AM — From samurai bonds to the price of your new car and a big SME fund of funds, it’s a busy start to the last week before Ramadan

Good morning, friends, and welcome to the last workweek before the start of Ramadan, which begins this coming Saturday. We hope you had a relaxing weekend and are looking forward to what is already shaping up as a busy week. Though hopefully not _quite_ as busy as last week, between a snap rate hike and devaluation, a massive stimulus program, bns of USD in investment announcements, and confirmation that we’re in talks with the International Monetary Fund once again.

Market watchers are pleased with how we’re handling things so far, with Goldman Sachs MENA economist Farouk Soussa telling Bloomberg TV the moves should boost confidence and bring fresh inflows from foreign investors (watch, runtime: 5:56). Last week’s move on the EGP will take off the board investor concern about the risk of further devaluation — and even raises “the possibility of some appreciation in the coming months,” Soussa said last week.

Meanwhile, folks are continuing to throw money at NBE + Banque Misr: The new 18% CDs launched by Banque Misr and the National Bank of Egypt (NBE) attracted deposits worth a combined EGP 153 bn was invested in the four days following the Central Bank of Egypt’s 100-bps rate hike, Al Mal reports. Some EGP 102 bn has been invested with NBE, while Banque Misr has seen EGP 51 bn in inflows.

PSA #1- Devaluation shouldn’t affect the price of your new car if you’ve already signed on the dotted line. The trade and supply ministries have agreed with the Federation of Egyptian Chambers of Commerce that its members will abide by the original value of contracts signed before the EGP’s depreciation and the onset of the Russia-Ukraine war, according to a cabinet statement. The Trade Ministry has received “a large number” of complaints in recent days that retailers have been hiking the price of cars, electronic gadgets and white goods for which consumers had already signed and paid deposits, Trade Minister Nevine Gamea said. Supply Minister Aly El Moselhy urged buyers to reach out to the Consumer Protection Agency, which he said would take action against unjustified price hikes.

If last week was all about the economy, the start of this week has a distinctly diplomacy bent to it:

IT’S A BIG WEEK FOR DIPLOMACY-

Egypt is taking part in another landmark Middle East summit. There are reports that Foreign Minister Sameh Shoukry will be in Israel today to join the two-day Abraham Accords summit, alongside the foreign ministers of Israel, the UAE, Morocco, Bahrain and the United States. While the Israeli Foreign Ministry made no mention of Egypt, the US State Department said yesterday that Egypt is attending, confirming reports in the Israeli press that suggested Shoukry would be involved in the talks. Jordan’s foreign minister, Ayman Safadi, is also being pushed to attend, the reports said.

This comes less than a week after President Abdel Fattah El Sisi hosted Israeli PM Naftali Bennett and UAE Crown Prince Mohamed bin Zayed for three-way talks in Sharm El Sheikh that covered rising energy / food insecurity and regional geopolitical issues including the nuclear negotiations with Iran.

Another major summit on Friday brought together El Sisi with leaders from Jordan, Iraq and the UAE to discuss the economic repercussions of the Ukraine conflict.

SPEAKING OF DIPLOMACY- It’s that time of the year again: AmCham’s Doorknock mission is kicking off “within days,” according to a cabinet statement. The typically-annual corporate diplomacy tour has been on hiatus for the past two springs due to the pandemic. AmCham delegations accompany several members of cabinet to Washington, DC, to meet with members of the US administration, Congress, think tanks, and the media in a bid to attract private sector investment and raise Egypt’s profile on the Hill. Prime Minister Moustafa Madbouly recently sat down with AmCham members to discuss Egypt’s priority sectors for investment, including tech, green and renewable energy, transport, water treatment and desalination, and manufacturing, specifically EV manufacturing in light of the upcoming automotive strategy.

AND- Cyprus Energy Minister Natasa Pilidou is in town this week heading a delegation of Cypriot companies to discuss business ties with ministers and Egyptian firms, according to an official statement. The delegation will be in town from 28-31 March.

TODAY IN LEGISLATIVE AFFAIRS:

• The Senate will continue debating the Unified Ins. Act today, reports Ahram Online. The bill, which has been at least three years in the making, will make the Financial Regulatory Authority the primary regulator for the sector and make ins. compulsory for SMEs and freelancers, among other things.
• The Senate will also discuss amendments to the law regulating NGOs in Egypt, and is set to decide on giving another one-year extension for NGOs to legalize their work in the country. If approved, the amendments will be sent over to the House of Representatives for discussion.

WATCH THIS SPACE -The Central Bank of Egypt (CBE) is working to streamline import procedures for a list of essential commodities agreed upon by the supply and finance ministries, amid pressure on imports caused by the Russia-Ukraine war, according to a cabinet statement. While the statement was scant on details, it could be that the CBE is considering exempting more goods from the new requirement for importers to submit letters of credit. We’ll keep you posted as and when we hear more.

The Pharaohs are halfway to getting their revenge against Senegal and qualifying for the World Cup after edging the first leg of the World Cup playoff 1-0 on Friday night. Played in front of a 75k-strong crowd in Cairo International Stadium, the Pharaohs had to rely on an unlucky own goal in the fourth minute to hand them the advantage in the tie, which was played just six weeks after Senegal beat them on penalties in the final of the African Cup of Nations. The second leg will be played in Dakar on Tuesday night.

PSA #2- Summer (not spring) is in the air: Prepare to shed the layers this week as the Egyptian Meteorological Authority (EMA) forecasts (pdf) a gradual rise in temperatures. Our favourite weather app is forecasting a high today of 24°C in the capital city (29°C in Alexandria) rising to 35°C on Saturday, the first day of Ramadan (25°C in Alex).

PSA #3- So, when do we eat? Maghrib prayers are at 6:14pm CLT on the first day of the holy month (6:20pm in Alexandria), while you’ll have until 4:15am CLT to caffeinate or otherwise consume the sohour of your choice ahead of fajr prayers (4:18am in Alexandria).

PSA #4- All individual taxpayers have until this Thursday, 31 March, to submit their 2021 tax returns to the Egyptian Tax Authority. The deadline for companies with January-December fiscal years is 30 April.

FROM THE DEPT. OF GOOD NEWS-

The number of women in Egypt who have bank accounts has risen 171% since 2016, the central bank said this weekend in a statement (pdf). Some 16 mn women had bank accounts at the end of 2021, compared to 5.9 mn in 2016, it said. The CBE also noted that its requirement that all banks have at least two women on their boards resulted in a 67% increase in female representation on bank boards.

MARKET WATCH-

Traders are again predicting that oil could breach the USD 200 per barrel mark this year due to Russia’s growing isolation imposed by Western sanctions and a shortage of alternative supply sources, according to the Financial Times. A Europe and US-led boycott of Russian oil could cause the market to lose as many as 3 mn barrels of oil per day, while any alternative suppliers — including other OPEC+ members such as GCC countries — would need at least a year to ramp up output enough to plug the gap, traders say.

COVID WATCH-

Egypt saw an average of 625 new covid-19 infections per day last week, down from 788 per day the week before — and a daily average of eight covid-related deaths, down from 12 per day the previous week, according to Health Ministry figures released yesterday. Around 32 mn people are now fully vaccinated, and more than 1.9 mn have had their boosters, the statement added.

CIRCLE YOUR CALENDAR-

Afreximbank and the Angolan Embassy in Egypt are hosting (pdf) an Angola-Egypt investment roundtable on Wednesday at the Hilton Cairo Heliopolis Hotel. Click here to RSVP to join the discussion.

The Egypt International Mining Show (EIMS 2022) kicks off on Monday. The virtual event will wrap on Tuesday.

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

IN MEMORIAM: President of the Lawyers' Syndicate Ragai Attia has passed away at the age of 84, Al Masry Al Youm reports. Attia suffered a heart attack during an ongoing trial at a Giza court. In addition to his notable career in law, Attia was the author of dozens of published books in the literary, religious, and legal fields, including The renewal of religious thought and discourse.

*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: Last week, we talked to the CIT Minister advisor on AI Sally ‘Golestan’ Radwan and took a deep-dive into the ministry’s national strategy on the sector. Today, Radwan tells us about the practical applications of the strategy and its development.

Egypt successfully closed its maiden Samurai bond issuance, selling USD 500 mn (c.JPY 60 bn) of the JPY-denominated bonds in Japan today, the Finance Ministry said in a statement Thursday. The ministry took the issuance to market despite the spillover from the Russian invasion of Ukraine, and the sale makes Egypt the first in the region to issue JPY-denominated bonds in the Japanese market, the ministry said.

The five-year bond carries an annual coupon rate of 0.85%, the ministry said, making it more attractive in comparison with average coupon rates of 2.33% for USD-denominated bonds. The statement did not include details on the bonds’ subscription rate. It received a credit guarantee from Japan’s Sumitomo Mitsui Banking — which also managed the issuance — and coverage from Nippon Export and Investment Ins. (NEXI).

Tapping the international bond market in spite of topsy turvy global markets: The issuance reflects Egypt’s ability to successfully close a sale on the international bonds market, Finance Minister Mohamed Maait said, despite “unprecedented challenges seen by global economies.” The issuance went ahead in spite of doubts that suggested it could be postponed due to poor global market conditions caused by the Ukrainian war.

Background: The issuance comes a few months after meetings between officials to take the issuance to market in Japan, as part of Egypt’s debt diversification strategy. The government had been mulling selling JPY-denominated bonds back in 2019, as well as RMB-denominated Panda bonds, but Maait said in late 2020 that the planned sales were being delayed until at least FY2021-2022 because of complications caused by the pandemic. Marketing foreign bonds in Asian markets is a different ball game and also requires new ratings assessments by Asian agencies, a senior government official told us in 2020.

Palm Hills closes landmark EGP 3.25 bn sukuk: Palm Hills Developments (PHD) has closed its first sukuk issuance worth EGP 3.25 bn, issuance manager Sarwa Capital said in a statement (pdf). The sharia-compliant bonds — which the real estate developer’s general assembly greenlit a couple weeks back — carry a 10-year tenor and will be used to finance its Badya project in Sixth of October.

This is our first corporate sukuk sale of the year and comes after a very quiet 2020 for shariah-compliant debt issuances. By our count, 2021 witnessed a single EGP 2.5 bn sale from Contact Financial Holding (formerly Sarwa Capital) back in July.

Advisors: The sale was managed and promoted by Contact Financial subsidiary Sarwa Capital. Banque Misr and its investment arm Misr Capital acted as underwriters and promoters. Our friends at ALC Alieldean Weshahi & Partners were legal advisors, while KPMG Hazem Hassan served as auditor.

More sukuk sales ahead? Wadi Degla Developments’s EGP 2 bn sukuk sale and Amer Group’s EGP 1.1 bn offering — both quarterbacked by Contact — should take place during the first half of the year, Sarwa Promoting and Underwriting head Ayman Elsawy told us in January.

Egypt won’t be tapping the international wheat market with new tenders before the middle of May after having received all its backlogged orders of Russian wheat, Supply Minister Ali El Moselhy said Thursday, Bloomberg and Reuters report. The government is focusing for now on the local harvest, which begins at the start of April, through which it expects to procure between 5 mn and 6 mn tons of wheat, the minister told Bloomberg.

The suspension of further international wheat tenders comes as the war in Ukraine roiled global wheat markets. Egypt’s last international wheat purchase was in mid-February after the conflict forced state grain buyer GASC to cancel two tenders due to high prices and a dearth of offers. This has pushed authorities to ramp up its local wheat buying and issue both incentives and punitive measures to maximize production and boost farmers’ wheat sales to the government. Prior to the conflict, around 80% of Egypt’s wheat imports came from Ukraine and Russia.

Argentina talks to start this week: Egypt will hold talks on wheat imports with the Argentinian government this week, El Moselhy said, as the Madbouly government goes in search of alternative suppliers. Egypt has already held talks with the US and France, he said.

Fertilizer for wheat? Egypt is also looking into a potential barter agreement with Romania that would see us trade fertilizer for Romanian wheat, the minister said.

Kazakhstan wants to set up a logistics zone at Ain Sokhna port that would be used to ship its grains and other foods to Africa, Kazakhstan’s ambassador to Egypt said yesterday in a meeting with Agriculture Minister El Sayed El Quseir, according to a ministry statement.

State-owned banks launch EGP 2 bn SME fund of funds: A group of banks and financial institutions led by the National Bank of Egypt (NBE) have launched Egypt’s first fund of funds (FoF), which has reached a EGP 905 mn first close, the state-owned bank announced in a press release (pdf). Avanz Manara for Private Equity will invest in funds focused on SMEs, the statement read, without adding how many funds the firm is looking to back, the expected size of its investments, or when it plans to reach its targeted EGP 2 bn final close.

Avanz Manara has doubled the size of its targeted final close to EGP 2 bn since it was first announced last year. DC-based asset manager Avanz Capital — an affiliate of I Squared Capital with over USD 13 bn in assets under management — has been tapped to manage the fund, the statement confirmed.

Who’s in? The NBE is the largest single shareholder, having paid in EGP 300 mn, followed by Banque Misr, Banque du Caire, Ahli United Bank, Misr Ins. Holding, and Suez Canal Bank, which each stumped up EGP 100 mn. United Bank of Egypt contributed EGP 50 mn, private-sector outfit Attijariwafa Egypt committed EGP 45 mn, and fund manager Avanz Capital contributed EGP 10 mn. The firm is targeting an EGP 2 bn final close, according to the press release, which did not lay out a timeline.

Where will it invest? The fund plans to invest in SMEs in healthcare, education, fintech, agribusiness, renewables, fast-moving consumer goods and IT, a BdC source previously told us.

And what’s a fund of funds? In basic terms, a FoF chooses to invest in other funds — whether equity or debt — rather than individually vetting specific companies or debt issuances it may want to back. The fund managers to whom the FoF hands AUM are then trusted to generate returns that pass back to the managers of the fund of funds.

The Madbouly government and CBE have tagged SME finance as a priority going forward: State institutions including MIH, BdC and Suez Canal Bank last week made commitments to Catalyst Private Equity’s EGP 1 bn impact investment fund targeting Egyptian SMEs. They were joined by private-sector actors Attijariwafa and Ahli United Bank.

Advisors: The banks’ legal advisor for the launch was Zaki Hashem & Partners, while White & Case advised Avanz Capital.

Ministries and government agencies will start looking at ways to trim spending from the beginning of next month as the cabinet tries to get its fiscal house in order amid spiraling international commodity prices and the war in Ukraine. Sources have reportedly told Al Shorouk that Prime Minister Moustafa Madbouly has notified ministers, governors and state officials that in April they will need to review their budgets and cut costs where necessary. This comes a few days after the prime minister warned of potential austerity measures to balance out the increased social spending and rising import costs caused by the conflict in Ukraine,

Reportedly on the chopping block: Any new projects that have not yet been implemented and that require USD-based payments will be postponed and foreign travel for government officials will be prohibited unless absolutely necessary, the sources said.

Prime Minister Moustafa Madbouly reiterated the challenges ahead on Thursday, warning that the surge in oil prices “presents very big pressure on the currency and the state.” Speaking at the opening of the Ahlan Ramadan supermarket expo, the PM called on members of the public to limit their fuel use, noting that the doubling in the price of oil to around USD 120 per barrel means the state is now also paying double for imports at some USD 1 bn per month.

UAE-based VC firm Shorooq Partners has launched its USD 150 mn Bedaya Fund II to back early-stage startups operating in fintech, software, platform verticals, and digital assets in the MENAP region, according to a press release (pdf). The fund is backed by Abu Dhabi wealth fund ADQ’s venture firm, DisruptAD, the Dubai Future District Fund, Bupa Ins., and others. Bedaya Fund II will soon announce its first investments, which have already begun being deployed.

Shorooq has invested in Egypt’s grocery delivery startup Breadfast, with the commitment to the homegrown platform among 80 tickets it has written to more than 50 companies with a gross equity value of USD 1.5 bn.

Background: Shorooq launched last year the region’s first focused venture debt fund, Nahda Fund 1, with the VC firm hitting its fundraising target in just four weeks.

El Sisi calls for diplomatic solution to the war in Ukraine in call with Zelensky: President Abdel Fattah El Sisi received a phone call from his Ukrainian counterpart Volodymyr Zelensky on Thursday, according to an Ittihadiya statement, marking the first time the two leaders have spoken since Russia invaded Ukraine at the end of February. El Sisi stressed the importance of diplomacy and dialogue to solve the crisis, according to the statement, adding that Egypt is following with concern “the deterioration in the humanitarian situation” in Ukraine. “We agreed on the need to restore peace” in Ukraine, Zelensky wrote on Twitter following the conversation, adding that he thanked El Sisi for help provided to Ukrainians.

Shoukry was also in talks: Foreign Minister Sameh Shoukry also discussed ways to achieve a lasting peace with his Ukrainian counterpart Dmytro Kuleba in a call on Thursday, according to a statement.

Egypt is walking a delicate line on the war. Russia and Ukraine are both important strategic partners, together providing some 80% of our wheat imports and around a third of our inbound tourism market. Russia is building a nuclear power plant and an industrial zone here, Ukraine is involved in our national railway upgrade, and both countries are longstanding defense partners.

Two weeks since El Sisi-Putin talks: The call came two weeks after El Sisi offered to help mediate an end to the conflict during talks with Russian President Vladimir Putin.

El Sisi wasn’t the only Arab leader Zelensky reached out to this weekend: The Ukrainian leader joined the Doha Forum on Saturday and urged Qatar and other gas exporters to increase shipments to Europe and help it reduce its reliance on Russian energy, Bloomberg reported.

Europe is getting more gas from the US: The US will ship 50 bn cubic meters of LNG to Europe each year until at least 2030 under an agreement signed during President Biden’s visit to Europe last week. The supplies will cover about a third of the gas the EU receives from Russia, according to the Wall Street Journal.

Reminder: European nations are soon going to have to cough up some RUB if they want to keep importing Russian gas. Putin last week gave his government a week to put into place a mechanism for accepting RUBs rather than EUR or USD as payment for gas, which would mean Europe not only propping up the currency but helping Russian banks to skirt sanctions.

Biden seems to have inadvertently called for the overthrow of Putin, breaking with official US policy which has avoided publicly calling for regime change in Moscow. “For God’s sake, this man cannot remain in power,” the US president said in an unscripted remark at the end of an address in Poland yesterday. Cue clarifications from the White House press team.

EGYPTIANS IN UKRAINE-

An Egyptian citizen has died in Mariupol: Yehia Hassan Yehia Hamed was killed in the attacks on the city of Mariupol, which has seen some of the worst shelling and airstrikes since the onset of the war, according to a statement by the Egyptian community in Ukraine.

EFG Hermes’ net income rose 12% y-o-y to EGP 1.5 bn in 2021, the universal bank said in its earning release (pdf) on Thursday. The bank’s bottom line growth was supported by a 12% rise in revenues which finished the year at EGP 6.1 bn.

Revenue growth of 19% in 4Q2021 was underpinned by strong performance at its non-bank platforms and the acquisition of the Arab Investment Bank in the quarter, which contributed EGP 306 mn to the group’s top line in the period. Revenues at EFG’s non-bank arms rose 33% y-o-y during the October-December period to EGP 537 mn: Microfinance platform Tanmeyah recorded a 25% increase in revenues to EGP 372 mn, while revenues at the bank’s consumer finance arm valU almost doubled to EGP 84 mn. EFG Hermes is a universal bank in Egypt and the leading investment bank franchise in frontier emerging markets.

Diversification was key to EFG’s success this past year: “As I look back, I am confident now more than ever that our strategies over the last five years — from expansion into FEMs, to the diversification into NBFIs, and the entrance into the commercial banking space — have not only borne fruit but have given us the ability to withstand very tough and turbulent market conditions,” said Group CEO Karim Awad.

Egyptian Media Production City (EMPC)’s board of directors has appointed Abdel Fattah El Gebaly as its new chairman, replacing former information minister Osama Heikal, according to an official statement. El Gebaly was recommended by the EMPC’s mother company, the National Media Authority (NMA). El Gebaly is a journalist and economic expert who was previously chairman of Al Ahram Foundation and chairman of Al Watan newspaper, according to El Dostor.

Food prices were once again a topic of conversation on the airwaves last night: Abdel Moneim Khalil, head of internal trade at the Supply Ministry, phoned-in to Al Hayah Al Youm, telling show host Lobna Assal that last week’s price controls on unsubsidized bread have now been implemented and the ministry is conducting a nationwide awareness campaign to make sure bakeries understand the changes (watch, runtime 7:56). The three-month price controls on baladi and fino bread — announced last week to put a lid on inflated prices caused by Russia’s war in Ukraine — have set different price caps depending on the weight of the bread. Anyone found to be violating the rules will face hefty fines between EGP 100k to EGP 5 mn.

Community immunity: Our covid numbers have been declining over the past few weeks due to a higher number of fully-vaccinated citizens — around 32 mn — as well as stronger immunity, Acting Health Minister Khaled Abdel Ghaffar told El Hekaya’s Amr Adib in a phone-in (watch, runtime 2:43). Healthy Ministry spokesperson Hossam Abdel Ghaffar relayed the same information in a phone-in with Al Hayah Al Youm’s Lobna Al Assal (watch, runtime 5:56).

The foreign press are still focusing on how the conflict in Ukraine is impacting us here at home: Bloomberg, CNN and Deutsche Welle are out with pieces looking at how ordinary Egyptians are struggling with rising food prices ahead of Ramadan.

Why is the UAE investing that USD 2 bn? To bolster stability in Egypt, Bloomberg suggests

AND- Israel wants us to get those F-15s: Israel is lobbying for a major arms export sale from the US for Egypt, in the latest show of strengthening Egypt-Israel ties. (Axios)

ALSO worth a read: Moon Knight director Mohamed Diab criticizes Wonder Woman 1984's portrayal of Egypt in AV Club.

Egypt is working on an energy transition plan for Africa alongside the African Union which will be launched during the COP 27 climate summit in November, Oil Minister Tarek El Molla said last week. The minister was speaking during the International Energy Agency’s 2022 ministerial meeting which took place on 23-24 March.

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

• Axa plans to set up a micro ins. company: Axa is currently working on the feasibility study and the final decision will likely be decided based on the final version of the Unified Ins. Act, which is currently at committee-level discussions in the House.
• UK-based SDX Energy announced a gas discovery at an exploration well in its South Disouq concession. The well will start contributing to production in June.
• US railway equipment provider Wabtec plans to make an offer to supply Egypt with the world’s first battery-powered electric freight trains, which Wabtec unveiled last year. The US railway equipment provider is already supplying the Egyptian National Railway (ENR) with 100 new locomotives at an estimated cost of EUR 248 mn.

El Sisi talks with MbS following Houthi attacks: President Abdel Fattah El Sisi stressed Egypt's solidarity with the Saudi government during a phone call with Saudi Crown Prince Mohamed bin Salman on Saturday, Ittihadiya said in a statement. The call came shortly after the KSA’s Energy Ministry confirmed that the Houthi militia attacked two Saudi oil stations in Jeddah. No injuries or casualties were reported.

MEANWHILE- El Sisi signed several cooperation agreements with Rwandan president Paul Kagame at Ittihadiya palace yesterday, according to an official statement. The two leaders discussed several issues, including economic and commercial matters, and they agreed to increase cooperation on the Grand Ethiopian Renaissance Dam (GERD). El Sisi emphasized the need to reach a legal agreement that would enhance regional stability

Three countries are apparently ready to sign a nuclear agreement with Iran: Iranian Foreign Minister Hossein Amirabdollahian said his country has agreed with France, Germany and the UK on a draft text to revive the 2015 nuclear pact, while the US has “accepted” that it has to address “a few key remaining issues,” he said in a televised interview, according to Bloomberg. Iran has made it clear that it has one condition before finalizing the agreement: The US has to take the Revolutionary Guard off of its terror list, a demand that Washington is reportedly considering.

North Korea on Thursday said it had launched a long-range test of a “new kind” of intercontinental ballistic missile, in the first such test since 2017, reports Reuters. The move comes as a way for North Korea to flaunt its military and nuclear prowess at a time where global tensions are at a high. The missile landed off the west coast of Japan, within the country’s exclusive economic zone (EEZ), leading Japanese Prime Minister Fumio Kishida to call the test an “unacceptable act of violence.”

You’ve GOT to watch the video North Korea released to go with it.