 November 2022: 3Q2022 earnings season.

**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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