AM — State banks, institutions commit USD 85 mn to Global Ventures’ Egyptian fintech fund

Good morning, wonderful people, and welcome to a business-heavy issue of Enterprise as a flood of fundraising, M&A and investment news pushed the local fallout from the war in Ukraine further down our metaphorical front page.

Four stories really stand out: Global Ventures’ new, USD 85 mn Nclude fund, to be sure. But also the increasing (and quite welcome) acquisitiveness of Emirati players (as lender FAB eyes a potential acquisition of GB Lease), burgeoning interest in all things green (ammonium, this time) and the rollout of future flow securitization.

That last bit — future flow securitization — is a mouthful, but don’t gloss over it. It could be a game changer for many businesses. Imagine you run a school (or a SaaS business or a sports club or anything else with recurring, subscription-like revenues). You have tuition coming in at regular intervals, including from families that are on payment plans. But you want all the cash now to fund innovation, or build an expansion, or simply to smooth out your cashflows. Future flow securitization would effectively allow you to get a big chunk this year’s total tuition paid to you today, in a lump sum — if you’re willing to give up a bit of the total value to the investors who will front you the cash today.

BUT, BUT, BUT… Excited as we may be this morning about business news, war in Ukraine will be back at the top of the front page later today or tomorrow. That’s when the Madbouly government will announce new measures in response to the negative effects of the Russia-Ukraine war, Kelma Akhira’s Lamees El Hadidi said yesterday (watch, runtime 3:25). President Abdel Fattah El Sisi yesterday instructed the government to immediately put together a package of measures to soften the economic and social impact of rising inflation caused by the conflict.

MEANWHILE- Foreign Minister Sameh Shoukry’s Asian tour continues today. The FM held talks yesterday with his Pakistani counterpart, Shah Mehmood Qureshi, according to a ministry statement. Shoukry has in recent days made whistle stops in Indonesia and Malaysia and is scheduled to attend a summit of the Organization of Islamic Cooperation in Islamabad on this Tuesday and Wednesday.

PSA- “Wintry” weather ahead: The cold is staying with us this week, according to the latest forecast by the folks over at the Egyptian Meteorological Authority. Expect highs of 18°C and lows of 8°C in Greater Cairo and Alexandria through Friday. There’s also a 20% chance of light rain this week, it added. Don’t worry, though: We’re still looking at the mercury entering the 30s by the first day of Ramadan, according to the long-range forecast on our favourite weather app.

It’s day two of the maritime logistics conference Marlog, which is taking place at the Hilton Green Plaza hotel in Alexandria. The event closes tomorrow.

CIRCLE YOUR CALENDAR-

It’s interest rate week: The Central Bank of Egypt will hold its policy meeting to review interest rates this Thursday, 24 March. Six of the nine analysts we polled last week expect the central bank to raise interest rates in response to rising inflation and tighter financial conditions. There was a lack of consensus on the size of the potential hike, with some forecasting rates to rise by 50 bps and others predicting an aggressive 150 bps increase.

Actually, make that seven of nine (no, not that Seven of Nine): Arqaam is calling a 250 bps rate hike — “well above consensus” when the Monetary Policy Committee meets on Thursday, Head of Research Jaap Meijer said in an email yesterday. “With inflation possibly reaching close to 10% in March, to keep the carry trade continuing, and a low tolerance to see FX reserves slip, we now expect a rate hike in the range of 200-300bps at the next meeting,” Meijer wrote in a research note (pdf) yesterday with Aliya El Husseini.

MEANWHILE- Is Israeli PM Naftali Bennett planning a trip to Cairo? That’s the assertion in the Times of Israel, citing an unconfirmed report in the Israeli press, which suggests Bennett could meet President Abdel Fattah El Sisi in Sharm El Sheikh this coming September if the plans firm up. The newspaper points to the potential meeting as the latest sign of warming ties between Israel and Egypt.

ALSO- Do you need to dive deeper into e-invoicing? Lynx Strategy Business Advisors are hosting a webinar on Wednesday, 23 March to discuss the system. The Arabic-language gathering will take place 12:00-1:30pm with speakers from the Finance Ministry and the Tax Authority and a panel discussion including the CFOs of PepsiCo, Talabat and Unilever.

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: Since the September 2020 suspension of the SAT, alternative tests — namely the ACT and EST — have been used for American Diploma students to enter university in Egypt. Though the alternative tests have overcome initial capacity strain, they don’t appear to be completely filling the gap left by the SAT — with schools citing difficulties obtaining information as a particularly significant challenge. But perhaps the biggest challenge of all is that the market position of all three tests remains unclear, with some sources noting that greater clarity would offer consistency for both schools and students hoping to sit these tests.

Global Ventures, state banks launch USD 85 mn fund: Three of Egypt’s state-owned banks are investing in a new USD 85 mn fintech fund launched by Dubai-based VC Global Ventures, according to a statement (pdf) out yesterday. The fund, dubbed “Nclude,” will invest in Egyptian startups specializing in fintech and working to accelerate financial inclusion.

Who’s in? Banque Misr is acting as an anchor investor in Nclude, while NBE and Banque du Caire are on board as strategic investors, Global Ventures said. NBE has contributed USD 30 mn to the fund while Banque du Caire stumped up USD 25 mn, NBE Vice Chairman Yahya Aboul Fotouh told Al Masdar. e-Finance’s parent company e-Finance Investment Group has made a USD 10 mn commitment to the fund, 30% of which will be deployed this year with the remainder to be invested quarterly over the next four years, it said in a statement (pdf). Egyptian Banks Company (EBC) also made undisclosed investments to the fund. Set up by the state and Egyptian banks back in the 1990s, EBC is the OG Egyptian payments firm — it runs the 123 ATM network and serves as the automated clearing house for electronic fund transfers between banks, among other duties. Nclude will also be supported by global ventures builder Shipyard Technology Ventures, the statement said without providing further details.

The targets: Nclude will target early- and growth-stage fintech startups based in Egypt, as well as regional firms looking to expand into Egypt. The fund will invest 90% of its capital into existing startups through seed, series A and series B rounds, and the remainder towards co-creation and venture building activities, e-Finance said.

The fund has already invested in four local startups:

• Khazna: The fund has made an undisclosed investment in Khazna. Founded in April 2019, Khazna is one of the nation’s hottest fintech players and provides online financial services to Egyptians who don’t have a bank account through its salary advance app. The Cairo-based startup aims to increase their paper money advance service to cover 20 mn Egyptians with limited credit access.
• Lucky: Nclude led Lucky’s USD 25 mn series A round, which also attracted investments from PayU, Endeavor Catalyst, Venture Souq, Oman Technology Fund, Arzan Capital and Disruptech Ventures, it said in a statement (pdf) yesterday. The round is Egypt’s largest fintech series A to date. Founded in 2018, Lucky has connected over 6 mn customers to a range of credit products, price reductions, and cashback rewards.
• Mozare3: It has deployed funds to Egyptian agri-fintech startup Mozare3, the statement said without disclosing the amount. Mozare3 supports small farmers by providing them with agricultural inputs of pesticides, fertilizers or seeds. Last year it landed a seven-figure pre-seed investment and has regional expansion in its 2023 plans, with an eye on Sudan and Morocco.
• Paymob: It has also invested in payment gateway Paymob. The startup was founded in Egypt in 2015 and has since expanded to several other markets — including Jordan, Palestine, Kenya and Pakistan — making it Egypt’s first fintech firm to expand overseas.

There’s more funding on the way: Nclude is expecting further investment from “prominent regional and international investors,” the statement said.

Global Ventures is no stranger to the Egyptian startup scene, having deployed USD tens of mns in local firms including Sympl, Paymob, Yodawy, Thndr, Minly, and Elmenus.

The announcement is getting coverage in the foreign press: Reuters | Bloomberg | Al Arabiya.

ALSO FROM PLANET STARTUP-

Lebanon-based beauty e-commerce platforms SohatiCare and Loolia Closet have expanded to Egypt, according to Waya. SohatiCare, an online pharmacy offering beauty and personal care products, and Loolia Closet, a marketplace for makeup, skincare and other cosmetic products, currently operate in Lebanon and Jordan.

Intro Group subsidiary Intro Sustainable Resources (IRS) is looking to invest some EGP 1 bn in waste recycling this year, Mostafa Khairat — the CEO of Intro’s waste management arm and BariQ, told Al Mal. IRS was established in 2020 to develop clean energy, waste management and recycling projects through its subsidiaries, Intro Power and Utilities and Intro Waste Management and Material Recovery. Intro Waste Management acquired recycling company BariQ from Raya for EGP 571 mn last year.

Last we heard, IRS was in line to receive USD 5.3 mn from the European Bank for Reconstruction and Development to finance projects including combined heat and power plants, renewable energy generation, electricity distribution, and waste management. The USD 5.3 mn funding will finance around a quarter of the total project cost — USD 18.7 mn — which will include two combined heat and power plants.

Cross-border acquisitions on the menu: IRS has set aside EGP 500 mn for acquisitions this year, including in Egypt, Africa, and the Gulf, Khairat said. He didn’t provide further details on the specific targets, but said they would all be in the recycling sector.

IPOs in the works: BariQ could also be looking at an EGX debut in 2023, Khairat is quoted as saying. The recycling company’s potential IPO would depend on it reaching a certain critical mass and meeting governance and structural requirements for offering shares, Khairat added. IRS is considering IPOing BariQ on its own or alongside other subsidiaries, or taking the parent company to market, according to the CEO.

First Abu Dhabi Bank (FAB) is in advanced talks with GB Auto to acquire 100% of its leasing arm GB Lease, Al Shorouk reported Saturday, citing sources familiar with the discussions. The two sides have not yet settled on a valuation but an agreement is supposed to be finalized some time during 2H 2022, the sources claimed.

No agreement yet: GB Auto has not entered any “definitive agreements” on a stake sale in subsidiary GB Lease, it said in an EGX disclosure (pdf) yesterday.

FAB on a buying spree: The Gulf lender recently made an offer to buy a majority stake in leading frontier emerging markets financial services corporation EFG Hermes as part of its wider plans for regional expansion.

IN OTHER M&A NEWS-

Palm Hills Developments (PHD) has upped its stake in Incolease for the second this month, purchasing a 5.76% stake in the company for EGP 47 mn, according to an EGX disclosure (pdf). The company now owns 15.36% of Incolease after it bought more than 1.1 mn shares at EGP 41 apiece. The transaction comes less than two weeks after PHD purchased a 7.97% stake in the company for EGP 65.4 mn. El Tarek Automotive also acquired a 23% stake in Incolease in an EGP 189 mn transaction earlier this month.

Another green ammonia plant in the SCZone? France’s EDF Renewables and Egypt’s ZeroWaste are together one of six international consortiums currently in talks with the Suez Canal Economic Zone (SCZone) to establish a USD 1 bn green ammonia plant that would produce green fuel for ships, SCZone head Yehia Zaki told Enterprise, confirming a report from Al Borsa. Zaki declined to name the other companies and consortiums that are eyeing the facility. The plant would have an annual production capacity of around 220k tons.

This is the second green ammonia plant we’ve gotten wind of over the past week: Norwegian renewable energy giant Scatec announced last Monday that it had signed an MoU to build a USD 5 bn facility in the SCZone backed by the Sovereign Fund of Egypt (SFE) that would have an initial production capacity of 1 mn tons per year.

The SFE could be getting on board with the latest project: The EDF-ZeroWaste consortium is looking at partnering with the SFE on the plant, Zaki told us. Al Borsa’s sources also claim the consortium has already reached preliminary agreements with international banks for the plant’s financing, and is hoping to sign final contracts sometime this year.

EDF Renewables is already active in Egypt, with a stake in Egyptian solar player KarmSolar, and two 65-MW solar plants at Benban.

There’s growing interest in green ammonia in Egypt: Abu Qir Fertilizers is also currently studying the establishment of a green hydrogen and green ammonia project in cooperation with Total, while British energy services company Petrofac will conduct a feasibility study on a new green hydrogen / ammonia facility for a subsidiary of low-carbon energy firm Mediterranean Energy Partners.

The government is trying to lure investors into the industry with tax incentives: The government recently widened the number of companies eligible for tax incentives under the Investment Act to encompass investments in green ammonia projects.

French shipping company CMA CGM is reportedly looking into making an undisclosed investment in the Ain Sokhna port, Al Mal quotes the head of the company’s Sudan and Egypt unit, Tariq Zaghloul, as saying. The company is studying projects related to the Ain Sokhna port to assess whether it aligns with its objective, Zaghloul said, without disclosing further details.

Tahya Misr all-purpose terminal to open in 4Q 2022: The company recently signed an agreement to operate and manage the Tahya Misr all-purpose terminal in Alexandria port, in which it has invested USD 175 mn so far, Zaghloul said. The terminal is expected to be fully operational by the end 2022, receiving its first container ship in October and its first cargo ship next April, according to Al Mal.

Eyes on the Tenth of Ramadan dry port: The company is also bidding alongside Elsewedy Electric for the contract to establish the EGP 3.5 bn Tenth of Ramadan dry port. It is competing with at least three other consortiums.

IN OTHER LOGISTICS NEWS-

The Transport Ministry signed several agreements with Abu Dhabi Ports Group yesterday that will see it manage and operate a multi-purpose terminal in Ain Sokna port and a river port in Minya Governorate, the ministry said in a statement. The Emirati ports operator is bidding for contracts to establish the Tenth of Ramadan dry port and a new cargo terminal at Safaga. If successful, it could invest around USD 500 mn, the company said last year.

FinMin trims budget targets as Ukraine conflict weighs on state finances: The Finance Ministry has revised downwards its fiscal targets for FY 2022-2023 as rising commodities prices put pressure on public finances, according to figures published in an Ittihadiya statement yesterday evening.

Deficit still on course to narrow: The government now sees the budget deficit contracting to 6.3% of GDP in the upcoming 2022-2023 fiscal year from an expected 6.9% in the current FY. Preliminary figures released by the ministry in January had targeted a 6.1% deficit in the coming fiscal year.

This will mean a slimmer primary surplus: The ministry has lowered its primary surplus target to 1.5% in 2022-2023 from 2% previously.

No word on debt: Finance Minister Mohammed Maait didn’t disclose the ministry’s debt-to-GDP target for the coming fiscal year. The minister said in January that public debt levels were expected to fall to below 90% of GDP in 2022-2023.

Or GDP: The statement didn’t disclose whether the government has altered its growth forecast in response to the conflict and the resulting inflation. The ministry is currently targeting a 5.7% growth rate in 2022-2023.

Revised targets were in the cards: Maait said earlier this month that the ministry would likely have to reassess its fiscal targets in light of the war in Ukraine and its impact on the Egyptian economy.

The government had already lowered its deficit target for the current fiscal year: The ministry originally targeted reducing the deficit to 6.7% this fiscal year from 7.4% in 2020-2021 but has now lowered this to 6.9% due to the fiscal impact of the Ukraine conflict.

Government spending to rise 12% next year: The government expects to spend EGP 2.07 tn in 2022-2023, up from its EGP 1.84 tn projected spend this year, according to the statement. This includes EGP 400 bn for wages, EGP 365 bn for public investments, and EGP 323 bn for state subsidies.

Revenues are forecast to rise 17% to EGP 1.45 tn during the year, according to the statement.

MB Engineering EV charging subsidiary Sha7en has signed an agreement to manage and operate 30 EV charging stations owned by Revolta Egypt, MB Engineering announced in an EGX disclosure (pdf) yesterday. The stations could generate up to EGP 18 mn in revenues per year, and are located across Greater Cairo, Alexandria, Fayoum, the Red Sea, Sharqia, Qalyubia, and Port Said.

Revolta Egypt stopped doing business in Egypt a few years ago, leaving its 65 charging stations up for grabs.

The stations will be connected to Sha7en’s larger network of charging points across Egypt, and will be up and running before the end of the month, according to the disclosure.

About Sha7en: The EV outfit launched its first charging station in January, and is planning to set up 100 charging points across five governorates by the end of the year, Zawya recently reported.

IN OTHER GREEN NEWS-

Alexandria Port to introduce energy-saving mechanism: The Alexandria Port Authority is working to apply the OPS mechanism, which automatically stops ships’ engines when they are anchored at port.

Future flow securitization is officially here: President Abdel Fattah El Sisi has ratified amendments to the Capital Markets Act that introduce future flow securitization, according to a decree published in the Official Gazette (pdf).

What is future flow securitization? Future flow securitization differs from traditional securitization in that it allows the securitization of payments that aren’t yet on the company’s balance sheet, giving companies access to liquidity without needing a big portfolio of accounts receivables (think: home and car financing, leasing portfolios and the like). Future income — whether from club memberships, phone bills, utility payments, tuition fees or rents — is packaged into securities and offered to investors in order to raise capital. This gives public- and private-sector companies such as utilities providers, healthcare companies, telecom players, and education outfits a new way to access liquidity.

Background: The Financial Regulatory Authority approved the instruments for use in Egypt last May, and the House of Representatives voted the amendments through last month.

IN REGULATORY NEWS-

The Financial Regulatory Authority wants to broaden its toolkit to identify risks in the non-bank sector and is looking to introduce new mechanisms to assess market conditions and gauge lenders’ exposure to risk, it said in a statement (pdf) yesterday. The regulator began stress-testing non-bank financial institutions (pdf) in the wake of the covid-19 pandemic, and last year began working with Sanad Fund and the Frankfurt School of Finance to develop new tests to assess sector risks.

Turkey optimistic on peace agreement as Russia issues ultimatum to Mariupol: Turkish Foreign Minister Mevlut Cavusoglu has claimed that Russia and Ukraine are “close to an agreement” on key areas, in comments picked up by Turkish newspaper Hurriyet. Turkey is acting as a mediator between the two sides and earlier this month hosted direct talks between the Russian and Ukrainian foreign ministers. “There is convergence on the two countries’ positions on the critical issues,” Cavusoglu said, adding that four of the six points of disagreement are close to being settled.

Where there’s progress: Turkish presidential adviser Ibrahim Kalin told Hurriyet on Saturday that Russia and Ukraine have made progress on four key points: Kyiv’s relationship with Nato, mutual security guarantees, protection of the Russian language in Ukraine, and what Russia refers to as “denazification.”

The sticking points: Russia and Ukraine remain far apart on the future status of Crimea and the separatist regions in the Donbas, he said. Russia annexed the Crimean peninsula in 2014 following the Maidan revolution, and has sponsored breakaway republics in the east of the country which is recognized as independent states prior to its invasion.

ON THE GROUND-

Moscow issues ultimatum to surrender Mariupol: Russia has given Ukrainian forces in the besieged port city of Mariupol a deadline today to surrender their weapons. A statement from the Russian Defense Ministry carried by RIA Novosti said that Russian troops would abide by a ceasefire to open humanitarian corridors and allow aid into the city but demanded that Kyiv tell Moscow in writing by 5am Moscow time that its fighters would leave the city. The Ukrainian deputy PM rejected the deadline, saying that there would be “no question” of surrender.

Cleopatra Hospitals (CHG) reports record 4Q2021 results: Cleopatra Hospitals Group’s (CHG) net income grew 6% y-o-y in 4Q2021 to EGP 122.6 mn, according to the company’s earnings release (pdf). The company’s bottom line was underpinned by its highest-ever quarterly revenues, rising 6% y-o-y to EGP 648.7 mn. On a full-year basis, CHG’s net income rose 38% y-o-y to EGP 410.7 mn, with revenues growing 28% to EGP 2.54 bn.

Growth was “balanced” across CHG’s facilities, with its polyclinics delivering 70% top line growth and fertility-specialist Bedaya Hospital recording a “steady increase in patient volumes,” boosted by a growing demand in medical tourism. The group served 1 mn cases across its facilities throughout the year, which allowed it to deliver on its long-term targets. The group’s covid-related revenues grew 49% to EGP 274.6 mn, contributing to 11% of its total revenues for the year.

“2021 was a transformational year for CHG which saw us deliver robust financial and operational results while taking important strides forward on our longer-term growth and development strategy,” CEO Ahmed Ezzeldin said.

Looking ahead: The group launched a new multi-specialty surgical model in its El Katib Hospital, the results of which it expects to see reflected on revenues later this year. “Our overarching goals for 2022 remain unchanged as we look to drive new organic and inorganic growth, further optimize all aspects of our operations, and, most importantly, continue serving our patients and their families to the best of our abilities,” said Ezzeldin.

Ibnsina Pharma’s net income more than tripled y-o-y in 4Q2021 to EGP 74.4 mn, according to the company’s earnings release (pdf). The company booked revenues of almost EGP 6 bn, rising 20% y-o-y. On a full-year basis, the company’s bottom line rose 40% y-o-y to EGP 315.7 mn, on the back of a 16% y-o-y increase in revenues to EGP 21.7 bn.

Price hikes, OPEX cuts drive growth: Ibnsina reported sales growth of more than 7% during the year, which it said was “mainly driven by increases in the average selling price.” The company also said it had managed OPEX growth, cutting OPEX to sales to 3.8% from 4.4% in 2020.

Looking ahead: Ibnsina is forecasting double-digit retail sales growth in 2022 as strong economic growth and a rising population supports consumer demand. It also expects non-retail sales to grow this year in anticipation that public procurement processes will become more efficient.

The nation’s talking heads took a break from discussing food price inflation last night, and instead turned their attention to the rising price of cigarettes. British American Tobacco Egypt yesterday announced that it will raise its prices between EGP 1-3 per pack, a hike that Federation of Egyptian Industries cigarettes division head Ibrahim Embaby said was the result of the central bank’s decision to require letters of credit (L/Cs) from importers. During a phone-in with Al Hadath Al Youm’s Hadret Al Mowaten (watch, runtime 3:24), Embaby said the decision to raise prices was caused by a decrease in supply on the back of fewer raw materials being imported by manufacturers. As of the beginning of March, banks have stopped documentary collection as part of the import process after the CBE instructed them to only accept L/Cs. Embaby called for raw materials used in tobacco products to be exempted from the decision due to a lack of local alternatives.

Then again: Maybe it isn’t exactly a public health disaster if cancer sticks get a bit more expensive? Just a thought. (Also: Nothing is more self-righteous than an ex-smoker. We admit that…)

No plans to increase the prices of meds: The pharma industry is staying strong in the face of global price surges and will work on decreasing production costs to avoid any price increases for consumers, Gamal El Leithy, head of the pharma chamber of the Federation of Industries, told Kelma Akhira’s Lamees El Hadidi in a phone-in (watch, runtime 5:00). “These are tough times, but I want to reassure Egyptians that there will not be any medicine shortages across the country,” he said.

Manufacturers want the Consumer Protection Agency to reconsider its recent decision requiring companies to include expiration dates on product labels from May. In a phone-in on Ala Mas’ouleety (watch, runtime 2:32:51), Federation of Industries board member Mohamed El Bahy said that it didn’t make sense to include a shelf life on durable goods and called on the agency to only apply the decision to medical products.

There’s a new covid strain on the block: The new BA.2 variant is a "sublineage" of the omicron variant that appears to be even more transmissible, said Hossam Hosny, head of the committee to combat the coronavirus, in a phone-in with Al Hekaya’s Amr Adib (watch, runtime 5:18) However, its symptoms appear to be just as mild as omicron, with fewer hospitalizations so far, he said.

The war in Ukraine and its effect on our wheat supply is continuing to get ink in the foreign press this morning: The Madbouly government’s move to ban exports of key staples including wheat, flour and lentils for three months comes as more Arab nations veer towards food protectionism amid the Russia-Ukraine war’s impact on food security, Bloomberg reports. The New York Times also name-checks Egypt in a story headlined Ukraine war threatens to cause a global food crisis.

Egypt is the world’s biggest wheat importer, and relies on Russia and Ukraine for more than 80% of its wheat supply.

Houthis launch drone attacks on Saudi energy infrastructure: Yemen’s Houthi rebels launched drone and missile strikes on Saudi Arabia that targeted a liquified natural gas plant, a water desalination plant, a power station and an oil refinery owned by Aramco and China’s Sinopec, the Saudi Press Agency said yesterday. The attacks caused a temporary drop in output at the oil refinery, but no casualties, it said.

Also worth knowing this morning:

• The brother of Lebanon's central bank governor Riad Salameh has been arrested as authorities step up their probe into alleged money laundering and embezzlement by senior officials at the bank, Reuters reports.
• US classifies Rohingya violence as genocide: The Biden administration has ruled that the ethnic cleansing carried out against Myanmar’s Rohinigya minority by the country’s military constitutes a genocide and crime against humanity, US officials told Reuters.