AM — ADQ enters the EGX in a big way with USD 1.8 bn buy

Welcome, friends from Abu Dhabi.

IT’S A BIG DAY FOR the private sector after Abu Dhabi wealth fund ADQ bought stakes yesterday in bold-name EGX-listed companies including CIB and fintech player Fawry in a series of block trades on the Egyptian Exchange. ADQ has previously invested in our friends at SODIC (alongside Aldar) and other household names here. ADQ deployed some USD 1.8 bn here yesterday.

ADQ’s rapid scaling up of its investments in Egypt comes as part of a drive by our GCC allies to help us sort through the fallout from Russia’s war in Ukraine, which has sent commodity prices skyrocketing, nuked the high-volume Red Sea tourism market, and upended the global wheat market upon which we depend.

We like Abu Dhabi’s strategy: Separately, Emirati lender FAB is pursuing a majority stake in our friends at EFG Hermes, the premier financial services corporation in frontier emerging markets, and Alpha Dhabi (which already has exposure to Egypt through its stake in Aldar) is looking at how to get more exposure to Egypt. And now there’s chatter in the market that another arm of ADQ is looking to buy a stake in a brandname consumer foods company.

We don’t know ADQ (or FAB), but we know how they and other Emirati investors operate from talks over the years with our friends who do business with them: They’re investors who put an emphasis on good governance, crisp management, aggressive growth targets, and no BS. More of this, please.

We have more on ADQ’s big day in the news well, below.

WATCH THIS SPACE- We’re getting an economic recovery task force to steer us through the storm whipped up by war in Europe. Prime Minister Mostafa Madbouly directed the ministerial economic committee (which includes cabinet ministers, CBE deputy governors, and the head of investment body GAFI) to form a task force to develop a strategy for the economic recovery from the repercussions of the ongoing war on Ukraine, according to a statement.

MEANWHILE- EgyptAir will resume direct flights between Cairo and Moscow on Friday, 15 April, according to a statement from the national flag carrier, which said it would run one flight per day between the two cities. MPs last week approved a draft law allowing the Finance Ministry to ins. EgyptAir against potential losses on flights to and from Russia, which were suspended in March due to the war.

Flights to Moscow are restarting a couple days later than planned: Online booking had previously been available for flights starting yesterday. The airline is asking customers whose earlier bookings to Moscow were canceled to call its 1717 customer service line.

DATA POINT- Investors have now poured some EGP 523 bn into 18% CDs at Banque Misr and the National Bank of Egypt. Nearly 70% went to the NBE, while the remainder went to Banque Misr, Hapi Journal reported here and here. The CDs launched three weeks ago, following the central bank’s 100-bps interest rate hike.

AND- The Pharaohs have a new coach: Former football player Ehab Galal has been appointed the new coach of the men’s national football team, succeeding Carlos Queiroz, who stepped down from his position by mutual agreement earlier this week, the Egyptian Football Association (EFA) announced yesterday. Galal was in the running lead the team back in 2019 but the EFA went with Hossam El Badry instead. The EFA also dismissed its technical manager, Nelo Vingada.

KUDOS (Pt II): We took note yesterday of the CEOs of Egyptian companies that made Forbes Middle East Top 50 Healthcare Leaders for 2022. Other Egyptian CEOs on the list heading companies domiciled outside Egypt included:

• 21- Julphar CEO Essam Mohamed
• 24- Eva Pharma CEO Riad Armanios
• 25- Jamjoom Pharma CEO Tarek Hosni
• 32- American Hospital Dubai CEO Sherif Beshara
• 37- Viatris head of Middle East, Turkey and Levant Ayman Mokhtar.

SO, WHEN DO WE EAT? You’ll be breaking your fast at 6:21 pm CLT this evening in the capital city, and fajr prayers are at 4:00am.

THE BIG STORY ABROAD- Other than the latest in the war in Ukraine (see just below) and the reaction to a new 40-year high for US inflation (scroll on a little further), the international press is taking note of an attack on the New York subway system yesterday in which at least 10 people were shot. AP has the details.

WAR WATCH- A packed day of news on the home front means your daily update on Russia’s war in Ukraine comes in bullet-point form this morning. Here’s what you need to know:

• Putin calls time on peace talks: Russian President Vladimir Putin said that peace talks with Ukraine are “at a dead end” and vowed to continue the invasion of Ukraine, Bloomberg reports. Ukraine accused Russia of sabotaging the negotiations.
• Biden accuses Putin of genocide: The war of words saw a significant escalation when the US president for the first time accused Russia of genocide in Ukraine. (Bloomberg)
• The Biden administration will send Kyiv USD 750 mn in military aid (Reuters).
• The Ukrainian government and some of its Western allies are investigating allegations Russia may have used a chemical weapon in the besieged eastern Ukrainian city of Mariupol. (New York Times)
• The World Bank is lending Ukraine USD 1.5 bn — USD 1 bn of which comes from the lender’s fund for poor countries. (Reuters)

MARKET WATCH-

US inflation reaches new 40-year high as Ukraine war hits home: Inflation in the US surged to 8.5% in March, its highest level since December 1981, data by the Bureau of Labor Statistics showed yesterday. Food and rent prices saw particularly large jumps during the month, while the cost of gasoline accounted for more than half of all the items’ monthly increase, rising 18.3%. Inflation is being driven by both significant grow as the US economy bounces back from covid, the Wall Street Journal reports, as well as by sharp rises in oil and commodities prices on the back of the war in Ukraine.

This is (slightly) above expectations: Analysts expected the CPI to come in at 8.4%.

Markets didn’t quite know what to make of it: US stocks closed marginally down, paring gains earlier in the day as traders wagered that price pressures could have reached their peak, Bloomberg reports. Rising commodity prices — including all important oil — seemed to put paid to those hopes, with international benchmark Brent crude climbing to trade near USD 105 in the early hours of this morning.

Markets are now looking to earnings releases from big banks — which will start coming in today — for their next cue on the impacts of inflation, as we noted yesterday.

COVID WATCH- iPhone maker halts production in Shanghai due to worst Covid outbreak in two years: Apple iPhone assembler Pegatron has halted production at two of its plants in China due to the strict stay-at-home measures in force in Shanghai to counter a covid outbreak, Bloomberg reports. This is major, fellow iSheep: Pegatron assembles around 20-30% of all iPhones.

There might be some light at the end of the tunnel: Authorities are beginning to lift some restrictions on neighborhoods where no new infections have been reported, after food shortages caused public outroar, the Associated Press reports.

CIRCLE YOUR CALENDAR-

Companies have one week left 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. 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.

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: If you’ve found yourself lost driving on a new bridge lately, desperately trying to get a hint from your phone on where it leads or when you’ll reach the next exit, you’re not alone. Cairo’s roadmaps are changing at speed thanks to the government’s infrastructure push — and Google Maps sometimes finds it hard to keep up. In this week’s Hardhat, we try to shed light on how the platform functions and why Cairo traffic routes can send it into a tailspin.

Abu Dhabi wealth fund ADQ acquired state-owned stakes in five EGX-listed companies yesterday as part of an agreement reached last month to provide Egypt with emergency liquidity as we grapple with fallout from Russia’s war in Ukraine.

The fund purchased shares in CIB, Fawry, Abu Qir Fertilizers, Mopco, and Alexandria Container & Cargo Handling for around USD 1.8 bn, according to EGX data yesterday. The bourse didn’t name the buyer, but as we noted last month, the government had agreed to sell stakes in each of these five companies to ADQ as part of an investment package worth up to USD 2 bn.

The breakdown (by our math):

• CIB: A 17.15% stake in the leading private sector bank was sold for USD 911.5 mn, at an average price of USD 2.68 per share.
• Abu Qir: A 21.5% stake owned by the National Investment Bank was sold for USD 391.9 mn, at an average price of USD 1.44 per share.
• Mopco: A 20% stake in Mopco was sold for USD 266.6 mn, at an average price of USD 5.82 per share.
• Alex Containers: A 32% stake in Alexandria Container & Cargo Handling was sold for USD 186.1 mn, at an average price of USD 0.39 per share.
• Fawry: An 11.8% stake in fintech player Fawry was sold for USD 54.9 mn, at an average price of USD 0.27 per share.

Shares rose on the news: Fawry saw the biggest gain during trading yesterday, closing the session up 4.9% at EGP 4.94 per share. Meanwhile, Abu Qir rose 3.6%, to close at EGP 24.75, Mopco gained 2.5% (closing at EGP 97.30) and CIB rose almost 2% to end the session at EGP 44.00. The outlier was Alex Containers, which fell 1.4%, closing the day at EGP 7.60.

Who were the sellers? NBE and Banque Misr were the sellers of stakes in both CIB and Fawry, Al Borsa reports, citing unnamed sources. The Finance Ministry sold ADQ a 20% stake in Mopco, reducing the size of FinMin’s stake to 6%, the local outlet says. National Investment Bank reportedly made a complete exit from Abu Qir through its stake sale. And the Alex Containers stake was reportedly sold to ADQ by Alexandria Port Authority.

What about regulatory approvals? The CIB stake sale received approval from the Central Bank of Egypt (CBE) a few days prior to the transaction, according to Al Borsa. Anyone looking to take a stake of more than 10% in any Egyptian bank requires CBE approval under the Central Bank and Banking Act, and the CBE’s sign-off before taking a board seat and appointing someone to fill that vacancy.

ADQ already has a strong portfolio of Egyptian investments: In 2019, ADQ established a USD 20 bn joint investment fund with the Sovereign Fund of Egypt to channel funds into a variety of industries and assets. The wealth fund has had plenty of appetite for acquisitions in Egyptian companies: Its latest blockbuster transaction was its acquisition of leading real estate developer SODIC alongside Aldar Properties last year. ADQ also acquired 99% of Bausch Health’s local pharma outfit Amoun Pharma, as well as 75% of Atyab brand owner Ismailia Agricultural and Industrial Investments.

Speaking of ADQ: Chief Executive Officer Mohamed Hassan Alsuwaidi joined Aldar’s board of directors earlier this week.

ADQ and Chimera to launch first MENA SPAC listing

It was a huge day for ADQ, which also announced the launch of the first MENA-based SPAC in cooperation with our friends at Chimera. The fund and Chimera’s PE arm yesterday announced the establishment of their SPAC, dubbed ADC Acquisition Corporation, which hopes to raise AED 367 mn (EGP 1.85 bn) through an IPO on the Abu Dhabi exchange. The ADX paved the way for the move when it issued its SPAC regs back in February. The listing is subject to market conditions (which are less than ideal for SPACs right now) and all the usual regulatory approvals.

Abu Dhabi has pipped us to the post for MENA’s first SPAC — but don’t rule out involvement from Egyptian firms. The blank-check firm will look to merge with one or more “fast-growing, technology-driven businesses with strong management teams and attractive valuations” across the MENA region, according to a joint statement. We had expected to see Egypt’s first SPAC established early this year, but we’ve heard nothing on that front recently (unsurprisingly, given that the effects of war in Ukraine have most policymakers in crisis-management mode.)

Paymob lands in Pakistan: High-profile Egyptian fintech startup Paymob has officially launched in Pakistan, it announced in a press release (pdf) yesterday. The digital payments provider said it will launch a number of payment services in the country, including payment gateways, POS, SoftPOS, and contactless payments.

Why Pakistan? Paymob said that Pakistan is “perfectly suited” to the company’s strategy due to the low rate of fintech penetration and the country’s high population. Home to more than 220 mn people and more than 4 mn SMEs, there are only 80k POS terminals and less than 3k ecommerce gateways in the South Asian country. Pakistan’s economy is also expected to see strong growth, as is the value of the country’s e-commerce sector, which increased 83% last year to USD 3.9 bn.

Paymob’s entry to Pakistan is also getting mentions in the foreign press: Bloomberg | The National.

Infrastructure management platform Pylon has raised USD 19 mn in a seed funding round led by Endure Capital, Cathexis Ventures, Khwarizmi Ventures, LoftyInc Capital and angel investors, the startup announced in a statement (pdf). The investment includes an unspecified mix of equity and debt and will be used to help the company expand into new markets and develop its product offering.

About the company: Launched in 2017, Pylon provides what it calls “smart metering as a service” to water and electricity distribution companies. It uses data analytics and AI to detect where electricity is being stolen and where losses are happening on the grid, helping distribution companies reduce losses, increase efficiency and improve their revenues.

Where does it operate? The company is currently active in Egypt and the Philippines, according to TechCrunch, and now serves more than 1 mn meters. It works with five of Egypt’s nine distribution companies, serving 500k meters across South Cairo, the South Delta, Alexandria, the canal region, and Middle Egypt, and operates meters in Madinaty and Mostakbal City.

By the numbers: The company has reached profitability less than five years after its launch, and experienced 3.5x growth last year.

Expansion plans: The company is targeting new emerging markets in Southeast Asia, Africa and Latin America, it said.

E-receipt system pilot to kick off 15 April: The Finance Ministry will launch a pilot of its e-receipt system for business-to-consumer (B2C) transactions this Friday, 15 April, it said in a statement yesterday. The trial period will last for 11 weeks until 1 July when the system will be officially rolled out, it said.

What’s this all about? The taxman wants the ability to track back and validate any sale a retail business makes to a customer. Imagine, for example, a shopper at your Friendly Neighborhood Supermarket buying an EGP 500 basket of goods. With the e-receipt system, the details of the transaction would be captured in real time by the taxman from the point of sale. That would make it impossible for Friendly Neighborhood Supermarket’s owner to hide revenue from the Tax Authority by keeping two sets of books: one with 100% of sales and expenses for his / her own use, and the other for government consumption with, say, 85% of sales and 100% of expenses.

How it works: Sales data controllers will be installed in all payment processing systems used by retailers and wholesalers to monitor and record all tax-relevant transactions. A state contractor — which has not yet been contracted, we’re told — will provide retailers with POS machines and will be responsible for activating and monitoring them and providing technical support. The e-receipts will also be encoded with QR codes that allow tax officials to verify their validity.

Who’s involved: Some 100 taxpayers from a variety of sectors will be involved in the pilot, Mohamed Keshk, who heads an internal audit department at the Tax Authority’s large taxpayers division, told us yesterday. He declined to name names, but did say that two of consumer electronics giant El Araby’s subsidiaries are involved in the program.

E-receipts won’t be issued from the get-go: During the first month of the pilot, sales data controllers will be distributed and retailers will receive training on how to use the system, says Keshk. By mid-May, we can expect to see the first e-receipts being rolled out, he added.

Wasn’t this supposed to start two weeks ago? We had reported that the pilot would kick off on 1 April, but Keshk told us yesterday that the beginning of April marked the end of the authority’s preparations, rather than the start date for the pilot.

What’s the plan for the official rollout? Companies with the largest sales volumes will be the first to be onboarded to the system in July, before it is rolled out to medium and small companies at a later stage, Keshk said. The ministry has not yet settled on a timeline for the full rollout, he added.

The system is being implemented by E-Tax, a subsidiary of EGX-listed fintech player e-Finance.

BACKGROUND: The new system complements the ongoing rollout of the wider e-invoicing program, and — in addition to cracking down on tax evasion — aims to help the Tax Authority reduce the size of the informal economy. It could also shore up consumer rights, since purchasers will no longer have to keep hold of paper receipts if they end up deciding to return items, FinMin has said.

Current state of the e-invoicing rollout: Over 52k companies have so far registered on the system and have sent some 154 mn e-invoices, according to the statement. The system had detected over 17k cases of tax evasion — clawing back more than EGP 6 bn for the treasury — as of the end of 1Q, officials said previously.

Where this came from: The Tax Authority launched a pilot for the B2B e-invoicing program 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 all B2B and B2C invoices across the country should be fully automated by December.

Investor acquired 7.5% of Sinai Cement amid Vicat dispute settlement: The settlement of the dispute between Sinai Cement’s parent company and the Egyptian government paved the way for an investor to acquire a 7.5% stake in the firm, four years after the purchase took place, Enterprise has learned. The 10 mn shares bought by Asmaa Amer Gharib back in 2018 were frozen after the government allegedly tried to force the French cement producer Vicat to sell its majority stake, and were only unfrozen last month when the two sides settled the ownership dispute. No details on the settlement were publicly disclosed.

The details: Gharib acquired 9.98 mn shares of Sinai Cement on 20 March at an average price of EGP 10 each, according to an EGX disclosure (pdf) filed Monday. Vicat and the government signed the settlement agreement a day later. Gharib has no public profile that we can ascertain.

Vicat is now mounting a takeover bid: A mandatory tender offer submitted by Vicat for another 42.1% of Sinai Cement at EGP 6.74 per share got underway on Sunday. The subscription period will finish on 21 April. Vicat owned some 56.2% of Sinai Cement as of the end of 2021, according to the company’s latest financials.

We could finally get a law that criminalizes child marriage: The cabinet has approved a draft bill that would, if passed, criminalize child marriage and hand out jail terms and fines for people found guilty of violating the act, it said in a statement following its weekly meeting yesterday. ِIn the first legislation of its kind, the bill would prohibit marriage of anyone under the age of 18 and require marriage officiants to notify prosecutors of any common-law marriage — also known in Arabic as orfi marriage — that involves a child.

Violators of the law are subject to jail terms + fines: Those who marry or are involved in the marriage of a child under 18 will face at least one year in jail and a fine of EGP 50k-200k. Family courts could remove guardianship of children in cases where family members are convicted. The same penalties would be imposed against those encouraging child marriage, the statement said, adding that children involved would not be held accountable. Marriage officiants who fail to inform the prosecution would receive a minimum six months in jail and an EGP 20k-50k fine.

Stats on child marriage in Egypt are hard to come by: One of the most recent was in 2017 when state statistics agency Capmas said that more than 117k children under 17 are married each year. The Cairo-based Forum for Development and Human Rights Dialogue argues that the real number could be three times higher.

What’s next for the bill: The usual, we presume — the bill will make its way on to the House of Representatives for debate and amendments.

ALSO FROM THE MEETING-

More infrastructure ahead of COP 27. Cabinet has approved extending the validity of renovation permits for several hotel projects in Sharm El Sheikh and Nabq until the beginning of October. The extension would allow resorts to continue renovating existing facilities ahead of the COP 27 summit in November. Some hotels are being converted to run on solar power ahead of the conference.

The Ramadan lull continues: Next to nothing was happening on the airwaves last night, except for Agriculture Minister El Sayed El Quseir reassuring Ala Mas’ouleety’s Ahmed Moussa that the state can fulfill citizens’ food supply needs and at low prices (watch, runtime: 6:07).

Where have our talking heads gone? Ramadan has put them into a month-long hibernation. We haven't seen Kelma Akhira’s Lamees El Hadidi since the holy month kicked off almost two weeks ago, while Masaa DMC and Al Hayah Al Youm have also been absent from their respective YouTube channels. Talkshows typically go on hiatus during the holy month.

Human rights is again leading coverage of Egypt in the international press: The state-backed National Council for Human Rights (NCHR) is tracking prosecutors’ work to look into the death of economics researcher Ayman Hadhoud. Hadhoud died in early March at Abbasiya Mental Health Hospital after reportedly being detained by government agents a month earlier. Both Reuters and The Independent have the story.

Also making headlines:

• Israel’s climate envoy wants tech solutions prioritized at COP 27, saying the “time for describing the problems is over.” (The Times of Israel)
• If an Egyptian Cannot Speak English: A novel by Egyptian-American Noor Naga gets some ink. (New York Times)

Fancy a trip to Bulgaria? It’s now sans-covid paperwork. Starting today travelers arriving to Bulgaria from Egypt no longer have to show any coronavirus-related documents, including proof of vaccination. The move also applies to travelers coming from Turkey, Israel, and a handful of Bulgaria’s neighbors in eastern Europe — and to NATO troops arriving in Bulgaria amid the war in Ukraine. (Statement)

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

• The Financial Regulatory Authority has joined the Organisation for Economic Cooperation and Development’s International Network on Financial Education, an initiative launched in 2002 to improve financial literacy. (Statement)
• The Planning Ministry and MIT’s Abdul Latif Jameel Poverty Action Lab (J-PAL) have launched the Egypt Impact Lab, which will work to connect academics and government partners to strengthen our poverty alleviation policies. (Press Release)

RIP to an iconic comic voice: US actor and comedian Gilbert Gottfried has died at the age of 67, the AP reports. Gottfried died of a rare genetic muscle disease that causes an abnormal heartbeat. He was famed for his trademark “raw, scorched” voice — best known as the voice of Iago the parrot in Disney’s Aladdin (the good, old version). This clip says it all (watch, runtime: 2:20).