AM — Qatar is investing USD 5 bn in Egypt

Good morning, friends, and happy almost-THURSDAY. We have yet another very big news day, led by word that Qatar plans to invest some USD 5 bn here. Add in the USD 2 bn that Abu Dhabi’s ADQ has pledged and that’s USD 7 bn in fresh investment coming in from GCC countries in the coming weeks and months.

French bank BNP Paribas thinks there’s more coming from both Saudi Arabia and Kuwait, as we note in the news well, below, which suggests that GCC investment could plug the lion’s share of the funding gap the Sisi administration faces thanks to spiraling wheat and energy prices (and tourism receipts drop) on the back of Russia’s war in Ukraine.

FROM THE DEPT. OF GOOD NEWS- Could the food price shock finally be abating? Wheat and corn futures fell yesterday amid increasing optimism that Russia and Ukraine may soon reach a peace agreement, Bloomberg reports. An announcement by Moscow yesterday that it would withdraw troops from around Kyiv sent wheat futures down as much as 8%, while corn declined as much as 4.7%. We have all the latest on the negotiations in this morning’s War Watch, below.

WHAT’S HAPPENING TODAY-

Car price caps in force today: Car dealers won’t be able to hike prices from today when official prices are announced, said Ayman Hossam El Din, head of the Consumer Protection Agency in televised statements (watch, runtime 6:25). Distributorships that sell at higher rates will face fines of up to EGP 2 mn, he said. Many dealers have been hiking car prices, or refusing to sell at all, after the EGP devaluation. It’s not clear how long the price freeze will last.

Swvl to SPAC? Shareholders of Queen’s Gambit Growth Capital ⁠— the blank-check firm that is expected to merge with mass transportation firm Swvl and take it public on the Nasdaq ⁠— will meet today to approve the listing. If everything goes to plan, 35% of the company’s shares will hit the Nasdaq tomorrow under the ticker “SWVL”.

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

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. The delegation stays until 31 March.

---

WORLD CUP 2022-

Our World Cup dreams were shattered last night after the Pharaohs lost against Senegal. In a penalty shootout. Again. The nation was subjected to agonizing dejavu last night as the World Cup qualifier with Senegal played out in much the same way as the African Cup of Nations final less than two months ago. An attritional game short of memorable moments climaxed with a shootout that ended with Salah’s Liverpool teammate Sadio Mane scoring the deciding penalty for Egypt’s West African rivals.

Egypt’s slender 1-0 lead was nullified just minutes into the first half when Senegal striker Boulaye Dia poked the ball home inside the fourth minute. From then on, the hosts dominated proceedings and controlled much of the rest of the game. Egypt substitute Zizo had a couple of chances to give his team that crucial away goal, but wasn’t able to convert.

One of the worst penalty shoot-outs we’ve seen in a while: The shootout started with four misses from both Egypt and Senegal, including two from our best penalty takers: Salah produced what was probably the worst penalty we’ve ever seen him take, and Zizo sent his shot wide. After Senegal’s star keeper Édouard Mendy pulled off a vital block from Mostafa Mohamed, it was left to Mane to deliver the final blow, sending his country through to the World Cup finals in Qatar.

Subscribe to Enterprise

MARKET WATCH-

Russia won’t be shown the door at OPEC+ anytime soon: The Saudi and UAE energy ministers have made clear they won’t be heeding US-led calls to kick Russia out of the oil cartel over its war in Ukraine, Reuters reports. “Everybody leaves his politics at the door” at OPEC meetings, Saudi Energy Minister Prince Abdulaziz bin Salman said during an industry panel, with his Emirati counterpart Suhail Al Mazrouei adding that the group’s “only mission” is to stabilize the markets. The US “should be pragmatic and understand that the OPEC+ producers alliance is looking out for the benefits of consumers,” Al Mazrouei added.

Aramco will likely hike prices to record levels for Asian customers: Aramco could raise the price of its key Arab Light crude by a record USD 5/barrel for May cargoes to Asia, Bloomberg reports, as crude markets continue to surge on the back of the war. Refiners and traders see the Saudi oil giant raising prices despite the chance of decreasing demand as China fights a serious covid outbreak.

CIRCLE YOUR CALENDAR-

All individual taxpayers have until tomorrow to submit their 2021 tax returns to the Tax Authority. The deadline for companies with January-December fiscal years is 30 April.

Companies have a little less than two weeks to file their first quarterly ESG compliance report: Listed firms and non-bank financial services companies need to submit their first quarterly ESG report by 10 April, the FRA said (pdf) on Sunday. The regulator is making it mandatory for corporates to publicly disclose their performance on key environmental, social and governance (ESG) metrics each year when they submit their annual financial statements, starting 2023.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Egypt’s local wheat harvest has taken on new importance this season after global food markets were thrown into disarray by Russia’s invasion of Ukraine. The two countries supplied some 80% of our wheat, forcing the state to look for alternative suppliers. As part of its strategy to shore up the country’s grain reserves, the government wants to purchase as much as 6 mn tonnes of local wheat during the coming season. But with a shortage of places to store it, how realistic is this plan?

Qatar to invest USD 5 bn in Egypt: Qatar has agreed to invest USD 5 bn here “in the coming period,” becoming the second country in the Gulf to commit funds as we grapple with the impact of surging food and energy prices on the back of Russia’s war in Ukraine. The governments will consult each other via a new joint committee, cabinet said in a statement yesterday following talks between Prime Minister Moustafa Madbouly and Qatari Foreign Minister Mohamed bin Abdulrahman Al Thani.

Details are so far thin: The statement didn’t disclose where the money would be invested or when the transactions would be closed, but Planning Minister Hala El Said told Bloomberg that the Qatar Investment Authority — the country’s sovereign wealth fund — would acquire the assets.

Egypt’s fiscal position has come under pressure as surging food and energy prices, lower tourism revenues and portfolio outflows threaten to strain our balance of payments.

Qatar isn’t the first Gulf state to offer Egypt financial support: Abu Dhabi sovereign fund ADQ has agreed to purchase government-held stakes in EGX-listed companies. The fund will reportedly spend USD 2 bn acquiring shares in five companies, including up to 18% of leading private sector bank CIB, as well as unspecified stakes in Abu Qir Fertilizers, Mopco, and Alexandria Containers. State-owned Banque Misr recently acquired an nearly 9% stake in Fawry, upping its total holding to nearly 15.8% ahead of what we believe is a sale of that stake to ADQ, which has shown strong appetite for Egyptian investments in the past couple of years.

Another USD 5 bn inbound from the GCC? Saudi Arabia and Kuwait may soon join the UAE and Qatar in providing emergency financial support to Egypt, BNP Paribas said in a note yesterday reviewed by Enterprise. The French bank said there is a “reasonable chance” that Egypt will receive USD 3 bn from the Public Investment Fund and USD 2 bn from Kuwait in the coming weeks. President Abdel Fattah El Sisi traveled to Kuwait and Saudi Arabia for high-level talks in recent weeks.

BNP puts Egypt’s total funding gap at USD 17.6 bn in FY2021-2022, which suggests that Abu Dhabi, KSA, Kuwait and Qatar will together plug just over 68% of that gap if all of the funding comes through.

On top of the IMF: A fresh IMF program is now looking highly likely after the government and the lender confirmed last week that talks are ongoing for financial assistance. It is unclear how much the IMF will allow Egypt to borrow and what kind of facility would be used. This would be the country’s third program in six years, having borrowed USD 12 bn through an extended fund facility in 2016 and USD 8 bn in covid-related financing in 2020.

---

Doha didn’t waste time entering the Med: Qatar Energy announced that it had agreed to acquire a 40% working interest in an Exxon–owned exploration block in the Mediterranean. The US energy giant acquired the North Marakia offshore block in late 2019, and will continue to operate the remaining 60% under the agreement, which is still subject to regulatory approvals, the statement said.

Or the Red Sea: This comes a few months after the company made its first moves into Egypt’s upstream oil and gas sector, announcing in December that it had agreed to acquire a 17% stake in two Shell-operated Red Sea oil and gas exploration blocks.

---

IN OTHER INVESTMENT NEWS-

Assiut Cement owner Cemex plans to invest up to USD 20 mn in Egypt this year, despite the sector facing headwinds from the conflict in Ukraine, the company’s president for Egypt and the UAE, Carlos Gonzalez, told Ahram Online. The Mexican cement giant has spent around USD 1.5 bn in Egypt since it acquired Assiut Cement in 1999.

** READ MORE about how the jump in global commodity shock is pushing up the prices of cement and building materials in Egypt here.

South African gold miner Harmony Gold is considering investing in Egypt for the first time, company CEO Peter Steenkamp said in a meeting with Oil Minister Tarek El Molla, according to a ministry statement. Steenkamp said the company is eyeing investing in gold exploration in Egypt as it looks to expand beyond South Africa and Australia. Amendments to the Mineral Resources Act offering investors more attractive terms have helped bring in more foreign investment into the sector, with a number of companies being awarded exploration concessions in a bid round last year.

Egypt’s wheat imports in marketing year (MY) 2022-2023 are expected to drop to their lowest in nine years as the Russia-Ukraine war cuts two of our biggest suppliers off from the export market, the US Foreign Agricultural Service (FAS) said in a report (pdf). Wheat imports are expected to drop 8.3% y-o-y to 11 mn metric tonnes in the upcoming MY, which begins in July, according to the report.

In case you needed reminding: The war is “aggravating already unsettled supply chains and causing major disruptions of wheat supplies to import destinations in the Middle East and North Africa region,” FAS said. Egypt has relied heavily on wheat from Black Sea nations, buying around 82% of our wheat over the last five years from Russia and Ukraine, which offer cheaper prices and faster shipping compared to other countries.

The good news: We’re producing more wheat domestically. Total domestic wheat production is expected to hit 9.8 MMT in MY2022-2023, up 8.9% y-o-y, on the back of an increase in the total harvest area. The government has also increased a range of incentives — including raising prices and introducing mandatory quotas — to increase local production this year.

This will allow the government to trim its reliance on imported wheat: The Supply Ministry hopes to purchase between 5 mn and 6 mn tonnes of local wheat in the upcoming season, which begins in April.

And that is allowing us to turn our backs on the international wheat market for the next six weeks, with new tenders on hold until at least mid-May. Our last international wheat purchase was in mid-February before the conflict removed Ukrainian and Russian wheat from the market.

But we’re still working on securing our supplies. France said will “stand by Egypt” on wheat and make sure we get what we need if the war in Ukraine drags on, as we reported yesterday, and Supply Minister Ali Moselhy said last week that we’re also in talks with India, Argentina and the United States for more.

An Egyptian delegation set to visit India in the first week of April, Indian government sources told Reuters, adding that Egypt could buy up to 12 mn tonnes of wheat. The delegation from Egypt will reportedly be meeting potential Indian buyers, examining logistical issues, and assessing the quality of Indian wheat, the sources said.

There were talks this week, too: India's Commerce and Industry Minister Piyush Goyal said yesterday that he met Planning Minister Hala Elsaid in Dubai and discussed New Delhi's "readiness to supply high-quality wheat" to Cairo.

India is the world’s second-largest wheat producer, and has become a key supplier to countries hit by the fallout from the Ukraine war. India could potentially ship 12 mn tons in 2022-2023, up from 8.5 mn tons last year, helping to ease the pressure on global supply and lower prices which has recently surged to record highs, Bloomberg reports.

E-receipt system pilot to kick off in April: The Finance Ministry will launch its e-receipt system for B2C transactions this Friday, 1 April, to complement the ongoing rollout of its wider e-invoicing program, it said in a statement yesterday.

Who’s involved: The ministry didn’t disclose which companies are taking part in the pilot. It said last year that 100 taxpayers would participate, without providing further details.

How it works: Sales data controllers (SDCs) will be installed in all payment processing systems used by retailers and wholesalers to monitor and record all tax-relevant transactions. A state contractor (see below) will provide retailers with POS machines and will be responsible for activating and monitoring them and providing the necessary technical support.

The system aims to help the Tax Authority monitor and verify all commercial transactions of goods and services between taxpayers and consumers in real time, while cracking down on tax evasion and reducing the size of the informal economy. It could also boost consumer rights, since purchasers will no longer have to keep hold of paper receipts if they end up deciding to return items, the statement read.

It’s an e-Finance affair: The system is being implemented by E-Tax, a subsidiary of EGX-listed fintech player e-Finance.

OFFICIAL SPIN- “Citizens will soon see the positive impact it will have on them,” Tax Authority senior official Salah Ismail told Al Tasi’a’s Youssef El Husseiny in a phone-in (watch, runtime 19:26) last night.

What’s the current state of the wider e-invoicing rollout? Over 52k companies have so far registered on the system, more than 43k of whom have activated their accounts, sending some 154 mn e-invoices, according to the statement. The system has so far detected over 17k cases of tax evasion, clawing back more than EGP 6 bn for the treasury, officials say.

The Tax Authority launched a pilot with 134 companies in late 2020, before extending the system to all large taxpayers last July. All B2B invoices issued by businesses based in the Greater Cairo Area will be automated by June, director of taxpayer services at the Tax Authority Mohsen El Gayar recently told Enterprise, while B2C invoices across the country should be fully automated by December.

The House of Representatives has approved a law that expedites public sector wage hikes and pension increases, an urgent measure announced last week to soften the economic impact of the Ukraine war, Ahram Online reports. The bill brings forward the new remuneration rates by three months, meaning that they will take effect at the beginning of April rather than at the start of the new fiscal year in July. This comes as part of a package of fiscal measures announced by the government last week to mitigate the impact of rising inflation and the recent EGP devaluation on household finances.

The details: Public sector workers covered by the Civil Service Act will receive an 8% raise on their gross monthly salaries at the beginning of April. Civil servants not within the legislation will get a 15% raise. Monthly bonuses will increase by EGP 175-400, depending on the rank. Meanwhile, pension payouts will rise by a minimum of EGP 120 a month.

OFFICIAL SPIN- Parliament’s approval of a law expediting public sector wage hikes and pension increases got attention on Al Hayah Al Youm (watch, runtime 5:07) and Ala Mas’ouleety (watch, runtime 6:24).

Also given final approval:

• Amendments to the law regulating real estate brokers that would see a registry set up for licensed brokers.
• Amendments to the law on illegal migration and people smuggling that will see tougher penalties and a national coordination committee set up.
• Amendments to a law regulating the safety of vessels at sea that will make it mandatory for ship owners to report the sale or rent of their units to the authorities.

What’s next: The amended laws will now be on their way to President Abdelfattah El Sisi to be ratified into law.

There’s a new project to transport East Med gas to Europe: Turkey and Israel are in discussions to build a gas pipeline running between their two countries, a project that is being seen as part of the solution to the energy crisis in Europe, which is trying to reduce its reliance on Russian hydrocarbons. The idea has apparently existed for several years but in recent weeks conversations between the two countries have picked up, with a senior Turkish official telling Reuters that “concrete decisions” could be taken in the coming months.

The plan: A subsea pipeline would link Israel’s largest offshore gas field, Leviathan, to Turkey. This would allow Israel to ship its gas directly to Southern Europe.

Needless to say, this would pose competition to Egypt Gas Hub™: In recent years Egypt has positioned itself as the premier regional gas hub capable of transporting natural gas from the region to Europe. Currently there are no pipelines linking Europe with the Middle East, leaving Egypt’s LNG terminals as the only way of shipping gas across the Med.

The challenge for Egypt: The current capacity of Egypt’s LNG infrastructure is not enough to turn the country into a major alternative gas supplier to the continent. The Idku and Damietta LNG plants have been running at maximum capacity in recent months, leaving Egypt searching for solutions on how to further scale up its exports.

This is why Egypt and Greece are looking at a pipeline of their own: The two countries are considering establishing a new subsea pipeline that would allow Egypt to export gas directly to Europe.

The Turkey-Israel pipeline has a major thing going for it: Cost. At EUR 1.5 bn, the pipeline would be significantly cheaper than the EUR 6 bn Israel-Italy line that was effectively scrapped earlier this year.

But there are a whole host of other things standing in the way, industry figures told Reuters. These range from complex regional geopolitics and competing territorial claims to questions about whether Israel can export enough gas to make it viable.

Gas from Egypt + Israel remains is far less than what Russia sells Europe: Israel is planning to increase production at Leviathan to 24 bn cubic meters (bcm) a year. Compare that to Russia, which last year sent 155 bcm of natural gas to Europe.

As folks who are building businesses ourselves, we have a particular fondness of startups that solve non-payments-related problems for people who are starting businesses — or running existing companies. We have news of three such companies today.

Robo-advisory startup Xpovi is deploying proceeds from its USD 300k pre-seed round led by angel investors to scale up its services. The funding has allowed it to grow its team and launch the country’s first “automated business planning web application,” CEO Mohamed Marei said in a release (pdf). Xpovi is now focused on its “data-automation, artificial intelligence, and user experience” as it targets a potential market of c. 4 mn Egyptian MSMEs.

What does Xpovi do? The company, founded in spring 2021, allows startup founders to build business plans by filling out an online questionnaire — taking delivery of their plan the same day. It says it relies on artificial intelligence and machine learning automate the process of data sorting automation and building financial models.

MEANWHILE- Kenyan fintech startup Churpy eyes Egypt: The account receivables automation startup wants to expand to Egypt, Nigeria and South Africa after securing USD 1 mn in seed funding (TechCrunch)

AND- New open-finance platform for MSMEs: E-payment companies Damen and CashCall, along with private equity player Aur Fintech have set up Madad, a new open-finance platform to provide Egyptian micro-merchants with non-banking financial services, according to a statement (pdf). Madad is looking to serve a network of 100k merchants to provide “various types of lending systems [and] working capital schemes,” among other products.

Russia offers to ease attacks on Kyiv ahead of potential peace accord: Moscow yesterday said it would pull forces back from the outskirts of Kyiv as talks between Russian and Ukrainian negotiators resumed in Turkey. Russia’s Deputy Defense Minister Alexander Fomin said that military activity around the capital would be reduced “radically” and said that the move was designed to “increase mutual trust” as the two sides discuss conditions for a ceasefire and Russian withdrawal from the country.

The US isn’t convinced: “We’re not convinced that the threat to the capital city has been radically diminished,” Pentagon spokesperson John Kirby told reporters yesterday. "We all should be prepared to watch for a major offensive against other areas of Ukraine."

Both sides said that progress was made yesterday: Fomin said that the sides were having “practical” discussions over Ukraine’s neutrality and non-nuclear status, as well as Ukraine’s demand for security guarantees. Ukrainian negotiator Mykhailo Podolyak said that guarantor states such as the US, UK, Turkey, France and Germany could be assigned to protect Ukraine from future aggression, and suggested that the future status of Crimea would be negotiated at a later date.

Momentum on an accord seems to be building: Ahead of the first day of talks, reports in the press claimed that Russia had relaxed some of its key demands while Ukraine was willing to put on the table its future neutrality and membership of Nato.

De-escalating military operations ≠ ceasefire, Russia says. "This is not a ceasefire but this is our aspiration, gradually to reach a de-escalation of the conflict at least on these fronts," Vladimir Medinsky, head of the Russian team, said in an interview with the TASS news agency, according to Reuters. Talks “still have a long way to go," he said.

This is the biggest story in the global press this morning: Reuters | AP | Bloomberg | FT | Washington Post | NYT | WSJ.

Top of the agenda last night: The World Cup qualifier post-mortem. Most of the nation’s talking heads focused on last night’s World Cup qualifier, which saw the Pharaohs lose a second penalty shootout against Senegal in as many months — and crash out of World Cup contention. Sports Minister Ashraf Sobhy spoke to Yahduth Fi Masr’s Sherif Amer from Senegal’s Dakar following the defeat (watch, runtime: 5:35 ) while Kelma Akhira criticized manager Carlos Queiroz’s choices and team formation (watch, runtime: 3:43). Masaa DMC (watch, runtime: 1:35) and Ala Mas’ouleety (watch, runtime: 2:09) also had coverage.

The Real Estate Registry Act in focus: Only 5-7% of Egyptian real estate properties are officially registered with the state, said Real Estate Registry and Notarization head Gamal Yaqout in a phone-in with Sada El Balad’s Salet El Tahrir (watch, runtime 4:15). The state official made the rounds on our airwaves to talk about the recent amendments to the Real Estate Registry Act, which he said will go into effect on 8 May. This comes after Justice Minister Omar Marwan appeared in a presser yesterday (watch, runtime 3:38) to highlight the new changes that will help streamline the real estate registration process — which Yaqout said is optional for all property owners — by significantly reducing the number of documents needed, digitizing parts of the procedures, and putting a time ceiling on the entire process. Those who submit forged documents as part of their registration process could face prison time of up to two years and fines of up to EGP 50k, Yaqout told Al Hayah Al Youm’s Mostafa Sherdy (watch, runtime 7:45).

Also getting play on the airwaves:

• In from the cold: President Abdel Fattah El Sisi’s meeting with Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani in Cairo was noted as a display of our strengthening relations on Al Hayah Al Youm (watch, runtime 10:06) and CBC Extra (watch, runtime 4:04). Doha yesterday pledged to invest USD 5 bn into Egypt, which you can read more about in the news well, above.
• E-receipts and raises for public sector employees and pensioners also got mention last night, as we note in stories above.

Leading the conversation in the foreign press this morning: Egypt’s woeful performance against Senegal, which saw us crash out of World Cup contention with one of the worst set of penalties we’ve seen in a long time. AP | AFP | BBC | CBS | ESPN.

A Cairo court has upheld Arabia Investments Holding’s appeal in its years-long EUR 150 mn lawsuit against Peugeot, filed in 2018 after the French firm unexpectedly ended the 41 year-old partnership. The appeal was filed after an Egyptian court issued a ruling in January 2021 that it lacked jurisdiction to consider the case, according to a disclosure (pdf).

IDH opens new Al Borg Scan branch in Sheikh Zayed: Consumer healthcare giant Integrated Diagnostics Holding (IDH) has announced the opening of its fifth Al Borg Scan branch in Sheikh Zayed’s Capital Business Park. This is the third branch to open in the past six months, according to a disclosure (pdf).

New rule for dual-listed companies on the EGX: The Financial Regulatory Authority has issued a new rule on disclosing names of shareholders in dual-listed companies who have frozen their shares. (Youm7)

We’re getting still cozier with Qatar: President Abdel Fattah El Sisi held talks with Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani yesterday, according to an Ittihadiya statement. El Sisi praised what he called “tangible progress in Egyptian-Qatari relations.” The meeting came on the heels of talks between Al Thani and Foreign Minister Sameh Shoukry. This was the second time the Qatari FM has visited Cairo since the countries normalized ties in January last year.

El Sisi also met with head of the Libyan Presidential Council, Mohamed El Menfi, a separate statement read, where the two agreed to work more closely to ensure Libya is able to proceed with elections and to work toward political stability.