AM — Threat of conflict in Ukraine brings “uncertainty” to global wheat markets -El Moselhy

Good morning, wonderful people, and welcome to our first slow news day in more than two weeks — we consider it our just recompense for having survived the vicissitudes of a news cycle that’s been rolling by in fast-forward for to long now..

We expect to be talking about oil and gas quite a lot in the coming days as the Egypt Petroleum Show (Egyps) gets underway today at the Egypt International Exhibition Center. The event runs through Wednesday. Speakers include OPEC Secretary General Mohammad Barkindo and International Energy Agency Executive Director Fatih Birol. Also speaking: Our ministers of oil, finance and the environment (among other government officials), as well as energy and oil ministers from countries including the UAE, Jordan, Yemen, Israel, Cyprus and Greece. Top execs from major oil and energy firms will also be in attendance.

There will be lots of noise about Egypt as the natural energy hub of the Eastern Med, a notion that longtime readers will recall we’ve been championing for years — and that has new relevance with Europe facing the prospect of a longer-term energy crunch thanks to tensions with Moscow. (More on those tensions below.)

On the other end of the “good for the planet” scale: We now have tariffs for charging electric vehicles after the Madbouly government published its rate sheet in the Official Gazette. We’ll have a deep dive into the details tomorrow in our Going Green vertical, presented each week thanks to the support of our friends at Infinity.

THE BIG STORY TODAY here at home? Policymakers are confirming what we’ve been saying for weeks here at Enterprise World Headquarters: War between Ukraine and Russia would not be good for the global wheat market. We’re the world’s largest importer of the grain. What’s more: They’re also two of our most important tourism markets (in volume terms, though admittedly not margin) — Russia is a key security and defense partner.

THE BIG STORY ABROAD- Is the Ukraine crisis coming to a head? This week could decide whether tensions between Russia and the West over Ukraine bubble over into armed conflict, Bloomberg and the Associated Press are reporting this morning. US President Joe Biden promised a “rapid response” if Russia does invade its neighbor in a phone call with Ukrainian counterpart Volodymyr Zelensky yesterday, as White House advisers continued to brief that Russia could create a surprise “pretext” to invade Ukraine any day now. Meanwhile, German Chancellor Olaf Scholz will head to Moscow today before meeting with Zelensky for talks on Tuesday for a last-ditch effort at diplomacy. More than a dozen countries have moved to pull non-essential diplomatic staff from Ukraine, with some airlines going as far as canceling flights to the country. The Wall Street Journal, Financial Times, and Reuters have more.

Will there be war? Some pundits in our socials are suggesting that Putin doesn’t need to invade to accomplish his goals: Taking the threat right up to the red line (but not crossing it) has already done enough to draw a line under his “security sphere” and open sew discord among Western allies, they suggest.

The prospect of war in Ukraine and the wheat crunch come at the same time as the global commodity shortage is back in the headlines. Stockpiles of goods from copper to coffee are at historically low levels, threatening further inflationary pressures, the Financial Times reports. Raw materials, food staples, metals and energy futures have all slipped into backwardation — when spot prices exceed futures prices, signaling scarcity. Traders are paying over the odds to secure immediate metal supply, while copper stocks at major commodity exchanges sit at less than a week’s worth of global consumption. Add to that an oil supply squeeze that has pushed prices to record highs (now being further boosted by geopolitical tensions in Ukraine), and last year’s alarm bells over a “commodities supercycle” are ringing in our heads again.

The good news: We aren’t set to see global shortages (yet). “The risk of shortages by the end of winter is remote at this point,” one analyst says. “But the market will still need to secure significant supply through the summer in order to prevent those concerns coming back next winter.”

PSA #1- Are you about to quote Forbes “magazine” in a presentation or proposal? Don’t. Stop. Go read this. Then think again. Why? It’s not looking much like a real media outlet these days as much as it does an unedited platform for “scams, grift, and bad journalism” writes the founder of Harvard’s Nieman Lab. If it’s tagged as being written by a “contributor”? It’s someone’s personal blog, not an edited work of journalism.

PSA #2- Are you running Zoom on a Mac? It might be listening to you right now, warns Macworld.

What to try instead? Google’s video and voice conference stuff is better, we think (it’s called Google Meet… we think? They rebrand this particular service more frequently than Amer Group changes CEOs). Microsoft’s Teams isn’t bad at all, just ugly as sin.

From the Dumpster fire that is our social media:

• Did your #2 just call in sick because his emotional support alligator is having a bad day after being caught in construction on the Ring Road all morning? Our collective ability to come up with inventive excuses for missing work dates back at least 3.2k years.
• Bye-bye, pandemic. The guy who wanted to “close everything” at the beginning of the outbreak now wants to reopen all the things. (The Atlantic)
• It may be a bit harder to get a laptop, tablet or new phone in the next little while after 6.5 mn TB of flash memory was ruined at two of the world’s leading producers thanks to contamination. (Bloomberg | Apple Insider)

CIRCLE YOUR CALENDAR-

It’s day two of the three-day Arab sustainable development week. Some 400 participants including the EU, World Bank and other institutions are chewing over how to tackle in a sustainable way the development challenges of the Arab world.

The Industrial Development Authority will receive offers from companies for licenses to manufacture iron products tomorrow.

Orange Ventures’ deadline to receive applications from seed-stage fintech startups for its seed challenge is also tomorrow.

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

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Private schools have been hit by price increases in recent months, as domestic inflation accelerates. With inflation running close to two-and-a-half-year highs, spending is being impacted across the board, with rising capex costs putting particular pressure on companies in the sector, say several operators. Today, we look at how the impact of inflation varies among Egypt’s private schools, and what they’re doing to mitigate it.

Rising tensions in the tug-of-war between Russia and Ukraine are causing “uncertainty” in the wheat market, Al Shorouk quoted Supply Minister Ali El Moselhy as saying. While the Madbouly government has previously suggested it had no plans to start hedging wheat, El Moselhy is quoted as having said a decision to do so could come by the end of next month.

Why Ukraine matters for our wheat supply: 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 needs from the eastern European country. Now, a potential Russian invasion of Ukraine threatens to disrupt supplies from the country. Prices “spiked” the last time Russia invaded Ukraine (when it seized Crimea back in 2014), according to the Economist. Russia is also a top supplier: around 50% of our wheat imports shipped from the country last year (while 30% came from Ukraine), Al Arabiya reports, picking up a Reuters story citing data from two regional traders.

The Supply Ministry is continuing to work on diversifying wheat imports, El Moselhy added. Diversification efforts that began last year saw us purchase wheat from Latvia for the first time and consider importing from other countries including France, Canada, and possibly the US.

We currently hold more than five months’ worth of wheat in our strategic reserves, El Moselhy said. Wheat prices have been declining over the past two weeks as the market saw a surplus and pandemic-induced demand began to subside, he added.

Wheat prices have been an issue since far before the crisis in Ukraine: Prices hit ten-year highs in the global market last year on the back of reduced crop production in some of the world’s biggest producers, higher shipping costs, and trade tariffs — meaning wheat is likely to sap an additional EGP 12 bn out of the fiscal budget for this fiscal year. Meanwhile, major producer Russia has been mulling higher export tariffs on the grain. As a result, the ministry is considering several scenarios for tapering bread subsidies for the first time in decades, including targeted cuts that ringfence the most vulnerable people and replacing subsidies with cash payments. Expect a final decision on how they will be reworked by the end of March.

EFG Hermes is looking to appoint an international financial advisor and an Egyptian law firm to advise on First Abu Dhabi Bank’s acquisition offer, the leading financial services corporation announced yesterday in an EGX disclosure (pdf). EFG’s board of directors held a meeting on Thursday to discuss the possible transaction and hiring the as-yet-unnamed advisors, the disclosure said, without providing further details.

FAB’s offer: In what would be the country’s biggest acquisition in years, the Emirati lender last week announced it had offered to purchase at least 51% of EFG in a transaction that would value the firm at EGP 18.5 bn. By comparison, the Aldar / ADQ acquisition of SODIC valued the upmarket realtor at EGP 7.1 bn. Rothschild & Co is providing financial advice to FAB, while Matouk Bassiouny & Hennawy are the lender’s local legal advisors.

FAB could raise its offer price due to “the prominence of EFG Hermes, its financial position, and its strategic role in the financial markets in Egypt and the region,” Al Shorouk reported, citing unnamed sources it claims have knowledge of the matter. The bank has offered to purchase the shares for EGP 19.00 apiece, a 21% premium on EFG’s closing share price the day before the announcement.

EFG’s share price has been on the rise since FAB announced its offer, gaining another 0.6% on the EGX yesterday to close at EGP 17.80.

FAB’s potential acquisition of EFG Hermes is a top priority for the bank’s board this year, and they would be willing to raise their offer based on the outcome of the due diligence process, according to the unidentified sources.

FAB eyes more Egyptian investments this year: The UAE bank is reportedly looking into more potential investments in the Egyptian market, and will be making decisions soon, the sources said, adding that FAB is particularly interested in listed companies, tech companies, and non-banking financial firms. Management has a strategic plan to consolidate upcoming Emirati investments in Egypt by ensuring that transactions are concluded through the bank and its subsidiaries, the sources reportedly added.

Takery Cloud Hubs, an Egypt-based cloud hub startup, has raised an undisclosed amount in a pre-seed funding round, according to a press release (pdf). The funding will be used to expand the company’s cloud branches, grow its team, and develop its tech. Including this first round, the company is looking to secure up to USD 3 mn in 2022, the statement says.

About the company: Takery is Egypt’s first company specialized in establishing and managing cloud hubs, according to founder and CEO Karim Morsi. The company offers fast-food chains and fast-moving consumer goods companies the digital infrastructure to grow their footprints, either by entering new markets altogether or expanding geographically.

More brands to land in Egypt? Takery is looking to bring new international and Gulf brands into the Egyptian market, the press release says, without providing further details.

The draft Labor Act (which got the Senate’s final nod yesterday) dominated coverage on the airwaves. The Senate approved an article that would give new fathers one day of paternity leave for the day of birth, after it had earlier struck down the initial proposal to allow them seven days of leave, Senate member Mohamed El Sebaie said in a phone call with Al Hayah Al Youm’s Lobna Assal (watch, runtime: 8:59). Senate Energy, Environment, and Manpower Committee head Abdel Khalek Ayad addressed criticism over the shortened paternity leave in a call with El Hekaya’s Amr Adib (watch, runtime: 8:49), arguing that the minimum requirement can be expanded by employers on a case by case basis. We have an explainer on the bill’s finer points here.

New measures to prevent illegal building on public land also got airtime: The government will use satellite technology to track and automatically report illegal building in governorates via a central operating room that could be up and running within months, the Agriculture Ministry’s head of agricultural services and follow-up, Abbas El Shenawy, told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 9:36).

Meanwhile, last week’s discussions on the so-called old-rent law and the Real Estate Registry Act continued on Masaa DMC (watch, runtime: 32:39).

It’s a nice, quiet morning for Egypt in the international press.

Star of critically acclaimed film Feathers and self-taught actor Damiana Nassar is the subject of a New York Times profile that also takes in the film’s reception at home and abroad.

On the human rights front, recently released Egyptian-Palestinian activist Ramy Shaath has spoken in a BBC interview on prison conditions.

Edita Food Industries is expanding its biscuits segment with the launch of Oniro Mini Lava at a retail price of EGP 3 per pack, the company announced in a press release (pdf). The four-stick biscuit packs come in vanilla and chocolate flavors. The launch comes as part of Edita’s efforts to grow its biscuits segment, which the snackfoods maker says grew at a rate of 79.2% y-o-y in 9M2021, making it Edita’s second fastest-growing segment.

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

• UAE’s Tabreed is coming to Egypt: National Central Cooling Company (Tabreed) has partnered with real estate developer Marakez and the Egyptian Company for Energy and Cooling Projects (Gascool) to provide cooling services for Marakez’s D5M Mall in New Cairo.
• Russia releases our oranges: Russian customs authorities have released Egyptian citrus exports that were held for days due to a reported sudden change in import rules at Russian ports.
• EgyptAir reportedly plans to set up Air Sphinx, a low-cost airline subsidiary, this year.
• Emirati firm Al Nowais’ subsidiary AMEA Power is set to send proposals to the government on two projects in seawater desalination and green hydrogen.
• Recycling company BariQ has secured EUR 8 mn in funding from three foreign institutions and two local banks to finance expansions. The company is working (pdf) on expanding its bottle recycling factory to double production capacity to 60k tonnes/year.

The Health Ministry reported 2,131 new covid-19 infections yesterday, down from 2,145 the day before. Egypt has now disclosed a total of 454,952 confirmed cases of covid-19. The ministry also reported 57 new deaths, bringing the country’s total death toll to 23,349.

The vaccine tally: 29,083,027 people are now fully vaccinated against the virus, while some 9.5 mn people have received only their first shots and 749,799 people have received booster shots.

Egypt has some 70 mn covid-19 jabs ready and waiting to be administered, head of the government’s covid-19 committee Hossam Hosny told Ala Mas’ouleety (watch, runtime: 15:29).

Anti-vax and anti-mask protests have erupted across major cities over the past week, as resentment grows against ongoing covid-19 restrictions even as the pandemic appears to be subsiding. Canadian police have finally cleared a six-day blockade that halted one of the country’s busiest trade links with the United States, Reuters reports, after truck drivers staged a “freedom convoy” against a vaccine-or-quarantine mandate for cross-border drivers. The protests have inspired similar demonstrations in the Australian capital of Canberra, while France saw a protest convoy against covid restrictions breach warnings to stay away from central Paris, with the police firing tear gas on demonstrators.

A ray of light? Some anti-vaxxers are being swayed by the protein-based Novavax jab. Many unvaccinated people in Germany have signed up to take the Novavax covid-19 vaccine, which uses a long-established protein-based technology, signaling that some who have doubts about novel mRNA vaccines could be persuaded to take other jabs, Reuters reports.

Libyan politics is again in danger of splitting into two rival administrations, after the Tobruk-based House of Representatives on Thursday appointed a new prime minister in a challenge to the UN-backed government in Tripoli, the Financial Times reports. Former interior minister Fathi Bashagha’s appointment throws the UN-backed process to unite the country into further uncertainty, following the blow dealt by the failure to hold elections that were scheduled for December. Interim Prime Minister Abdul Hamid Dbeibeh rejected the appointment of his rival and refused to step down until elections are held.