AM — Goldman is bullish on Egypt shares.
Plus: We’re off tomorrow for Coptic Christmas — see you on Sunday

Good morning, wonderful people, and welcome to our final edition of EnterpriseAM for this holiday-shortened workweek. A very Merry Christmas to everyone celebrating this weekend — here’s to a wonderful break with family and friends.

PSA #1- We’re all off on Thursday, 6 January in observance of Coptic Christmas, which falls on Friday. The EGX, central bank, cabinet and manpower ministry have all issued statements confirming it’s a national holiday. Your next regularly scheduled holiday will be Thursday, 27 January. We then start a long holiday drought stretching into late-April, at which time we’ll be deep into Ramadan.

PSA #2- Heading to Dubai from Egypt? You’ll need a QR-coded PCR test before departure — and have to take another one on arrival. All travellers to Dubai must show a negative PCR test taken no more than 72 hours previously — but PCR certificates for passengers traveling from Egypt (as well as India and Vietnam) must also include a QR code, under new guidance on the Emirates airlines website. Egypt also made the list of dozens of countries from which arrivals to Dubai must also take another covid-19 PCR test upon landing in the emirate — and remain in their hotels or homes until they receive a negative result.

There’s no word yet on the outcome of the final votes that were scheduled for yesterday in the House of Representatives on the proposed fintech act and the unified budget act. The House did give its preliminary approval to the Unified Planning Act in a plenary session, according to Ahram Gate. The legislation would, if passed, dictate how governorate-level economic, social, and urban development plans are implemented.

WHAT’S HAPPENING TODAY-

THE BIG STORY ABROAD- The Big Quit is showing no signs of slowing in the US after a record 4.5 mn workers quit their jobs in November, according to official figures released yesterday. The so-called ‘great resignation’ was a hot topic throughout 2021 in the United States as the number of people quitting their jobs kept notching new records, indicating a tightening labor market and stronger wage growth. The figures are everywhere in the business press this morning from Bloomberg and the Financial Times to Reuters and the Wall Street Journal.

Warren Buffett’s rethink on Apple could prove to be his best play ever: The ex-tech skeptic has made more than USD 120 bn on paper thanks to his pivot into Apple stock, according to CNBC. Buoyed by the historic covid-fuelled tech rally, Apple on Monday became the first company to clock a USD 3 tn market cap, after adding USD 1 tn to its market value in less than 16 months. Buffett, who began buying shares in the company in 2016 and owned a 5.4% stake in Apple as of last September, has seen his USD 36 bn investment surge almost 400% to USD 160 bn.

MARKET WATCH-

The OPEC+ alliance of oil producers is going ahead with its plan to increase output by 400k barrels a day in February amid indications that the omicron variant will only have a limited impact on global demand, Reuters reports.

Do markets think covid is roaring to an end? The price of points in that direction. Brent and US crude both closed up yesterday, prompting one energy analyst to tell the newswire that “it appears that the market [thinks] that omicron is the beginning of the end of covid-19.”

CIRCLE YOUR CALENDAR-

Key news triggers to keep your eye on:

• Foreign reserves: December’s foreign reserves figures will be announced before the week is out.
• Interest rates: Further afield, the Central Bank of Egypt (CBE) will hold its first policy meeting of 2022 on Thursday, 3 February.

The 2021 Africa Cup of Nations gets underway in Cameroon next Sunday, 9 January. The championship will run until Sunday, 6 February.

The World Youth Forum kicks off in Sharm El Sheikh next Monday, 10 January and runs until Thursday, 13 January.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development as well as social infrastructure such as health and education.

In today’s issue: The past year saw Egypt move forward in its energy hub ambitions, which we detailed in Part 1 and Part 2 of our year in review series. Going into 2022, there are continued snarls when it comes to infrastructure such as high transportation costs and supply chain woes, but so far it doesn’t seem like they will phase the energy sector which is looking to continue its momentum in the coming year through a number of agreements, projects, and plans to increase energy exports.

Egypt’s non-oil business activity “inched closer to stabilisation” in December, contracting at its slowest pace in four months, according to IHS Markit’s purchasing managers’ index survey (pdf). An easing of inflationary pressures, increase in export revenues, and uptick in tourism supported new business, though subdued demand and lower output continued to weigh on firms, pushing the gauge up to 49.0 in December from 48.7 the previous month — an improvement, but still below the 50.0 mark that separates expansion from contraction. This is the thirteenth consecutive month private sector activity has contracted.

Input cost inflation saw its fastest slowdown in over three years, due to a softening of increases in purchasing costs and wages, according to the report. “The latest Egypt PMI gave increased confidence that inflationary pressures peaked earlier in the fourth quarter and are now beginning to soften,” said David Owen, IHS Markit economist.

Weak demand and overall price hikes are still problematic: Price pressures were still strong overall, leading firms to mark up their selling prices. These higher rates were partly to blame for subdued customer demand. Business output and new orders fell for the fifth month running.

Tourism and exports had a good month: New business was supported by an improvement in tourism activity and the sharpest rise in export orders since February, according to the report. Egypt’s export revenues recorded a record USD 31 bn in 2021, according to Prime Minister Moustafa Madbouly.

Fewer jobs — though the hiring market shrank more slowly: Lower sales and a relatively mild rise in backlogs impacted hiring. However, the rate of job reduction was softer than the previous month and mostly driven by companies deciding not to replace employees who quit their jobs voluntarily, the report notes.

Global supply chain issues still have a local impact. Delivery times lengthened for the second month in a row, with suppliers unable to mitigate global bottlenecks. The supply delays meant that inventories were depleted for the fifth consecutive month, despite an increase in purchasing activity as some businesses attempted to replenish their stock. However, supply chains overall deteriorated only slightly in December, and less so than in November.

Omicron means businesses are still “downbeat” on outlook, with business confidence recording only a fractional rise from November's one-year low, says the report. Only around 23% of companies gave a positive outlook, as hopes for recovery were dampened by concerns over omicron and price hikes.

ELSEWHERE IN THE REGION- Saudi Arabia’s non-oil private sector activity fell to a nine-month low in December as omicron worries dented Saudi business confidence and new orders. The kingdom’s PMI fell to 53.9 in December from 56.9 in November, reflecting a sharp slowdown in growth even as it continued to expand for the sixteenth consecutive month.

GB Lease has completed the sale of EGP 4.3 bn of securitized bonds to investors, according to a statement (pdf) from CIB, which worked on the transaction. The leasing arm of GB Auto sold the securities in two separate issuances with tranches rated A through AA+. Abu Dhabi Commercial Bank was the sole subscriber to both issuances, which were backed by leasing receivables.

This is the company’s first issuance in a year: The last time GB Lease went to the securitization market was last January when it sold EGP 2 bn of asset-backed securities.

Advisors: CIB, Banque du Caire and the Suez Canal Bank acted as joint arrangers, underwriters, and financial advisors on a EGP 1.65 bn sale, while CIB, AAIB, Banque du Caire, and Al Ahly Bank of Kuwait worked on the second, EGP 2.65 bn issuance. Law firm Dreny and Partners provided counsel, while Sherif Dabbous was the auditor.

MEANWHILE-

Premium Card closed an EGP 170 mn short-term securitized bond sale, financial advisor EFG Hermes announced (pdf) yesterday. The issuance consists of a single ten-month tranche, and is part of a two-year, EGP 2 bn securitization program Premium Card launched last year. The bonds received a Prime 1 rating from rating service MERIS.

Advisors: EFG Hermes was the sole financial advisor, sole transaction manager, book-runner, underwriter and arranger for the offering.

2022 SO FAR-

The two sales bring the total value of securitized bonds sold since the start of the new year to almost EGP 6.9 bn, by our count. CI Capital’s leasing arm Corplease kicked off the year with a four-tranche, EGP 2.4 bn issuance earlier this week. A total of 19 securitized bond issuances with a combined value of EGP 15.8 bn went to market last year, according to our figures. Three of those issuances, together worth nearly EGP 1.75 bn, took place last week as the market saw a flurry of activity to close out 2021.

In the pipeline: Cairo Housing and Development’s maiden issuance to the tune of EGP 146 mn, while its sister companies are slated to take a EGP 190 mn issuance to market after receiving regulatory approval.

Solar energy players are lobbying to scrap a newly-imposed 5% import tariff on solar panels, Al Mal reports. The Solar Energy Development Association (SEDA) has sent a letter to Electricity Minister Mohamed Shaker requesting that the ministry cancel the duty, warning that the new levy will hurt the industry. “Egypt’s solar energy market is still trying to get on its feet and can barely afford to face more challenges,” a member of the industry body separately told Enterprise yesterday.

The fee was introduced in November as part of a bundle of customs hikes introduced by the Madbouly government as it looks to raise revenues. Previously exempt from tariffs, photovoltaic cells and solar panels are now subject to a 5% import tax, raising costs for local industry.

The solar industry is already under pressure from rising commodity + shipping prices: Rising shipping costs and surging prices of metals such as aluminum, steel and copper last year have squeezed margins and contributed to some projects being delayed.

SEDA members pessimistic: Members of the association, which includes more than 100 companies and investors in Egypt’s fast-growing solar industry, are downbeat on how the charge will affect the sector. The costs of constructing new solar stations will rise by 10% due to the tariff, Al Mal quotes Ahmed Hamdy, founder of Africa Solar Power, as saying. The newspaper also quotes Hatem Tawfik, managing director of Cairo Solar, as having said it will likely reduce the return on investment in the sector and hit demand.

*** Read Going Green: We recently took a look at how rising commodity prices are affecting Egypt’s local solar industry.

Eastern Company has appointed Tamer Mosli (LinkedIn) as its chief financial officer, the company announced in an EGX disclosure (pdf) yesterday.

The National Bank of Egypt finished 2021 still at or near the top of Bloomberg’s Africa syndicated loans league table, Hapi Journal reports. NBE managed 51 transactions — more than any other bank in the Middle East and Africa — worth more than EGP 235 bn during the year. The bank also ranked number three as financing agent and main arranger among banks in the MENA region.

The capital gains tax featured on the nation’s airwaves last night, as head of industry lobby group the Egyptian Capital Market Association (ECMA) Mohamed Maher phoned into Kelma Akhira (watch, runtime: 13:22) and Masaa DMC (watch, runtime: 6:32) to discuss changes ECMA wants to see made to the law that governs a 10% capital gains tax on EGX transactions. The CGT came into effect on 1 January. Maher also leads Prime Securities.

The industry lobby seems to want changes to the package of EGX tax cuts and fee reductions recently proposed by the government, which members of cabinet discussed yesterday with representatives of the securities industry, and a group of MPs. The government announced a range of measures in November designed to soften the impact of the new 10% capital gains tax on EGX transactions. The basket of measures includes reduced trading and clearance fees and lower taxes on share swaps and earnings from equity funds.

Unfortunately, we don’t know much else: Maher didn’t say what ECMA is trying to negotiate with the government or provide an update on the talks, saying only that the lobby group will finalize its proposed amendments in a few days and hopes to present them to cabinet in the next two or three weeks.

Reminder: The capital gains tax replaced stamp duty on EGX transactions at the beginning of the year. Resident investors will now pay the 10% tax on net portfolio earnings at the end of the tax year. International investors are not subject ot the tax.

El Nasr might have a Chinese partner to produce EVs by March: The government is in talks with two Chinese companies to partner with El Nasr Automotive to produce electric cars in Egypt, Public Enterprises Minister Hisham Tawfik told Yahduth Fi Masr’s Sherif Amer (watch, runtime: 3:50). The government hopes to finalize terms later this month and sign final contracts by March, he said. The talks come after negotiations with Chinese auto firm Dongfeng collapsed in November.

Does this imply the short list has gotten shorter? El Nasr CEO Hani El Khouly said just a few days ago that negotiations are ongoing with seven international companies.

Leading the conversation on Egypt in the foreign press this morning: Egyptian authorities have arrested two people in connection with the death of a teenage girl, who committed suicide after allegedly being blackmailed with deepfaked images of herself. (BBC | The National)

Also getting attention: The former managing director of defunct Egyptian budget airline Flash Airlines has been charged by a French judge of involuntary manslaughter, eighteen years after an air crash in the Red Sea that killed 148 people. (AFP)

Green hydrogen plan in the works: Egypt will soon sign an agreement with a foreign consultancy to put together a 12-month strategy to develop the country’s green hydrogen industry, according to Electricity Minister Mohamed Shaker. Last year’s directive from President Abdel Fattah El Sisi to establish Egypt’s green hydrogen strategy could yield an initial phase of green hydrogen projects possibly worth USD 3-4 bn.

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

• South Korea’s Korea Hydro & Nuclear Power could work on the construction of the Rosatom-built Dabaa nuclear plant after reaching an early agreement with the Russian state company.
• PASSAP Home Appliances is planning to inaugurate its EGP 90 mn stove factory by the end of the year, with an eye to earmark 50% of its output for exports.
• Air Supply Group could soon sign an EGP 250 mn agreement to construct, manage, and operate medical gas production facilities within Kima’s Aswan complex.
• BelCash is partnering with Orascom Development Holding to offer education financing and home renovation services to Gouna and Makadi Heights residents.

Egypt will receive its first shipments of Pfizer’s Paxlovid covid pills and AstraZeneca’s Evusheld antibody treatment this month, Health MInistry spokesperson Hossam Abdel Ghaffar said (watch, runtime: 12:38). Abdel Ghaffar had recently said the pills will arrive in the “coming weeks.”

The Health Ministry reported 769 new covid-19 infections yesterday, up from 723 the day before. Egypt has now disclosed a total of 388,651 confirmed cases of covid-19. The ministry also reported 19 new deaths, bringing the country’s total death toll to 21,836.

The US reported over 1 mn new covid-19 cases on Monday — a new record single-day number of new infections from the virus, CNBC reports. The record could in part be down to delayed reporting over the New Year weekend. That said, many experts now suggest death and hospitalization rates are the key figure to pay attention to with omicron, given that it’s generally less severe — particularly in those who have been vaccinated, boosted or previously infected.

President Abdel Fattah El Sisi discussed regional issues in a phone call with Abu Dhabi crown prince Mohamed bin Zayed yesterday, Emirati news agency WAM reported yesterday. No further details were reported.

Erdogan can’t pry Turkish investors from their greenbacks: Turkish government efforts to drive support for the TRY are doing little to persuade investors to part with foreign currency holdings, with total USD deposits rising to a record USD 239 bn in one week last month, Bloomberg reports. Despite apparent massive interventions in December to try and bolster the sliding TRY, the currency slid back to 13.30 to the USD yesterday. And with inflation at over 36% and Turkey’s official reserves dwindling, it’s unclear how long policymakers can stand in the way of USD demand, Bloomberg says.