Monday, 4 April 2022

AM — Domty and Giza Systems offer us rare Ramadan-time M&A news

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, ladies and gentlemen, and happy Monday. News flow has slowed down a little bit today, but there’s still plenty of meaty corporate stories to keep us all busy.

The traditional Ramadan killing of ads has begun, with the nation’s media regulator ordering Dice’s underwear ad off the air after reportedly receiving complaints from the Doctor’s Syndicate. You can catch the offending ad here, at least for the time being (watch, runtime: 1:10). Ah, for the days of dandoo…

Okay, but was it funny? We’re split here. Some of us found it hilarious. Others, meh.

ALSO: Is anyone else finding the ratio of “content” to advertisement more skewed in favour of ads than usual this year? The resident 14-year-old was growling last night that it felt as if there were 15 minutes of ads for every four minutes of content on Ramez’s latest hidden camera / prank “show.” (Yes, it is a failing of parenting on our part that she looks forward to Ramez each year.)

SO, WHEN DO WE EAT? You’ll be breaking your fast at 6:15pm CLT this evening in the capital city, and fajr prayers are at 4:12am.

H/t to reader Hisham H, who wrote in to let us know that (a) the chocolate with orange peel is the best stuffed date (following up on our shout-out to Mōko) (b) and pointed out that the maghrib and fajr prayer times we included yesterday were arguably a few minutes off. Our go to is Islamic Finder, but the Egyptian General Survey Authority’s official calendar lets you check exact times based on your city and governorate, and matches up with that used by Dar Al Iftaa. We’ll be using their official Cairo schedule for the remainder of the holy month.

DATA POINT of the morning- Investors have poured some EGP 401 bn into 18% CDs launched by Banque Misr and the National Bank of Egypt (NBE) as of Sunday, Masrawy reports, citing sources at the two lenders. The CDs were launched two weeks ago, following the central bank’s 100-bps interest rate hike.

KEEP YOUR EYE ON THIS- The UN’s latest climate report could be published today — if the politicians can get out of the way. The UN’s Intergovernmental Panel on Climate Change should be releasing the latest report in its current assessment cycle today, which will give concrete recommendations on how to limit global warming to 1.5 degrees this century ahead of COP27 in Sharm El Sheikh. But while the science isn’t up for debate, talks between researchers and governments over the wording of a summary of the findings have reached a gridlock, the Associated Press reports, citing anonymous observers.

What’s the snag? Major coal user India is reportedly among key players pushing for recognition that wealthy countries (who have contributed the most to historical emissions) should bear the brunt of carbon cuts and provide financing to ease the developing world’s green transition. If that sounds familiar, it’s because our government is pushing some of the same priorities for the African continent ahead of the November climate summit.

PSA- The Financial Regulatory Authority (FRA) is calling (pdf) on property and liability ins. holders to review the value of their properties and update ins. providers. Some ins. plans include a proportionality clause that comes into effect when there is a change in the asset’s market value — following, for example, last month’s currency devaluation — meaning that if your property has become worth more than your policy, the full value may no longer be ins.d and you could take a hit on the loss that isn’t covered.

CIRCLE YOUR CALENDAR-

Companies have a little over 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 20 April, the Financial Regulatory Authority (FRA) announced last week.

Didn’t we say yesterday that the deadline was 10 April? Yes, we did, per a circular (pdf) published by the FRA last month. The regulator has since amended the deadline, handing firms an extra 10 days to submit.

What you need to know: The regulator is making it mandatory for corporates to publicly disclose their performance on key environmental, social and governance metrics each year when they submit their annual financial statements, starting 2023. Reach out to Moustafa Taalab at InkankIR, our parent company, if you need some help.

Other upcoming dates you want to know about:

  • It’s PMI week: Purchasing managers’ index figures for March for Egypt, Saudi Arabia, the UAE, and Qatar will be released on Tuesday, 5 April. By that specific gauge, Egypt’s private sector has been in contraction since November 2020. Headwinds intensifying last month due to the conflict in Ukraine are unlikely to have changed that;
  • Foreign reserves: March’s foreign reserves figures will be announced some time this week;
  • Inflation figures for March are expected on Sunday, 10 April.

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

MARKET WATCH-

Oil prices are now on the decline — but crude trader Vitol says they do not reflect the “full risk” of a shortage in Russian supplies, Bloomberg reports. “Oil prices could be higher given the risk of disruption of supplies from Russia,” a top Vitol official said on a podcast. “But people are still lost figuring out those numbers.” Brent has slipped 13% from highs of near USD 140 after the US ordered an unprecedented release of its strategic reserves to tame prices.

Lithuania has become the first European country to say a permanent goodbye to Russian gas, the Lithuanian government announced. “Lithuania won't be consuming a cubic cm of toxic Russian gas,” Prime Minister Ingrida Simonyte wrote on Twitter yesterday.

Russia threatens to price more of its exports in RUB: Russia’s RUB-for-gas scheme is a “prototype” and could soon expand to more exports, the Kremlin’s spokesman told Russian state TV, according to Reuters. "It is the prototype of the system … I have no doubt that it will be extended to new groups of goods," Dmitry Peskov said.

enterprise

*** 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: We take a deep dive into how the inflationary environment is impacting private school enrollment. As prices rise, more children are transferring to less expensive private schools, sources tell us. But so high is the demand for private education that high and upper-middle income schools aren’t seeing enrollment rates fall. Middle-income schools, though, could see changes in the composition of their applicants – and it’s new schools that are most at risk of an enrollment slowdown, some in the industry say.

enterprise

Let’s Footgolf and go on an adventure. Explore a Floodlit 9 Hole Footgolf Course at Somabay Golf, the first of its kind in Egypt. From Friday to Monday, 6pm-10pm. For more information, kindly visit: https://somabay.com/golf/

M&A WATCH

Offshore group including company execs make a play for Domty

Domty up for grabs: A group led by Expedition Investments has submitted a non-binding offer for a majority stake in cheese maker Domty, the company announced in a statement (pdf) to the EGX. The group is looking to acquire up to 90% of the food producer at EGP 5.00 per share, according to a statement by the FRA to the bourse. The transaction could be valued at nearly EGP 1.3 bn if it goes through, based on our math.

Domty’s shares soared 14.2% on the back of the offer to close at EGP 4.50 apiece yesterday.

So who’s mounting the bid? Investors from Egypt and the Gulf, according to a source close to the transaction. Execs who are members of the Domty’s founding family, including Omar El Damaty (the company’s current chairman and MD) and Mohamed El Damaty (vice-chairman) are also on board and hold minority stakes in Expedition. The company is domiciled in Mauritius and counts veteran investment banker Mohamed El Akhdar as a board member. It was established on 21 March, according to the Mauritius company register.

Expedition wants to do the due diligence process on Domty “as soon as possible,” a company statement said, with a mandatory tender offer contingent on the outcome of due diligence and regulatory approvals.

Domty isn’t being expatriated, our source tells us. Though Expedition is an offshore special purpose vehicle, this transaction is about private equity changing hands, not a relocation for the Egyptian firm. Mauritius is a common jurisdiction for takeover vehicles that have raised foreign capital as well as for funds raised by private equity firms.

Matouk Bassiouny & Hennawy is advising Expedition, according to the statement..

Expedition will have more to say about the transaction in the coming weeks, our sources tell us.

INVESTMENT WATCH

B Investments exits Giza Systems to STC subsidiary

B Investments is selling its entire 44.7% stake in engineering subsidiary Giza Systems to Saudi Telecom’s internet subsidiary, the Egyptian private equity firm said in a statement (pdf). B Investments’ board accepted an undisclosed binding offer for the shares from Solutions by STC that would value Giza Systems at USD 145 mn, the statement read.

A turnaround for Giza Systems: A pioneer of what was once called the “IT” industry, the systems integrator has been in the market since the 1970s and lost a step in the marketplace prior to B Investments’ acquisition in 2006. The company now positions itself as a digital transformation specialist with some 1.4k professionals working across the Middle East and Africa providing “industry-specific technology solutions for asset-intensive industries” including telecoms, utilities, and oil and gas.

The usual caveats: The final value of the shares will be decided based on Giza Systems’ net debt and working capital at the close of the transaction, which is still pending final documentation and regulatory approvals, the statement read.

SOUND SMART- The Saudi telecom giant’s internet arm debuted on the Riyadh exchange last September in a transaction that valued the firm at some SAR 18.1 bn (USD 4.8 billion).

This marks the latest in a stream of recent news about incoming M&A and investment from the Gulf to Egypt, on both the public and private side of things. Yes, our GCC neighbors are stepping in to offer us a helping hand in a time of crisis — but this kind of news also underscores that many Egyptian sectors and firms offer an increasingly attractive proposition for regional investors. More of this, please.

STARTUP WATCH

Mental health startup O7 Therapy raises USD 2.1 mn seed round + Flat6 launches new Saudi fund

Egyptian online mental health startup O7 Therapy has raised a USD 2.1 mn seed round in what the startup says is the largest seed round for a mental health startup in the Middle East, the company announced in a press release (pdf). The round was led by UK-based VC Hikma Ventures with participation from corporate venture capital outfit CVentures (a unit of CIB), Lotus Capital, and several angel investors.

About the company: The online therapy platform matches users with bilingual (English and Arabic) psychiatrists and psychotherapists and connects them via online therapy sessions. It also offers employee wellness programs for organizations, an offering it plans to expand across the region with the help of the funding round.

Where the money’s going? O7 Therapy will use the funds to expand across the Middle East and introduce new products and features to its platform.

Hikma has been busy: This is the first time the pharma VC has led an investment round in the MENA region. The news comes just a few days after the announcement of Altibbi’s USD 44 mn series B round, in which Hikma participated.

ALSO FROM PLANET STARTUP-

Flat6Labs launches new Saudi seed fund: Flat6Labs and the Saudi Venture Capital Company have launched a new seed fund in Saudi Arabia that is expected to back more than 60 early-stage startups over the next three years, according to a joint press release quoting our friend Ramez El Serafy, Flat6’s CEO, and SVC chief Nabeel Koshak. The two VCs hope to raise SAR 150 mn (c. EGP 732 mn) over the next 12 months for their Startup Seed Fund, with Blominvest marketing the fund and taking sole responsibility for fundraising in Saudi Arabia.

Outsourcing fundraising to an outfit like Blominvest is fairly novel and frees the VCs to focus on building and managing their portfolio — an interesting my-drugs-blog.com.

Ticket size: The fund will commit between SAR 750k to SAR 1.5 mn (c. EGP 4 mn – EGP 7 mn) to each company, and follow-on funding will be made available to support expansion inside the kingdom and abroad, the statement said. The fund aims to back some 180 entrepreneurs in the kingdom and create c. 6k private-sector jobs while helping Saudi companies expand regionally.

The fund will run a four-month Flat6Labs Riyadh Seed Program twice a year for a three-year period. Its first cycle is set to begin in the third quarter of this year.

MANUFACTURING

Edita inaugurates its Moroccan production facility

Edita Food Industries has officially inaugurated its Moroccan plant, according to a company statement (pdf). The snackfoods giant started operations in December at the facility, which is the company’s first greenfield investment outside of Egypt and marks its transformation from manufacturer that exports to a host of regional markets into a true multinational with offshore operations. Catch a recording of the livestreamed inauguration ceremony here (watch, runtime: 7:30) and lots of additional highlights here, here and here.

About the facility: The company has so far invested MAD 203 mn (some EGP 382.5 mn) in the plant outside Casablanca, according to the statement, including initial investments of EGP 200 mn up to December. The factory employs 300 Moroccan citizens and produces three variations of Edita’s HOHOs cakes. The facility is operated by Edita Food Industries Morocco, a joint venture set up between Edita and Moroccan FMCG distributor Dislog Group. Edita holds a 77% stake in the company and Dislog holds 20%.

It’s wonderful to see a regional country rolling out the red carpet for an Egyptian company as the “Arab foreign investor.” Edita chief Hani Berzi and Dislog’s Moncef Belkhayat were joined by Moroccan Industry Minister Ryad Mezzour, who positioned the Edita investment as being a play on “the strengths of the Moroccan agri-food sector and … in line with its future priorities to meet global consumer demand.”

More expansion to come abroad… Edita is set to pour an additional MAD 170 mn (EGP 320.3 mn) into a second phase of expansions at the factory, with plans to employ another 400 people, add production lines, and introduce more products to the Moroccan market, the statement read. Edita is “pivoting from a focus on recovery and resilience to expansion mode,” the company said

…and at home: in its most recent earnings release, Edita said it plans to invest around EGP 400 mn to add new production lines for its baked goods and wafers segments in Egypt this year, as well as to expand to at least one new market in 2022 and another in the next five years.

WAR WATCH

Ukraine, UN, EU call for independent investigation, more sanctions as evidence mounts of alleged Russian war crimes

International outrage is mounting as evidence emerges of alleged war crimes by Russian soldiers in Ukraine: Images of the carnage left in the wake of the Russian military’s withdrawal from western parts of the country — including reports from the Ukrainian side of mass executions of civilians — has led to a fresh wave of condemnation and promises of consequences in the geopolitical arena.

Ukraine is requesting the International Criminal Court gather evidence of alleged war crimes by Russian troops in Bucha, according to Bloomberg. Asked to comment by the business information service, Kremlin spokesman Dmitry Peskov said many of the images were “fakes and staged shots.”

Guterres calls for an independent investigation: United Nations Secretary-General Antonio Guterres said in a tweet that he was “deeply shocked” by the images coming out of Bucha, adding that “it is essential that an independent investigation leads to effective accountability.”

And the EU prepares more sanctions: Further sanctions and support for Ukraine are “on their way,” European Council President Charles Michel said in a tweet, calling the images from Bucha “haunting.” New sanctions could will for now focus on “closing loopholes [and] strengthening existing actions,” including making sure Russian banks are completely cut off from the SWIFT payment system and sanctioning more individuals, Bloomberg reports citing diplomatic sources. Some members of the bloc are calling for harsher action, with Germany among those promising “further measures” to come.

CAPITAL MARKETS

EFG Hermes again tops Egypt league table, NBE dominates Bloomberg syndicated loan table

EFG Hermes topped the EGX’s brokerage league table once again in March, with a market share of 23.5%, according to figures from the EGX (pdf). Rounding out the top five were CI Capital (11%), Al Ahly Pharos (7.9%), Arqaam (6.2%) and Cairo Capital (5.9%).

The National Bank of Egypt was at the top of Bloomberg’s African syndicated loans league table as a financing agent, lead manager and promoter in 1Q2022, according to a statement (pdf) from the lender. The state-owned bank managed nine transactions worth more than EGP 35 bn during the quarter — more than any other bank in the Middle East and Africa, the statement read. The bank finished 2021 at or near the top of the league table.

MENA rankings: NBE came in third in the MENA region as a financing agent, and fourth as a lead manager.

MOVES

Credit Agricole Egypt appoints new CFO + Talaat Mostafa Group gets a new CEO

Credit Agricole Egypt has appointed Ravinarayanan Iyer (LinkedIn) as its new chief financial officer, replacing Hany Nassef, who stepped down in December, the bank announced in a regulatory filing (pdf) yesterday. The bank also appointed Osama Saleh as its new non-executive chairman, to replace Assem Ragab, whose term has ended; and Michel Le Masson (LinkedIn) as non-executive vice chairman. All changes are pending approval from the Central Bank of Egypt.


Talaat Moustafa Group (TMG) chairman Tarek Talaat Mostafa has become a non-executive chair of the company, according to an EGX disclosure (pdf). Hisham Talaat Mostafa was reappointed as company CEO and managing director.


Rear Admiral Nihad Shaheen Ali has been appointed chairman of the Alexandria Port Authority by Transport Minister Kamel El Wazir, according to a ministry statement. Ali previously served as the authority’s vice chairman for financial, administrative, commercial and engineering affairs, and replaces Tarek Shaheen who was reassigned to work as an advisor to the ministry.

Former vice chairman of the Red Sea Ports Authority Rear Admiral Ahmed Abdel Moati Mohamed Hawash has been appointed chairman of the Damietta Port Authority, according to the statement. Hawash replaces Walid Mostafa Awad Al Sayed, whose term has ended.

enterprise

LAST NIGHT’S TALK SHOWS

Gulf investments get airtime: Al Hekaya’s Amr Adib tipped his hat to the recent helping hand we received from the KSA (watch, runtime: 1:14). Saudi Arabia last week deposited USD 5 bn with the Central Bank of Egypt (CBE) and pledged around another USD 10 bn in sovereign investments to shore up our finances, which have taken a hit due to the Ukraine war, following similar moves from the UAE and Qatar.

UK won’t take a position on GERD: The UK supports the African Union-led negotiations between Egypt, Ethiopia and Sudan to reach a suitable solution for the ongoing dispute over the Grand Ethiopian Renaissance Dam (GERD) — but isn’t looking to enter the fray directly, UK’s Ambassador to Egypt Gareth Bayley said in an interview with Bel Warak W El Kalam on Saturday (watch, runtime: 3:33). “We don’t want to complicate the situation by adding our voice officially to the issue,” Bayley said.

A sprinkling of stardust as the Ramadan drama coverage continues: After trending on Twitter, Al Maddah 2 received some love from Al Hekaya’s Amr Adib, who spoke with the show’s star Hamada Helal (watch, runtime: 6:29). Maktoub Alaya star Akram Hosy joined Al Tasea in a phone-in (watch, runtime: 2:02) to give us the behind the scenes scoop. Still haven’t decided what to watch this Ramadan? Head to our rundown here.

EGYPT IN THE NEWS

Is Salah bowing out of international football? Speculation is mounting over whether Egypt’s star striker Mohamed Salah has played his final game for the national team following the Pharaoh’s failure to the World Cup. A video of Salah talking to his teammates following last week’s loss to Senegal shows him saying that he is proud of the team “whether or not I'm here," a statement being interpreted as a signal he may retire from the international game. “There isn't much to say, but it has been an honor to play with you, whether or not I'm here,” he says in the video, published by the Youth and Sports Ministry last week (watch, runtime: 2:40). AFP has more.

Speaking of which: Perhaps we haven’t seen the last of Queiroz after all. Egypt’s national team coach and manager Carlos Queiroz — who was reported to have left his post after last week’s loss to Senegal — is in fact “on leave” and could be back after FIFA and CAF hears the team's appeal over the match, depending on the ruling, the Egyptian Football Association said.

The holy month amid soaring food prices: The AP is out with another piece on the shadow cast over Ramadan by food and energy inflation on the back of war in Ukraine.

ALSO ON OUR RADAR

Contact + Nawy sign EGP 1 bn financing agreement: Contact Financial’s real estate finance subsidiary will lend EGP 1 bn to clients of Nawy after signing an agreement with the proptech startup, according to a statement (pdf. Users of Nawy’s real estate search engine will be able to borrow the money to purchase property found on its platform. Nawy recently received an undisclosed amount of bridge funding in a round led by the Sawiris family office.

Egypt, France and Malta’s sovereign wealth funds have established a “collaboration network” across the Europe, Middle East and North Africa (EMENA) region, according to a press release (pdf). The Malta-based EMENA Sovereign Wealth Funds Collaborative Network aims to support investments in green technology, sustainable development, SMEs and innovation to help plug the USD 700-900 bn funding gap in the EMENA area. Spain’s sovereign wealth fund has also signed an MoU pledging its intention to join.

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

  • EgyptAir has partnered with EFG Hermes’ digital payments subsidiary PayTabs and consumer finance arm valU to provide its customers with payment solutions to book and pay for domestic and international flights. (Hapi Journal)
  • Afreximbank will work with Elsewedy Electric and three other Egyptian companies to channel USD 1.5 bn of investment into infrastructure projects in Angola, the bank’s head of intra-African trade finance said at an event in Cairo. (Amwal Al Ghad)
  • US customer service provider Concentrix has opened two new call centers in Egypt, and plans to almost double its employee headcount in the country to 8.5k this year. (statement)
  • Egypt is courting the African Medicines Agency and wants it to choose Cairo as a base for its headquarters. (statement)
  • State-owned firm El Nasr Automotive inked a contract with German consulting group FEV to develop the local EV industry, after the firm helped El Nasr choose its soon-to-be-announced Chinese partner on local EV assembly. (Al Borsa)

PLANET FINANCE

Powered by
EFG Hermes - https://efghermes.com/

Surging oil prices gave sukuk transactions their best ever start to a year in 2022, Bloomberg reports. Sales of new sukuk maturing in at least a year reached nearly USD 24 bn in the first quarter, marking the best start since the business newswire began compiling data on the sharia-compliant bonds back in 1999. Saudi Arabia and Turkey were the biggest issuers of sukuk, which performed better than highly-rated global bonds, shedding 4% compared with 7% for investment-grade bonds overall.

Investor sentiment on high-growth private companies has done a 180° this year as rising interest rates threaten to hit valuations, the Financial Times reports. Some 95% of “growth investors” — investors situated between early-stage VCs and private equity groups that target older companies — are expecting to cut corporate valuations over the next 12 months, according to an investor survey by Numis. This compares to 70% who anticipated valuations to either remain the same or rise at the end of 2021. The reversal in sentiment mirrors what is happening in high-growth tech stocks, which have sold off this year ahead of rising borrowing costs.

Another IPO in the Gulf: UAE-based property developer FAM Holding is planning to list on Abu Dhabi stock exchange’s second market, a platform that allows private joint stock companies to list. If approved, FAM Holding, which has a property portfolio worth USD 545 mn, will be joining eight companies currently trading on the second market. (Bloomberg)

IN OTHER FINANCE NEWS-

  • More bad news for Russia’s bondholders: Russian corporate and sovereign debt has been removed from JPMorgan’s EM bond indexes, putting more pressure on Russian fixed-income assets, which have tanked since the country invaded Ukraine on 24 February. (Bloomberg)
  • China wants to keep its companies listed stateside: China has moved to make its auditing rules more transparent in a bid to stop US regulators delisting Chinese firms in 2024. The new rules allow foreign regulators to gain access to sensitive financial information and are being seen as a major concession to the US, which has upped the pressure on Beijing to allow it to access more information about listed Chinese firms. (FT)
  • Chinese fashion e-commerce startup Shein could raise some USD 1 bn in an upcoming funding round, which would value it at USD 100 bn, according to sources familiar with the matter. The company — known for its affordable designs and fast delivery — saw its app downloaded more times than Amazon in the US last year. (Bloomberg)

Up

EGX30

11,562

+2.9% (YTD: -3.2%)

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USD (CBE)

Buy 18.21

Sell 18.31

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USD at CIB

Buy 18.19

Sell 18.29

None

Interest rates CBE

9.25% deposit

10.25% lending

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Tadawul

13,083

-0.1% (YTD: +16.0%)

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ADX

9,929

-0.2% (YTD: +17.0%)

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DFM

3,537

+0.3% (YTD: +10.7%)

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S&P 500

4,546

+0.3% (YTD: -4.6%)

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FTSE 100

7,538

+0.3% (YTD: +2.1%)

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Euro Stoxx 50

3,919

+0.4% (YTD: -8.8%)

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Brent crude

USD 104.39

-0.3%

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Natural gas (Nymex)

USD 5.72

+1.4%

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Gold

USD 1,923.70

-1.6%

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BTC

USD 47,337

+2.7% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 2.9% at yesterday’s close on turnover of EGP 561.21 mn (42.5% below the 90-day average). Regional investors were net sellers. The index is down 3.2% YTD.

In the green: EFG Hermes (+9.1%), Mopco (+8.1%) and GB Auto (+7.0%).

In the red: Fawry (-0.6%), Orascom Construction (-0.5%) and Telecom Egypt (-0.2%).

DIPLOMACY

President Abdel Fattah El Sisi received the credentials of 18 new ambassadors to Egypt last week, according to an Ittihadiya statement. Among the officials were: Mariam Khalifa Al Kaabi (UAE), Hameed Shbeira (Algeria), Marc Baretti (France), Michele Quaroni (Italy), Oka Hiroshi (Japan), and Yvonne Baumann (Switzerland).

MEANWHILE- The Foreign Ministry has strongly denounced Israeli “escalations” against Palestine in the past days, including attempts by Israeli settlers to storm Al-Aqsa mosque and the targeting of Palestinian citizens.

blackboard

As inflation drives up overall costs and tightens budgets, a trend of transferring children to less expensive private schools has gathered steam, Eduhive CEO Karim Mostafa said recently. Lower-middle income schools are seeing an estimated two-three times the enrollment rate of high-income schools, education investment platform Lighthouse Education Deputy Chairman Mohamed El Sherif noted in February.

So are high-income or upper-middle income schools seeing enrollment rates drop? So far, no, say sources. Demand for private education is so high that existing school enrollment rates remain high too. For high-end schools, it’s business as usual. Middle-income schools could see a change in the composition of their applicants, but not reduced enrollment. But a slowdown is possible for new schools entering the market, facing inflation and the devaluation.

A large segment of Egyptian society will always prioritize education spending: Though we’re currently seeing considerable cost cutting, “education is sacred to the Egyptian family,” says Mostafa. Squeezed families will cut down other spending habits to allocate money to education whenever they can, he adds.

Wealthier families may weather the storm of inflation: Parents whose children attend international schools with annual tuition fees above EGP 140k are likely to have more disposable income to withstand inflation and devaluation, Elsewedy Capital Holding CEO Haytham Sabry tells Enterprise.

For those attending the most expensive schools, it “won’t even cause a dent,” El Alsson Executive Director Karim Rogers tells Enterprise. People whose children attend the likes of CAC, BISC, Malvern or NCBIS pay annual fees of around USD 20-25k or EGP 300k. If they can afford this, they’re unlikely to have to look for lower-priced options due to inflation, Rogers says.

Schools above the EGP 150k price point don’t seem to be facing enrollment problems: “I haven’t heard from schools with tuition fees over EGP 150k that they’re finding it hard to fill their seats,” says AIS Director Kapono Ciotti.

AIS reports stronger-than-usual enrollment levels: “We haven’t seen the economy play a negative role — even with inflation,” says Ciotti. AIS retained almost 97% of its students from 2021 — above normal levels of around 95%, he notes. “I’d say our re-enrollment is stronger than ever. Our new cheap essay is very strong too.”

El Alsson has seen parents stretched, but no drop in enrollment rates: El Alsson, which has fees of EGP 140-190k, has “a handful” of parents struggling due to recent price hikes, says Rogers. “But I haven’t seen anyone leave saying they’re moving to something cheaper.” So far, enrollment numbers this year have been within the expected range, says Rogers. “I think people are stretched. But if they’ve chosen us, they’re committed. And they probably want to continue here.”

Schools in Eduhive’s portfolio have seen a slight enrollment slowdown, but not enough to constitute a drop, says Mostafa. Projected numbers for this admissions season are steady, but the enrollment process is slower than in 2015, before rampant inflation. “I used to fill 100 vacancies by January or February, but now it might take until April. You still fill up, but it just takes longer.”

Middle-income schools — including those with EGP 60-100k fees — will more likely see enrollment changes, as parents target lower price points, say Rogers and Sabry. “The middle class is the most hit segment of society, so here you’ll definitely see parents downgrading schools to get lower fees,” Sabry says.

But they’ll see a change in composition — not a lessening of overall demand: Enrollment rates will stay strong because Egypt’s demand for private school education is just so high, sources agree. As some parents move to less expensive schools, others will take their place, says Sabry. “I don’t think this downgrading will affect admissions. It just affects the composition of the parents.”

The Gulf English School (GES) shows these changes at work: The Gulf English School, which Rogers calls a “totally Egyptian school with an international perspective,” has the same owner as Modern English School (MES). It filled with 600 students immediately after opening, says a source speaking off the record, noting that some parents left MES and went straight to GES. “GES is full, because its fees are EGP 60-80k, and it has good facilities, teachers, curricula and management. It’s really good value for money, so it’s oversubscribed,” notes Rogers.

But even if enrollment in existing schools isn’t hit, significant challenges remain, sources note.

Sweeping demand for private education could allow low-quality players easy market access, Rogers and Mostafa fear. “There’s a definite market for B- to C-class schools. It’s very profitable,” notes Rogers. Costs can be kept low if you don’t hire expat teachers or seek international equipment or resources. “But some schools seem to target anybody with a bag of money,” he adds.

New schools that haven’t yet proven themselves in the market could face lower enrollment rates, says Sabry. Established schools generally have long waiting lists, but new operators will need to heavily invest in school construction, while trying to attract students as costs are exceptionally high, he adds. The situation could slow market entry for new schools, including international franchises, Ciotti agrees.

And high-end schools could see inflation and the devaluation hit their margins hard, because they pay expat teachers in FX: “High end schools will see their margins affected. It’s enrollment that’s not affected,” says Sabry. They might have to decrease the number or quality of their expat teachers, to pay less, he speculates. While Rogers hasn't yet felt the crunch when it comes to paying expat salaries, the EGP slide puts him in a more difficult position than he’d anticipated when budgeting. “We have a buffer, but it’s usually USD 1 or USD 1.5 over the value of the EGP — which when we set it was around USD 15,” he notes. The USD is currently trading hands at EGP 18.30.

Will these trends continue for the rest of 2022 and into 2023? Yes, and they’ll become more acute, says Sabry. But it’s hard to predict by how much. “Just as in 2014 and 2015, the markets were in turmoil, but you didn’t know where the bottom was.”


Your top education stories for the week:

  • Deadline for Egyptian-Japanese school applications extended: The deadline for 2022-2023 applications to Egyptian-Japanese schools has been extended to 9 April, the Education Ministry announced.
  • Egyptian students returning from Ukraine: Almost 1.3k Egyptian university students who fled Ukraine are applying to continue their studies at universities in Egypt, the Emigration Ministry said in a statement.
  • USAID hosts careers fair: USAID Egypt’s University Center for Career Development hosted its third virtual careers fair on 28 March to connect students with large multinationals.

CALENDAR

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

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

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

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

15 February-15 June (Tuesday-Wednesday): ITIDA’s Technology Innovation and Entrepreneurship Center is organizing the first Metaverse Hackathon.

14 March-30 June: The “Escape to Egypt” exhibition at the Coptic Museum, in celebration of its 112th anniversary.

April: Fuel pricing committee meets to decide quarterly fuel prices.

April: Ghazl El Mahalla shares will begin trading on the EGX.

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

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

11 April (Monday): The deadline to submit bids for Chelsea FC.

14 April (Thursday): European Central Bank monetary policy meeting.

20 April (Wednesday): Deadline for listed companies and NBFIs to submit quarterly ESG reports.

Mid-April: Trading on the Egyptian Commodity Exchange to start.

21 April (Thursday): EGX-listed Taaleem will hold an extraordinary general assembly to discuss the mechanism to build and own nonprofit and private universities.

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

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

25 April (Monday): Sham El Nessim.

25 April (Monday): Sinai Liberation Day.

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

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

30 April (Saturday): Deadline to apply to the Tatweer Misr Innovation Competition.

Late April – 15 May: 1Q2022 earnings season

May: Investment in Logistics Conference, Cairo, Egypt.

1 May (Sunday): Labor Day.

1 May (Sunday): Suez Canal Authority raises tolls for different vessels.

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

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

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

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

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

5-7 June (Sunday-Tuesday): Africa Health ExCon, Al Manara International Conference Center, Egypt International Exhibitions Center, and the St. Regis Almasa Hotel, New Administrative Capital.

9 June (Thursday): European Central Bank monetary policy meeting.

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

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

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

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

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

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

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

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

2H2022: The inauguration of the Grand Egyptian Museum.

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

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

3Q2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release first financing product.

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

July: Fuel pricing committee meets to decide quarterly fuel prices.

Early July: Polish President to visit Egypt.

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

8 July (Friday): Arafat Day.

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

21 July (Thursday): European Central Bank monetary policy meeting.

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

30 July (Saturday): Islamic New Year.

Late July – 14 August: 2Q2022 earnings season.

August: Work to extend the capacity of the Egypt-Sudan electricity interconnection to 300 MW to be completed.

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

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

September: Central Bank of Egypt’s Innovation and Financial Technology Center to launch incubator for 25 fintech startups.

8 September (Thursday): European Central Bank monetary policy meeting.

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

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

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

October: Fuel pricing committee meets to decide quarterly fuel prices.

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

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

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

27 October (Thursday): European Central Bank monetary policy meeting.

Late October – 14 November: 3Q2022 earnings season.

November: Cairo Water Week 2022.

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

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

4-6 November: The Autotech auto exhibition kicks off at the Cairo International Exhibition and Convention Center.

7-18 November (Monday-Friday): Egypt will host COP27 in Sharm El Sheikh.

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

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

15 December (Thursday): European Central Bank monetary policy meeting.

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

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

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

January: Fuel pricing committee meets to decide quarterly fuel prices.

**Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish above between the actual holiday and its observance.

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