Tuesday, 1 February 2022

AM — More on our re-entry to JPMorgan’s EM bond index

TL;DR

WHAT WE’RE TRACKING TODAY

Welcome to February, wonderful people. It’s a straight shot from here to the end of 1Q and just 60 days until the start of Ramadan, which begins on or about 2 April (that’s a Saturday). We hope all of you FMCG and advertising folks have your plans locked in and that silly season is being good to you.

HAPPENING NOW- The bears are still salivating — and wondering what’s keeping stocks aloft.

US markets closed out a horrible month with a huge rally: The S&P 500 closed up nearly 2% on Monday while the Nasdaq surged 6.6% over the past two sessions, marking both index’s biggest two-day rallies since 2020, Bloomberg reports.

But that doesn’t change the fact that it was a terrible January for stocks, with the S&P falling 5.3% over the month, while the tech-heavy Nasdaq notched its worst monthly loss in over three years, down 8.5%. Market-watchers blamed the rocky January on the anticipated Fed tightening.

Oil was another story, posting its biggest January gain in at least three decades as supply continues to outstrip demand. Brent crude, the benchmark outside the US, settled at above USD 91 / barrel on Monday, marking a 17% gain for the month. Some analysts see oil at USD 100 / barrel this year — not great for inflation everywhere, and not wonderful for Egypt’s budget projections, either, given we’re a net importer.

OPEC+ will meet tomorrow — but isn’t likely to step in on spiraling prices. The cartel is expected to agree to another gradual oil production increase of 400k bbl/d — continuing a strategy that has so far failed to meet the recovery in demand as several member countries struggle to up their output.

THE BIG STORY ABROAD-

It’s still Ukraine: Russia and the US waged a war of words over Russian military buildup at its border with Ukraine at the UN Security Council’s meeting yesterday to discuss the issue. There was plenty of jawing and no action, but the Associated Press reports that Russia sent the US a written response to a proposal from Washington on how to de-escalate the crisis in the hours following.

Whether Russia is in fact willing to turn down the heat remains to be seen — though Foreign Minister Sergei Lavrov and US Secretary of State Antony Blinken are booked in to chat about it all over the phone today, Bloomberg reports. UK Prime Minister Boris Johnson, meanwhile, is getting on a plane to Ukraine. It can hardly be less hospitable than the environment he’s currently facing at home. And both the US and the UK are continuing to up their threats of very terrible sanctions for Russia — and newly, its elites — if it does invade its neighbor.

RELEVANT TO US- The threat of war is already driving up global wheat prices, the Wall Street Journal reports. The world’s largest wheat importer, Egypt is also the largest consumer of Ukrainian wheat, last year purchasing the equivalent of around 14% of its total wheat consumption from the eastern European country.

ALSO- The rest of the world is rushing to catch up to Egypt as they wonder when it’s okay to cancel covid. Go read the Wall Street Journal’s “Omicron pushes health authorities toward learning to live with covid-19” and marvel, once again, at how lightly Egypt has gotten off when it comes to pandemic-era lockdowns, restrictions and culture wars.

SIGN OF THE TIMES- The New York Times has bought Wordle. If you know, you know.

MEANWHILE- RIP, Dr. Johnny Fever. Howard Hesseman, who brought the radio DJ to life on WKRP in Cincinnati and was later beloved by a certain type of neurotic millennial in Head of the Class. He died at age 81. The New York Times has a nice obit.

CIRCLE YOUR CALENDAR-

The Central Bank of Egypt will hold its first policy meeting of 2022 on Thursday. All analysts surveyed in our regular interest rate poll expect the CBE to keep rates on hold, as they anticipate our rates continuing to attract portfolio inflows even amid Fed tightening and global inflationary pressures.

January PMI figures for Egypt, Saudi Arabia, and the UAE are also due out on Thursday.

From our friends at the US embassy: Women can now apply to join Fortune Global Women's Mentoring Program which will take place from 8-28 May 2022. The program aims to bring emerging women leaders from around the world to the US to meet and learn from the Fortune Most Powerful Women community, which includes executive women mentors from companies such as Accenture, Johnson & Johnson, and Aetna. The deadline to apply for the program is 8 February. You can begin your application by signing up here.

ALSO- The embassy is now accepting applications for Cultural Property Agreement Implementation projects that would help Egypt protect cultural property from looting, theft, and illicit trafficking. The guidelines state that concept notes should be sent in by this Thursday, 3 February, while shortlisted applicants will need to submit full applications by 4 May. Each project will receive USD 50-100k, with around USD 500k earmarked for the entire program.

The IMF and World Bank’s annual fall meeting this October will take place in Washington DC, with plans for Morocco to host delayed until October 2023 due to “continuing uncertainty over the covid-19 pandemic,” the World Bank announced in a statement. This marks the second year the Morocco meeting, which was initially set for 2021, has been pushed due to the pandemic. The lenders traditionally hold two consecutive annual meetings in DC, with the third meeting held in another member country.

The Cairo International Book Fair continues today at the Egypt International Exhibition Center. The event runs through to 7 February.

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

enterprise

*** 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: The EBRD has provided Egypt EUR 1 bn in total funding in 2021 — with 44% of that going towards green economy projects. We sat down with Heike Harmgart, the EBRD’s managing director for the Southern and Eastern Mediterranean (SEMED) region, where we discussed details of their 2021 funding, their priorities for 2022, and what the bank hopes to see coming out of COP27.

enterprise

DEBT WATCH

Egypt rejoins JPMorgan bond index

Egypt rejoined JPMorgan’s emerging-market bond index following a decade of absence yesterday in a move that could bring new passive flows into the local debt market. Fourteen EGP bonds worth around USD 26 bn have been added to the JPMorgan GBI-EM Global Diversified Index, giving Egypt a weighting of 1.85%, the Finance Ministry announced. The bonds have an average yield of 14.9% and a maturity of 2.9 years, it said.

That’s not all: The bonds have also been added to the GBI-EM Broad Diversified Index with a 1.47% weighting and the GBI-AGG Diversified Index with a weighting of 0.24%. Egypt has also been added to the investment bank’s green bond index following its USD 750 mn issuance in 2020.

This isn’t the first time Egypt has been a part of the index, having been kicked off in the wake of the economic turmoil that followed the 25 January Revolution in 2011.

“This inclusion confirms the confidence of the foreign [investor] community of Egypt’s improved fundamentals … Egypt is being put on the international radar as an investment destination,” said Finance Minister Mohamed Maait.

A very welcome buffer: The inclusion of Egyptian debt in the index will help to stabilize foreign inflows, Mohamed Abu Basha, EFG Hermes’ chief economist, told us. “This type of hot money is less volatile than the investments of active fund managers, and may limit the risk of the latter’s exit from emerging markets in the event of a US interest rate hike,” he said.

“Foreign flows into Egypt currently amount to about USD 30 bn, while the current relative weight of Egypt on the index is USD 4 bn,” he added.

A key moment: “The inclusion comes at a very important time because it coincides with the exit of some investors from global emerging markets,” said Radwa El Swaify, head of research at Al Ahly Pharos, who told us that in normal circumstances it could have brought in USD 3-5 bn in inflows.

Some aren’t expecting a flood of new inflows: “We think that the news is largely priced-in and don’t see [inclusion] as a major trigger,” Naeem Brokerage’s Allen Sandeep told us.

But that might not matter: “Our real yields are way too attractive, even if the Fed raises rates by 1.5 [percentage points] this year,” Sandeep says. Egypt currently offers the highest inflation-adjusted interest rate in the world, helping it to maintain attractiveness as global rates tick up in the coming months. Investors expect at least four quarter-point rate hikes from the Fed this year.

Three years in the making: The Finance Ministry has been talking about rejoining the index for the past three years. The US investment bank placed Egypt on its watchlist last April after the country’s debt profile met the maturity requirements for inclusion.

The next piece of the puzzle: Euroclear. The government now expects to finalize an agreement with the Belgian clearinghouse to clear local debt in Europe during the second half of 2022. Making Egyptian debt clearable in Europe will make it more accessible to foreign investors, translating into greater portfolio inflows.


Egypt will sell USD 5 bn in foreign currency bonds in FY2022-2023, Vice Minister of Finance Ahmed Kouchouk told Bloomberg Asharq yesterday. Egypt last took to the international debt markets in September when it sold USD 3 bn in long-term eurobonds.

Issuance of samurai bonds + sukuk could be coming before the end of the fiscal year: Maait said last week that the ministry wants to sell around USD 500 mn in JPY-denominated bonds during the first six months of 2022. We’re also expecting the country’s maiden sovereign sukuk sale to take place before the end of the fiscal year in June.

Plus another green bond sale: The minister said this week that it is considering selling another USD 750 mn of green bonds, though the timing of the issuance has not yet been set.

ECONOMY

Gov’t ups 2021-2022 growth forecast to 6%

Gov’t ups growth forecast: The Planning Ministry has upgraded its FY2021-2022 growth forecast for the Egyptian economy to 6% or more, from 5.6%, minister Hala El Said told Bloomberg Asharq yesterday.

This would be almost double last year’s growth: The economy grew 3.3% during FY 2020-2021, according to official figures.

The forecast is more optimistic than other estimates: The IMF last week revised upwards its 2021-2022 forecast to 5.6%, while the European Bank for Reconstruction and Development and the World Bank — as well as a Reuters poll of economists — predicted during the last quarter that the economy would grow 4.9-5.1% this year.

We still haven’t seen any official GDP data since the turn of the fiscal year in July, though El Said yesterday signaled that growth likely surpassed the 6-7% forecast for 2Q2021 in an interview with CNBC Arabia (watch, runtime: 5:15). Preliminary figures released last year suggest the economy grew by 9.8% in 1Q — its quickest pace in two decades — thanks to a favorable base effect.

Unemployment levels for 4Q2021 are not expected to rise above the 7.5% posted in 3Q2021, considering the number of jobs currently available, El Said also noted.

New growth figures to land in February: “We would like to assure everyone that the growth figures for the current quarter are better than expectations and we will announce the figures in mid-February,” El Said told the news website, without elaborating.

INVESTMENT WATCH

Ezdehar reaches USD 168 mn first close of EMF II fund

Ezdehar reaches USD 168 mn first close of EMF II fund: Private equity firm Ezdehar Management has reached the first close of its Mid-Cap Fund II (EMF II), overshooting its USD 100-120 mn target to book commitments totalling USD 168 mn, the firm announced in a statement (pdf) yesterday evening. The close means that Ezdehar now has more than USD 250 mn in assets under management between its two funds, making it one of the largest Egypt-focused fund managers.

About the fund: Ezdehar plans to deploy the capital by purchasing majority and minority stakes in 6-8 small to mid-cap companies with an individual ticket size of USD 5-30 mn. It will target companies in growth sectors such as consumer and retail, business services, education, healthcare, and manufacturing. Pharma and F&B firms are also on the list, Ezdehar founder and Managing Director Emad Barsoum previously told us.

The IFC is the latest LP to announce a commitment, saying that it had invested USD 20 mn in the fund.

It joins a number of other development finance institutions: The European Bank for Reconstruction and Development has contributed USD 25 mn, the UK’s CDC is in with USD 25 mn, the European Investment Bank has provided USD 15 mn, and Dutch development bank FMO has provided USD 20 mn. The Belgian Investment Company for Developing Countries (BIO) and the Egyptian-American Enterprise Fund have also made undisclosed commitments to the fund, Ezdehar said.

What they said: “With this fund, Ezdehar was able to significantly expand its investor base to include a unique set of reputable regional and global institutions,” said Emad Barsoum, Ezdehar's founder and managing director.

What’s next: Ezdehar expects to reach a final close of USD 180 mn by the end of 2022, it said in the statement.

IPO WATCH

Taqa Arabia eyes 2023 EGX debut

Qalaa Holdings’ Taqa Arabia is looking to make its EGX debut next year, Al Mal quoted CEO Pakinam Kafafi as saying. She didn’t provide details about the potential offering, saying only that it will depend on market conditions.

Taqa Arabia was initially planning to IPO back in 2020, before its plans were derailed by covid. Qalaa had reportedly planned to list 30-40% of its portfolio company in the first half of 2020. The company had reached a valuation and wrapped up all procedures for the sale prior to the pandemic, but now has to conduct a new fair value study and revisit the size of the stake to list on the EGX.

Advisors: EFG Hermes and HSBC — which were originally tapped by Qalaa to manage the IPO back in 2020 — could still advise on the offering, according to Kafafi.

Taqa Arabia wasn’t the only Qalaa subsidiary with an IPO on its horizon: Qalaa had planned to list the parent company of its Egyptian Refining Company (ERC) in 4Q2020, with bulge-bracket fixtures JPMorgan, Citigroup and Goldman Sachs vying for the mandate alongside EFG Hermes, HSBC and Renaissance Capital. That was before the pandemic upended the global economy and the collapse of oil prices into negative territory. ERC’s earning ability is tightly linked to global oil prices.

enterprise

STARTUP WATCH

Brimore secures USD 25 mn in series A funding

Social commerce startup Brimore has raised USD 25 mn in series A funding, the company announced in a statement (pdf) yesterday. The round was led by the International Finance Corporation and Silicon Valley VC Endure Capital, and featured participation from Fawry, Flourish, and Endeavor Catalyst Fund, as well as existing investors such as Algebra Ventures, Disruptech, Khawarizmi Ventures and Vision Ventures.

About the company: Launched in 2019, Brimore is a social distribution network that allows SME manufacturers to sell fast moving consumer goods via a network of freelance distributors, who sell to customers in their local communities. The company has built a network of almost 75k resellers in 27 cities across Egypt in the three years since its founding, and lists some 8k products.

Expansion plans: Brimore says it will use the funding to quadruple its network of sellers and suppliers and double the size of its team. It is also aiming to enter two new African markets by 2023, the statement said, without providing specifics. “In the past three years, we’ve focused on building a smart and reliable infrastructure that enables the masses to do their commerce businesses,” said Mohamed Abdelaziz, CEO and co-founder of Brimore. “We’ll be using the fresh fund to scale our infrastructure, enabling many more people to continue their journey of 50x growth by 2023.”

The investment comes less than two years after the company raised USD 3.5 mn in a pre-series A round led by Algebra Ventures. Algebra has backed the startup from the beginning, co-leading its initial USD 800k seed round in 2019. “We came in on the first round of investment and invested in every subsequent round, to ensure that the growth momentum stays on track,” said Algebra managing partner Tarek Assaad. “As Brimore experienced explosive growth over the past three years, Algebra has worked closely with the company to support in strategic and operational areas, especially recruitment.”

LEGISLATION WATCH

VAT changes are official as El Sisi signs four bills into law

President Abdel Fattah El Sisi yesterday ratified amendments to the VAT and the Stamp Tax laws alongside several other pieces of legislation, per an announcement in the official gazette (pdf).

How are VAT and stamp tax changing? The new legislation changes up the tax treatment for a handful of services and products. Under the amendments, fully-finished “broadcast” advertisements — advertisements on TV, radio, outdoor billboards and the interwebs — will be subject to 14% VAT, replacing the 20% stamp tax to which they were previously subject; and stamp tax on most ins. premiums would be raised by 1%. We have more on the amendments to both laws, which were approved by the House of Representatives late last year, here and here.

More legislation ratified by El Sisi yesterday:

  • A bill that provides for 5-15% of the annual surplus generated by ministerial “private funds” to be transferred to the state treasury. The bill is expected to generate a combined EGP 2.5-3 bn for state revenues, equalling some 7-8% of the annual EGP 36 bn surplus. The legislation, which was first approved in 2018, sunsets each year and requires renewal.
  • Amendments to some provisions of the law governing public universities, and the law governing the Academy of Arts.

Next steps: The legislation will take effect once the executive regulations are published in the official gazette.

What won’t be seeing the light: The House Education Committee rejected yesterday amendments to the Education Act that would have seen an EGP 500-1k fine imposed on parents whose children miss school without sufficient reason, according to Youm7.

enterprise

LAST NIGHT’S TALK SHOWS

Dominating the conversation on the airwaves last night: Our re-inclusion in JPMorgan’s emerging markets bond index, the benefits of which Finance Minister Mohamed Maait discussed at length in a phone-in with Al Hayah Al Youm (watch, runtime: 16:46). Kelma Akhira’s Lamees El Hadidi (watch, runtime: 1:31; 3:13) and Ala Ma’ouleety’s Ahmed Moussa (watch, runtime: 7:10; 4:35) also weighed in on the event.

Natural gas exports to Lebanon to begin by March: Oil Minister Tarek El Molla phoned in to Kelma Akhira (watch, runtime: 2:48) to discuss plans to export natural gas to Lebanon via the Arab Gas pipeline running through Jordan and Syria. The pipeline is expected to be up and running by the end of February or the beginning of March, El Molla said, adding that only paperwork remains to be completed and no further delays are expected. El Molla had previously said that the pipeline would be operational by the end of last year, before shifting the kick-off date to early this year.

EGYPT IN THE NEWS

Leading the conversation on Egypt in the foreign press: Egypt’s Afcon victory against Morocco on Sunday got substantial ink, with France 24, The Athletic and the National all delivering takes.

Also getting attention: Egyptian online therapy startup Shezlong is the subject of a Financial Times profile that looks at the company’s role in reducing the stigma on mental health and improving access to care across the MENA region.

ALSO ON OUR RADAR

Fawry sees 400% y–o-y boom in online payments in 2021

Fawry saw transaction values surge last year: The e-payments giant processed EGP 6 bn worth of cashless POS transactions through its Fawry Accept service in 2021, up 232% y-o-y, and EGP 5 bn worth of online payments, up 400% y-o-y, the company said in a statement (pdf) this week. The country’s biggest e-payments provider is eyeing further expansion, recently announcing a planned EGP 800 mn capital increase to help launch its pre-paid cards as it seeks to turn MyFawry into a super-app, as well as a potential US listing. It also launched the region’s first fintech-distributed money market fund in partnership with Misr Capital a few weeks back.

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

  • Investment firm Catalyst Partners is looking to establish subsidiaries in the UAE, Saudi Arabia and Morocco this year, following recent moves to expand into logistics and ins. services.
  • El Sewedy Electric for Trading and Distribution has signed an EGP 615 mn contract (pdf) with construction firm EDECS to complete network and infrastructure work at Alexandria Port.

COVID WATCH

Another daily covid case record + our first batch of Evusheld has arrived

Yet another record daily tally: The Health Ministry reported 2,223 new covid-19 infections yesterday, up from 2,210 the day before — a sixth consecutive record high as the omicron wave continues. Egypt has now disclosed a total of 425,911 confirmed cases of covid-19. The ministry also reported 31 new deaths, bringing the country’s total death toll to 22,635.

Remember: Cases aren’t expected to peak until at least the middle of this month, according to the head of Vacsera’s allergy center.

The vaccine tally: 26,138,418 people are now fully vaccinated against the virus, while some 11.3 mn people have received only their first shots and 620,004 people have received booster shots.

The government is aiming to have vaccinated 70% of the population by the start of 2H2022, Youm7 quoted health ministry spokesperson Hossam Abdel Ghaffar as saying. The country has so far inoculated 42% of people in targeted groups, he added. Around 60 mn people are eligible for vaccination.

We’ve received our first batch of Evusheld doses: 15k doses of AstraZeneca’s preventative antibody cocktail for the immunocompromised, Evusheld, arrived at Cairo International Airport on Saturday, the company announced in a press release (pdf). This makes Egypt the first country in Africa and the fourth worldwide to receive the med, according to the release. A total of 50k doses are expected to arrive this year, with more deliveries set to come in the next few weeks.

Where’s our Paxlovid? We were also expecting a shipment of Pfizer’s covid pill, Paxlovid, sometime in January, after we signed an agreement with the pharma giant to provide pills to treat some 20k people, but there’s been no word on those yet. Meanwhile, Merck’s Molnupiravir antiviral covid treatment was approved for emergency use in hospitals last week, paving the way for five local firms to begin supplying local hospitals with the medication.

PLANET FINANCE

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Businesses are going to start paying tax in the UAE for the first time ever next year after the government yesterday announced it would introduce a federal corporate tax from 1 June, 2023.

It’s not going to be a lot, though: Businesses will pay a 9% tax on profits, one of the lowest corporate tax rates in the world.

And the rest of the zero-tax regime will remain: Companies that do business in freezones will not be subject to the new tax provided they don’t trade with the mainland, and individuals will continue to pay no income tax.

The rationale: The government says it’s introducing a corporate tax to align with international standards and crack down on tax avoidance — and that the move would pave the way for a different, global rate to be applied to big multinationals. The UAE has signed on to the OECD’s plan to institute a global minimum corporate tax of 15%

Citigroup is hiring as it vies for Gulf listings: Citigroup is increasing its presence in GCC countries ahead of what it predicts will be another record year for IPOs in the region, Bloomberg reports. The bank is boosting its existing Saudi and Dubai offices and “adding resources all across the region,” joining Goldman Sachs and others looking to capitalize on strong Gulf IPO pipelines as listings elsewhere drop off.

Up

EGX30

11,490

+0.3% (YTD: -3.8%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

12,272

+0.1% (YTD: +8.8%)

Down

ADX

8,704

-0.7% (YTD: +2.5%)

Down

DFM

3,203

-0.5% (YTD: +0.2%)

Up

S&P 500

4,516

+1.9% (YTD: -5.3%)

Down

FTSE 100

7,464

-0.0% (YTD: +1.1%)

Up

Brent crude

USD 91.21

+1.3%

Up

Natural gas (Nymex)

USD 4.94

+1.4%

Up

Gold

USD 1,798

+0.1%

Up

BTC

USD 38,474

+1.3% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.3% at yesterday’s close on turnover of EGP 647 mn (41.5% below the 90-day average). Foreign investors were net sellers. The index is down 3.8% YTD.

In the green: TMG Holding (+8.6%), Qalaa Holdings (+5.2%) and Madinet Nasr Holding (+4.0%).

In the red: CIRA (-3.6%), Fawry (-1.8%) and CIB (-1.0%).

Major Asian benchmarks are solidly in the green this morning with just Shanghai slipping into the red. All major European benchmarks look set to follow suit later today. The story is a bit different across the pond, where futures suggest Wall Street will see the S&P, Nasdaq and Dow all open in the red at the opening bell.

AROUND THE WORLD

Biden names Qatar a major non-NATO ally to the US: US President Joe Biden will designate Qatar a major non-NATO ally in a bid to deepen “bilateral defense and security cooperation” with Doha, he announced in a White House statement ahead of his meeting with Qatar’s emir, Sheikh Tamim bin Hamad al-Thani, yesterday. The move comes as Biden tries to secure more natural gas supplies from Doha — which is the world’s second-biggest exporter of liquefied natural gas — in hopes of resolving Europe’s looming energy crisis.

Plane-purchase diplomacy: Qatar Airways signed a record deal at the White House with Boeing for up to 100 passenger aircraft — an order worth USD 34 bn at list prices, CNBC reports. The transaction deals a blow to European competitor Airbus, which earlier in January canceled a contract with Qatar Airways for 50 new planes amid a dispute over alleged surface issues.

Also worth knowing this morning:

  • The UAE intercepted and destroyed a ballistic missile fired by the Yemeni Houthi terrorist group according to state-run WAM news agency. The attack coincided with Israeli President Isaac Herzog’s first visit to the Emirates, Reuters reports.
  • Libya could have a new PM by next week: Libya’s parliament is set to vote on a new prime minister to replace incumbent Abdul Hamid Dbeibah next Tuesday, February 8, Bloomberg reports, after critical presidential elections were postponed in December on the back of “threats to the ballot.”
greenEconomy

How Egypt featured heavily in the EBRD’s global green strategy in 2021 … and how it will continue to do so in 2022: The European Bank for Reconstruction and Development (EBRD) had a pretty big year in terms of green financing, with a record EUR 5.4 bn in green investments globally last year. Egypt took up a significant portion of that funding, with the bank having invested over EUR 1 bn in 20 projects in Egypt this year, with 44% of that going toward the green economy, the EBRD said in a press release (pdf) on Sunday. Just to put that into perspective, that’s almost two thirds of the bank’s EUR 1.5 bn investments in 37 projects in the southern and eastern Mediterranean region (SEMED).

And the EBRD is planning to raise its green funding allocations here this year, Heike Harmgart, managing director for the SEMED region told Enterprise in an exclusive. She reveals to us that the bank hopes to at least match last year’s total funding commitment and raise the portion of funding green economy projects to 48% in 2022.

We also spoke with Harmgart on details of the bank’s green financing in 2021, its green funding priorities for 2022 and the outlook for Egypt as host of COP27.

Below are edited excerpts of our conversation:

Breaking down the EUR 1 bn in funding in 2021: The 20 projects that received EBRD funding included small on-lending projects with local partners as well as big infrastructure projects, Harmgart tells us. Eight or nine of the 20 projects were on-lending through small local partners, including green SMEs and value chain projects with local Egyptian banks. The bank provided a USD 518 mn loan that went toward the Cairo Line 1 and Alexandria metro projects.

70% of its investments had a gender and inclusion focus, with inclusion representing an important focus of the bank’s efforts in Egypt last year. Harmgart tells us that green and inclusion “are complementary targets,” and that focusing on developing more on-lending projects outside main cities was a big priority for the bank last year and will likely be important this year as well.

75% of the projects funded by the EBRD in Egypt were in the private sector. The EBRD was the top contributor to private sector financing in Egypt last year. This level is likely to continue this year, she says.

The EBRD is hopeful that it can match or exceed its 2021 investments in Egypt this year. The bank has allocated over EUR 1 bn to Egypt each year for the past three-four years and Harmgart expects that 2022 will be similar.

The EBRD aims to make 48% of its funding in Egypt this year green, with a focus on resilience, mitigation and adaptation. Harmgart explains that the EBRD is becoming more “technical” in its investments this year, focusing on new technologies such as green hydrogen, which it sees huge potential for in Egypt. She also notes that the next phase will likely include more renewable wind and solar energy projects, with a focus on integration of renewables into the grid and private-to-private sector projects. The EBRD is also looking to support zero emissions waste management projects, building on the methane gas pledge, as well as low carbon agriculture.

Private sector focus will remain a priority for the bank’s green funding initiatives: In addition to involving the private sector more in utility-level solar projects and connecting their plants to the grid, the EBRD is working on a “green” desalination project and is developing a project under a PPP model alongside the Sovereign Fund of Egypt and the Madbouly Cabinet, Hamgart said.

On-lending programs, including GEFF (Green Economy Financing Facility), will continue to feature this year. The EBRD is looking at doing more GEFFs and green value chain financing, with a focus on climate change assessments and exposure while helping banks to understand the impact on their operations from a climate change perspective to enable them to provide more green funding.

The bank is also working on tweaking existing green programs, including the Green Cities program. In April of last year, the EBRD announced the inclusion of 6 October City in its EUR 2.5 bn Green Cities program in an effort to make Egyptian cities greener, making it the third Egyptian member city in the program after Cairo and Alexandria. The EBRD has launched projects under the Green Cities cities program this year, identifying policy changes as well as potential investments that could help accelerate green urban living.

On the policy front, the EBRD would like to see more banks factor climate change into their assessments and raise their risk appetite for green funding. Harmgart stresses that climate change assessments are new to the banking sector even in Europe. It will be key for Egyptian banking institutions to get ahead of the curve to mitigate better, she stressed. The EBRD is looking to do more trade financing and identifying green trade opportunities with financial institutions to incentivize banks to take on more risks.

And it would like to see local operators issue more green bonds: Green bond issuance is another area that the bank is looking to develop, Harmgart tells us. With Benban maturing, the EBRD is looking at potential green bond issuances on the horizon.

Egypt’s revised target to source 42% of its energy from renewables by 2030 is very realistic, according to Harmgart, who says that Egypt has excellent wind and solar energy sources and needs to now focus on integrating renewables into the grid, as well as storage, transmission and distribution. She stresses that battery storage and fluctuation management are two areas that the EBRD is hopeful it can help Egypt with.

The EBRD is hopeful that COP27 results in an ambitious NDC and net zero target for Egypt and other North African and African countries. “Egypt is putting together a team for climate leadership, and I think we all stand ready to help them achieve this in time for Sharm,” Harmgart tells us. She stresses that it is key for Egypt to bring all its individual climate change efforts together in an ambitious NDC (Nationally Determined Contribution) and net zero target this year, hopefully leading the way for other African countries to follow suit. “Egypt has done a lot of different individual components successfully, and in 2022, it needs to bring all of these together in a realistic and ambitious NDC and net zero strategy at Sharm,” she tells us.

The bank hopes to see more financing commitments from global financing institutions at COP27, including global pension funds, commercial banks and global finance in general. “The need for financing is too large for a few multilateral development funds,” she tells us, stressing the need for more global players to contribute.


Your top climate stories for the week:

CALENDAR

1Q2022: Launch of the Egyptian Commodities Exchange.

1Q2022: Swvl acquisition of Viapool expected to close.

1Q2022: Waste collection startup Bekia plans to expand to the UAE and Saudi Arabia.

1Q2022: Rameda Pharma will begin selling its generic version of Merck’s oral antiviral covid-19 med.

1Q2022: Pharos Energy’s sale of 55% stake in El Fayum, Beni Suef concessions to IPR Energy Group subsidiary IPR Lake Qarun expected to close.

Early 2022: Results to be announced for the second round of the state’s gold and precious metals auction.

1H2022: Target date for IDH to close its acquisition of 50% of Islamabad Diagnostic Center.

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

1H2022: The government will respond to private companies’ bids to build desalination plants.

1H2022: Egypt’s second corporate green bond issuance expected to be announced.

January: Sovereign Sukuk Act executive regulations expected to be finalized.

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

January: Three-month trial period of ACI for air freight to begin.

9 January – 6 February (Sunday-Sunday): 2021 Africa Cup of Nations, Cameroon.

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

Second half of January: Regulations for installing EV charging stations will be published.

25 January – 1 February (Tuesday-Tuesday): EGX will open over the counter transactions for the National Bank of Kuwait.

27 January-7 February (Thursday-Monday): Cairo International Book Fair, Egypt International Exhibition Center.

30-31 January (Sunday-Monday): Ins. Federation of Egypt medical ins. forum.

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

January-February 2022: Construction work on the Abu Qir metro upgrade will begin.

February: 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.

February: Ghazl El Mahalla shares will begin trading on the EGX this month.

February: Suez canal transit fees set to increase 6%, exempting cruise ships and LNG carriers.

Mid-February: End of grace period to comply with new minimum wage for firms who sent in exemption requests.

Mid-February: A Hungarian delegation will arrive in Egypt for talks over a potential investment in an industrial area in the SCZone.

2 February (Wednesday): OPEC+ will meet to decide on another 400k oil production increase a day for March.

3 February (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

3 February (Thursday): January PMI figures for Egypt, Saudi Arabia, and the UAE will be released.

3 February (Thursday): Deadline to send in concept notes for Cultural Property Agreement Implementation projects to the US Embassy in Cairo.

4-20 February (Friday-Sunday): 2022 Winter Olympics, Beijing.

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

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

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

14-19 February (Monday- Saturday): An art exhibition created by marginalized children will be held at Townhouse Gallery. The event is organized by the Sawiris Foundation for Social Development, AlexBank, Townhouse Gallery, Al Ismaelia for Real Estate Investment, and Ubuntu Art Gallery.

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

15 February (Tuesday): Orange Ventures’ deadline to receive applications from seed-stage fintech startups.

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

19-21 February (Saturday-Monday): Nebu Expo for Gold and Jewelry 2022.

21 February (Monday): Hearing at Cairo Economic Court (pdf) on FRA lawsuits filed against Speed Medical.

26 February (Saturday): Speed Medical will elect a new board during ordinary general assembly (pdf).

End of February: Lebanon to receive gas from Egypt via a pipeline crossing Jordan and Syria.

March: Rollout of the government financial management information system (GFMIS), a suite of electronic tools to automate the government’s financial management processes (pdf) that will replace the existing “closed” financial management system.

March: 4Q2021 earnings season.

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

March: World Cup playoffs.

March: The government hopes to sign a final contract between El Nasr Automotive and a new partner for the local production of electric cars.

March: Target date for Saudi tech firm Brmaja to IPO on the EGX.

March: Egypt to host World Tourism Organization Middle East committee meeting.

9-18 March (Wednesday-Friday): The 55th edition of the Cairo International Fair.

15-16 March (Tuesday-Wednesday): Federal Reserve interest rate meeting.

24 March (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26 March (Saturday): Egypt-EU World Trade Organization dispute settlement consultations end.

28-29 March (Monday-Tuesday): The Egypt International Mining Show (EIMS 2022) will take place virtually.

31 March (Thursday): Deadline for submitting tax returns for individual taxpayers.

31 March (Thursday): Vodacom purchase of Vodafone Group’s stake in Vodafone Egypt expected to be completed by this date.

31 March (Thursday): Supply Ministry expected to take final decision on bread subsidies by this date.

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

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

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

22-24 April (Friday-Sunday): World Bank-IMF spring meeting, Washington D.C.

24 April (Sunday): Coptic Easter Sunday (holiday for Coptic Christians).

25 April (Monday): Sham El Nessim.

25 April (Monday): Sinai Liberation Day.

28 April (Thursday): National Holiday in observance of Sham El Nessim.

30 April (Saturday): Deadline for submitting corporate tax returns for companies whose financial year ends 31 December.

Late April – 15 May: 1Q2022 earnings season

May: Investment in Logistics Conference, Cairo, Egypt.

1 May (Sunday): Labor Day.

3-4 May (Tuesday-Wednesday): Federal Reserve interest rate meeting.

4 May (Wednesday): 3 February (Thursday): Deadline to send in applications for Cultural Property Agreement Implementation projects to the US Embassy in Cairo.

5 May (Thursday): National Holiday in observance of Labor Day.

2 May (Monday): Eid El Fitr (TBC).

19 May (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

14-15 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15-18 June (Wednesday-Saturday): St. Petersburg International Economic Forum (SPIEF), St. Petersburg.

16 June (Thursday): End of 2021-2022 academic year for public schools.

23 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

27 June-3 July (Monday-Sunday): World University Squash Championships, New Giza.

30 June (Thursday): June 30 Revolution Day, national holiday.

End of 2Q2022: The Financial Regulatory Authority’s new Ins. Act should be approved.

End of 1H2022: Emirati industrial company M Glory Holding and the Military Production Ministry will begin the mass production of dual fuel pickup trucks that can run on natural gas.

2H2022: The inauguration of the Grand Egyptian Museum.

2H2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

2H2022: The government will have vaccinated 70% of the population.

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

1 July (Friday): FY 2022-2023 begins.

8 July (Friday): Arafat Day.

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

26-27 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

30 July (Saturday): Islamic New Year.

Late July – 14 August: 2Q2022 earnings season.

18 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

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

20-21 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

October: World Bank and IMF annual meetings in Washington, DC

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

8 October (Saturday): Prophet Muhammad’s birthday, national holiday.

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

Late October – 14 November: 3Q2022 earnings season.

November: Cairo Water Week 2022.

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

January 2023: EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

**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 above between the actual holiday and its observance.

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