AM — Gov’t to privatize state companies “every month, or every two months" -Planning Minister

Well, friends, we’ve made it through another workweek together and our reward is … cold weather as far as the eye can see. That’s the latest prognosis from the national weather service, which doesn’t see daytime temperatures in the capital rising above 17°C until well into February. The mercury will fall as low as 6°C overnight tonight and tomorrow. Here in the capital city, you can expect 2-4 mm of rain this morning, according to our favorite weather app, with the wind picking up substantially in the afternoon.

School kids and public sector workers in Alexandria will have an extra day off this weekend after the governor announced that government offices and schools will close in anticipation of bad weather — though exams will still go ahead. Alexandria is expected to see medium to heavy rain and thunder tomorrow, according to the latest forecast.

NEWSFLOW IS HEAVY TODAY, with the wonderful Hala El Said making big news on the privatization and investment fronts, Egypt bucking the trend as the IMF downgrades slightly its global growth projections — and there’s a metric ton of legislative news from the House of Representatives. We have all of this and more in this morning’s news well, below.

THE BIG STORY ABROAD- What happens when Gazprom turns off the taps? That’s the question being asked by the Western media this morning as the US tries to find alternative sources of natural gas for Europe in the event conflict in Ukraine disrupts fuel supplies. Europe imports roughly a third of its gas and oil from Russia, potentially spelling dire consequences for the continent should Russia turn off the taps in a hypothetical conflict in Ukraine. The White House is reportedly in talks with suppliers in the Middle East and Asia, though Qatar — one of the world’s biggest producers — apparently won’t be able to step in. Everyone from the Washington Post and the New York Times to CNBC and Bloomberg have coverage.

It’s not like we mention this often, but: Egypt has gas. And our neighbors to the east have gas — and a pipeline through which to ship it to us. And we have pretty nifty liquefaction infrastructure, too…

*** DID YOU MISS THE RESULTS OF OUR 2021 ENTERPRISE READER SURVEY? The emergence of the delta and omicron variants, supply chain issues, and surging commodity prices did little to put a damper on business, with the vast majority of you saying 2021 was a good year. Optimism is the prevailing sentiment as we push ahead with 2022, with most respondents signaling plans to increase investments this year and suggesting they see their companies faring better than the competition. Tap / click here to see the full results.

We’ll be announcing next week the names of eight readers who we’re inviting to breakfast when this current wave of the pandemic eases.

WHAT’S HAPPENING TODAY-

It’s the big day in DC: How hawkish is the Fed going to be? The Federal Reserve is widely expected to confirm that it will begin raising interest rates in March at the end of its two-day policy meeting today. The markets are currently pricing in four 0.25-percentage-point interest rate hikes this year, in what would be the bank’s most aggressive tightening cycle in decades as it tries to get a hold on inflation.

The catch: Markets are not happy. Chairman Jay Powell will face the cameras today with the unenviable task of maintaining the Fed’s credibility and talking tough on inflation while at the same time trying to temper rising volatility in the markets, which are balking at the prospect of higher interest rates. Don’t be surprised to hear some slightly more dovish notes from the chairman about the Fed’s plans post-March.

US shares resume downwards slide as interest rates, Ukraine tensions loom: For a while, it looked like US shares were going to pull off another incredible afternoon reversal after suffering heavy losses in early trading for the second day running. It wasn’t to be: weak tech earnings combined with investor nerves surrounding rising interest rates to send indexes falling deeper into the red late in the session. The S&P 500 finished down 1.2%, the Nasdaq lost 2.3%, and the Dow Jones ended marginally in the red, down 0.2%. (Bloomberg | Reuters)

Asian markets are mixed in early trading this morning, while futures suggest we have re-entered the dip-buying zone, with US and European indices in the green across the board as the markets seesaw ahead of the Fed’s announcement.

A fresh crypto winter? BTC fell to its lowest level since July when it dipped below USD 33k earlier this week, CNBC reports, before staging a recovery on Tuesday to bring it back past the USD 36k mark. Despite the comeback, some investors fear that the cryptocurrency could be heading into bear market territory. Ethereum and Solana have also fallen significantly from their record highs in November, leading some analysts to warn Bloomberg that we could see a repeat of the Great Crypto Winter of 2018, when the market went down hard — and stayed there for months.

⚽️ AFCON- It’s the Pharaohs’ turn to fight for a place in the quarter-finals of Afcon 2021 tonight. Egypt and Ivory Coast will meet for the first time in 14 years tonight in the penultimate last-16 game of the round. Having only scored two goals in their three group games, Egypt are going to need to find their shooting boots if they’re going to get past the Ivorians, who scored six in an arguably tougher group.

Kick off: 6:00pm CLT.

Who will Egypt / Ivory Coast face in the quarters? Beating Ivory Coast will set up a quarter-final tie with Morocco, who beat Malawi 2-1 last night to secure their place in the last eight.

Eight dead in stadium stampede: At least eight people have died and 38 were injured trying to watch Cameroon’s last-16 tie against Comoros yesterday, after a stampede occurred while spectators were entering the stadium, the Associated Press reports.

PSA #2- Fully vaccinated tourists can, in fact, visit Abu Dhabi without getting a booster shot, according to the newly updated Abu Dhabi tourism website. Only residents and citizens are required to have received a booster shot to enter the UAE’s capital city, the emirate said, after previously signaling that a booster would be required for anyone visiting.

FROM THE REGION-

Israeli President Isaac Herzog will pay an official visit to the UAE next week for talks with Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan, marking the first-ever visit to the country by an Israeli head of state, Bloomberg reports.

CIRCLE YOUR CALENDAR-

Startups have until next Sunday, 30 January to apply for the spring 2022 cycle of EGBank’s Mint Incubator. The incubator offers two tracks: A sector-agnostic track for startups at the MVP stage, and a fintech track that accepts early-stage startups both at the ideation and MVP stages. Main founders must be between 16-35 years old. You can apply here.

The Cairo International Book Fair starts this Thursday at the Egypt International Exhibition Center. Members of the public will be allowed to enter without providing proof of vaccination, the Culture Ministry said last week. The two-week event runs through to 7 February.

Catch an art exhibition for a good cause: The Sawiris Foundation for Social Development and AlexBank are organizing the first art exhibition by marginalized children in partnership with Townhouse Gallery, Al Ismaelia for Real Estate Investment, and Ubuntu Art Gallery, according to a press release (pdf). The exhibition will showcase work from art workshops attended by 250 children from institutions such as Banati Foundation, Samusocial International, Association for the Protection of the Environment, Educate Me Foundation, the UNHCR, and Save the Children International. The opening of the exhibition is slated for 13 February before opening its doors to the public at Townhouse Gallery from 14-19 February.

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, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Threats to Egypt’s water security from GERD to climate change and population growth have kept water projects high on the government’s agenda in the past few years. The government budget for FY2021-2022 earmarks some EGP 21 bn to costly — albeit necessary — projects on water-saving, seawater desalination, and canal lining. But one project recently launched by the Irrigation Ministry could offer a more cost-effective solution to combat water scarcity threats: managing and rationing groundwater collection through the use of auto-control devices.

Gov’t to step up privatization efforts in coming months: The Madbouly government is planning to sell stakes in state-owned companies every month or two, Planning Minister Hala El Said told Reuters.

Riding the e-Finance wave: State-owned e-payments firm e-Finance completed the EGX’s biggest IPO since 2015 in October, attracting strong demand from foreign institutional investors and seemingly breathing new life into the government’s stalled privatization agenda.

It’s these investors the government wants: “We're trying to select the right companies that can attract good institutional and good private sector [investors], and at the same time help in deepening the capital market in Egypt,” she told the newswire. “We're almost targeting a company every month, or every two months.”

But no names: El Said declined to tell Reuters which companies the government is considering offering to investors.

Military firms to be part-privatized this year: Stakes in the National Service Projects Organization’s bottled water company Safi and oil company Wataniya Petroleum could be offered to investors later this year, El Said said. The Sovereign Fund of Egypt is currently restructuring the companies ahead of the sales, which could involve buy-ins by strategic investors ahead of possible IPOs on the EGX.

The program, stalled since launch in 2018 by market conditions and then the pandemic, gained momentum last year following e-Finance’s IPO, which raised almost USD 370 mn for the fintech firm. Several weeks later, state petrochem firm Abu Qir sold a 10% stake in a secondary offering. State-owned Ghazl El Mahalla FC is set to offer a 67.5% stake in early February in its IPO, which is expected to raise a total of EGP 135 mn after attracting EGP 37 mn from institutional investors during the private placement.

Also from El Said:

• Gov’t to make clear where private investment is welcome — and where it isn’t: The government will soon publish a document explaining to private investors which areas of the economy they can invest in. Coming under the framework of its three-year IMF-backed reform program, the document “will say this is a green light where this is totally private sector, this is a red zone where this is totally for the government to invest, and this is a yellow zone where we can work together with guidelines and a level playing field,” El Said said.
• NIB restructure to take another four years: The government will finish restructuring the heavily-indebted National Investment Bank by 2026, as part of a plan agreed with the IMF to reduce fiscal risks. El Said — who chairs the bank — said that the government has completed around half of the work, which involves gradually reducing the bank’s liabilities and offloading assets over time.

The IMF downgraded its projection for global growth in 2022 to 4.4% in its World Economic Outlook update, down 0.5 percentage points from its last outlook report in October. The lender sees growth slowing to 3.8% in 2023, noting that, although this forecast is 0.2 percentage points higher than its previous expectation for next year, it “largely reflects a mechanical pickup after current drags dissipate in the second half of 2022.” Tap / click here to read the full report (pdf).

Bringing 2021 problems into 2022: The IMF points to the pandemic’s “continued grip,” persistent supply chain disruptions, rising inflation, and tightening monetary conditions across the world as the factors that came together to put the global economy “in a weaker position than anticipated” at the beginning of 2022.

Egypt bucks the trend: The IMF has revised upwards its growth forecast for Egypt to 5.6% in FY 2021-2022, from its 5.2% projection made in October. The Egyptian government is also expecting the economy to grow 5.6% this year.

We’re yet to see official figures, but the initial signs look good: Preliminary figures announced by Planning Minister Hala El Said last year suggest that the economy grew by 9.8% in 1Q — its quickest pace in two decades — and 6-7% in 2Q, thanks to a strong base effect.

The MENA region also got a slight upgrade: The Fund now expects the MENA economy to grow at a 4.3% clip in 2022, up from 4.1% in October.

Globally, inflation is set to be reined in by 2023: Inflation “is expected to remain elevated” this year, hovering at around 3.9% in advanced economies and 5.9% in EMs and developing economies, before cooling down next year as supply chain disruptions are resolved and tightening monetary policy reins in price increases.

But US tightening poses risk for EMs: The report points to potential pressure on emerging market currencies and more expensive debt leading to “challenging monetary and fiscal policy trade-offs” as the US Federal Reserve prepares to kick off its monetary tightening cycle. Meanwhile, vaccine rollouts continue to lag in developing countries and emerging markets, which is weighing on global growth recovery and allowing new variants of the virus to emerge, the report notes.

Downwards revisions in major economies weigh heaviest: The report sees major economies — the US, China, Canada, the UK, and the eurozone — clocking in lower growth this year and dragging down the forecast for overall global economic performance.

The downturn is likely to be front-loaded in 2022, with the first quarter of the year expected to see the bulk of the negative impact, the report suggests. This impact “is expected to fade” in 2Q2022, the report says.

This is all assuming we don’t see another covid wave: The forecasts are based on the assumption that severe illness, hospitalization and death from the virus become more or less a thing of the past by the end of the year.

Yes, 2023 growth will be higher than expected, but there’s a but: The IMF says global output will grow faster than it previously anticipated next year, but notes that the upwards revision it penciled in is not enough to compensate for its 2022 downgrade. “Cumulative global growth over 2022 and 2023 is projected to be 0.3 percentage points lower than previously forecast,” the report says.

Daily covid cases reach record high as omicron strikes: The Health Ministry reported a record 1,809 new covid infections yesterday, up from 1,651 the day before. The previous record was 1,774, set on 19 June, 2020, during the first wave of the virus. Egypt has now disclosed a total of 413,558 confirmed cases of covid-19. The ministry also reported 35 new deaths, bringing the country’s total death toll to 22,431.

The vaccine tally: 25,202,302 people are now fully vaccinated against the virus, while a little over 11.8 mn people have received their first shots and 580,112 people have received booster shots.

Molnupiravir for hospital use only: Merck’s antiviral covid-19 pill will only be used in hospitals to treat patients and will not be available for over-the-counter purchase in pharmacies, the Health Ministry has said. The Egyptian Drug Authority (EDA) on Monday approved the pill for emergency use, paving the way for five local firms to begin supplying local hospitals with the medication.

Is Gavi / Covax drying up? The World Health Organization’s Gavi / Covax vaccine initiative — which is providing Egypt with 40 mn vaccine doses under an agreement signed last year — can no longer accept new jab commitments from donor countries due to a USD 5.2 bn funding gap for 2022, Gavi’s chief exec told the Financial Times. Though countries donate jabs, the program needs funding for accessories crucial to the rollout, including syringes.

The House of Representatives gave the Unified Budget Act + Unified Planning Act its final nod in yesterday’s plenary session, Youm7 and Al Borsa reported.

Unified Budget Act: The legislation would require the government to be more transparent in how it plans public finances, forcing it to present an annual medium-term budgetary and fiscal strategy to the House and set spending limits for each ministry.

Unified Planning Act: The bill, which received preliminary approval earlier this month, would dictate how governorate-level economic, social, and urban development plans are financed and implemented. It would also seek to diversify funding for development projects by encouraging more public-private partnerships (PPP).

What’s next for the bills: The usual process should now follow: The two bills will make their way to President Abdel Fattah El Sisi to be signed into law before taking effect when its executive regulations are published.

Also approved yesterday-

#1- An overhauled tourism and hotels act was given preliminary approval by the House. The bill is set to simplify licensing rules for hotels and tourism companies. It will be up for further discussion in the House’s next plenary session before receiving its final nod.

#2- A draft law that will see the creation of a tourism and antiquities fund received its final nod from the House, according to Al Borsa. The fund will finance the development of tourist areas and archeological sites, as well as restoration projects from the Supreme Council of Antiquities and cultural heritage work.

#3- A draft law permitting landlords to evict organizations from non-residential properties was approved by the House Housing Committee yesterday. Labeled the ‘old rent law’ by the press, the bill will allow landlords to evict government agencies, public and private companies, embassies, clubs, associations and other entities leasing properties under the old rent system within five years of its being signed into law. Tenants would pay five times the current rent — with a 15% annual rent hike — in the meantime. The bill doesn’t impact individuals renting residential properties under the old rent system. Al Shorouk has more.

The House will hold its next session on Sunday, 6 February, according to Youm7.

Edita Food Industries will invest around EGP 400 mn to add new production lines for its baked goods and wafers segments in 2022, IR director Menna Shams El Din told Enterprise. Some of the investment will also be earmarked for expanding operations at its recently inaugurated HoHos cake production facility in Morocco, Shams El Din said.

Edita has been all about baked goods + wafers lately: The company last week launched Freska Choco Sticks as part of its plan to expand its 15% market share in the wafer segment, which is its fastest-growing line of business. Meanwhile, its new EGP 135 mn production line — which is set to increase Edita’s production capacity for baked goods by 20% amid rising demand for its Molto range — should be operational before the end of 1Q2022, Shams El Din confirmed. Edita had also eyed acquiring the assets of Egyptian Belgian Company to further boost its baked goods production capacity, before the transaction fell through earlier this month.

As well as cross-border expansion: Edita expanded overseas for the first time with last year’s inauguration of its Moroccan facility, which could eventually include at least two more production lines. The snackfoods giant is also planning to expand to two new markets over the next five years, with entry into one of those slated for this year, as part of wider regional expansion plans.

OTHER INVESTMENT NEWS-

China's Zhengbang Group plans to invest up to USD 20 mn to set up a new poultry feed factory in Beheira, Al Mal quotes the company's Egypt general manager as saying. The company is currently in talks with authorities to finalize the licenses for the new plant, with construction expected to kick off in 2Q2022 and production to start by the end of the year.

New oil and gas exploration rights will be up for grabs in 1H2022. The government plans to launch a new global tender for oil and gas exploration before June, Bloomberg Asharq reported Oil Minister Tarek El Molla as saying during a press conference yesterday. No further details were disclosed on the upcoming tender.

The Oil Ministry kicked off 2022 by wrapping up its last tender: Earlier this month, seven international energy companies including BP and Eni were awarded eight of the 24 oil and gas exploration blocks included in the government’s 2021 bid round. The ministry didn’t disclose the status of the other 16 concessions put up for auction in the bid round, which ran between mid-February and the end of July last year.

The sector has seen a lot of activity lately: At the end of last year, the Oil Ministry inked a USD 3.5 bn agreement with Apache and Sinopec, and Italian energy firm Eni committed to invest a minimum USD 1 bn on oil production in Egypt. Canadian firm Transglobe and London-based Pharos Energy this year signed E&P agreements worth USD 506 mn. The ministry wants to attract USD 7 bn of foreign direct investment (FDI) into the oil and gas sector next fiscal year, El Molla said earlier this week.

Ezz Steel has completed its purchase of Ahmed Abou Hashima’s 18% stake in Egyptian Steel, announcing yesterday in an EGX filing (pdf) that the shares have changed hands. The steel giant’s board of directors in December approved the acquisition through its subsidiary Al Ezz Dekheila Steel, which was set to pay EGP 2.5 bn for the shares in an all-cash transaction, valuing Egyptian Steel at almost EGP 14 bn. The move sees Abou Hashima sell down his remaining shares in the company he founded back in 2010, after he sold an 82% stake to the military's National Service Projects Organization in 2017.

ADVISORS: Sarie Eldin & Partners were sell-side legal advisors, with Rizkana & Partners acting as buy-side counsel. Eagle Advisors conducted the fair value study, while Moore Egypt served as the auditor.

ALSO IN M&A-

OC completes acquisition of Sawiris-owned business: Orascom Construction (OC) has completed its USD 35 mn acquisition of 100% of a Sawiris family-owned equipment import, distribution and services business, the company said in an EGX disclosure (pdf). The acquisition, which was greenlit by OC shareholders in December, saw OC acquire the target company’s three subsidiaries — Orascom Trading, Orascom Freezone and National Equipment Company.

El Sisi, Tebboune talks dominate the talk shows: President Abdel Fattah El Sisi’s discussions with Algerian President Abdelmadjid Tebboune in Cairo yesterday was the talk of the airwaves last night. The two heads of state discussed the dispute over the Grand Ethiopian Renaissance Dam (GERD) and the political crisis in Libya, where efforts to organize national elections are in danger of falling apart. Kelma Akhira (watch, runtime: 9:45), Yahduth Fi Masr (watch, runtime: 3:05), Al Hayah Al Youm (watch, runtime: 3:13), and Masaa DMC (watch, runtime: 3:10) all had coverage.

Covid vaccines for the kids: The Health Ministry is considering allowing children as young as five to be vaccinated against covid-19, Ministry Spokesperson Hossam Abdel Ghaffar said on Ala Mas’ouleety last night (watch, runtime: 9:40). The vaccine rollout has so far only been extended to children aged 12 and above.

The cause celebre du jour that is As7ab wala A3az is leading coverage in the foreign press this morning: Western journos are picking up on uproar in the Egyptian Twittersphere, where people are all but accusing Netflix of causing the downfall of Egyptian civilization. The film checks quite a few items on the list of transgressions against conservative social mores (albeit tamely): same-[redacted] relationships ✅; (female) infidelity ✅; alcohol consumption ✅. This has led to Rep. Mostafa Bakry calling for Netflix to be banned from the country, while some social media users have directed particular fury at star Mona Zaki, who is facing calls from some to be ejected from the actors’ union. Our advice: Watch the move and form your own opinion. (Variety | Washington Post | The National)

US green-lights USD 2.5 bn Egypt arms sale: Egypt could spend as much as USD 2.5 bn (EGP 39.3 bn) on American fighter jets and radar systems after the State Department yesterday (statements: here and here) green-lit the sale. The government wants to purchase 12 Super Hercules planes from US defense giant Lockheed Martin for up to USD 2.2 bn, while three SPS-48 land-based radars would be supplied by L3Harris Technologies for as much as USD 355 mn. Egypt was the third-largest arms purchaser of any country in the period spanning 2013-2020, according to the Stockholm International Peace Research Institute.

CI Capital is set to offer factoring services this year, with a strong pipeline expected to “boost the company’s portfolio,” a senior official from the state-owned investment bank told us yesterday, confirming a Daily News report. The bank obtained a factoring license last year from the Financial Regulatory Authority (FRA), the source added, without disclosing further details on their upcoming plans or an expected timeline. The company will integrate factoring into its portfolio of non-banking financial services (NBFS), which includes its microfinance arm Reefy, leasing venture Corplease, consumer finance outfit Souhoula and mortgage finance firm CI Mortgage. Head to our handy explainer here for more details on how factoring works, and why more NBFS players are looking to offer factoring services.

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

• Homebuyers looking to lease-purchase properties will no longer have to make an advance payment, the Financial Regulatory Authority said in a statement yesterday, in a move meant to help more citizens buy their own real estate.
• Arizona State University has agreed to partner with Galala University to create the first dual-degree program between a US university and an Egyptian public university.
• Jumia has launched its second Egyptian tech center in Alexandria. The center is the first regional center for tech and software development in Egypt, and will service the 11 African countries in which Jumia operates.
• Capricorn Energy (formerly Cairn Energy) has seen production from its Western Desert oil assets rise 8% since acquiring them from Shell last year.
• State-owned Delta Steel will be allowed to ramp up production more than 7x after the Public Enterprises Ministry granted it a license to produce up to 500k tons of steel each year.

Shoukry talks GERD, Sudan with US Horn of Africa envoy: The Biden administration’s new envoy to the Horn of Africa, David Satterfield, discussed the Grand Ethiopian Renaissance Dam (GERD) and the political crisis in Sudan with Foreign Ministry Sameh Shoukry in Cairo yesterday, the Egyptian Foreign Ministry said in a statement. Satterfield, who replaced Jeffrey Feltman as Washington’s regional envoy earlier this month, is currently touring the region “to promote democratic civilian rule in Sudan and to support peace and prosperity in the Horn of Africa,” the US State Department said Tuesday. He has already visited Saudi Arabia, Sudan, and Ethiopia, and Kenya, and will travel next to the UAE, Turkey, and Israel.