AM — El Sisi wants to attract USD 40 bn in private investment through sale of state assets over the next four years

Good morning, wonderful people, and welcome to the next-to-last workday of Ramadan. It’s another huge news day today, so we’re going to jump straight in with this public service announcement:

PSA #1- The whole of next week will be a bank holiday to celebrate Eid al Fitr, the Central Bank of Egypt (CBE) said overnight. The country’s banks will be closed from Sunday, 1 May through Thursday, 5 May. Shortened Ramadan hours will end when banks reopen for business as usual on Sunday, 8 May. With banks closing for the week, you can expect an announcement any moment now from the EGX that it is following suit.

REMINDER- The private sector won’t be taking the entire week off for Eid, unlike the public sector. The private sector will officially get Labor Day (that’s 1 May) and the first two days of Eid as paid vacation days, the Manpower Ministry has said. Now it’s up to you (or your bosses) to decide if your company will bridge the entire week.

PSA #2- Only e-invoices will be accepted as proof companies have paid VAT on goods and services starting 1 July, the Finance Ministry said in a statement. The Tax Authority will accept paper invoices issued before companies were obligated to join the e-invoice system, as well as from companies granted exceptions by the authority.

What e-invoicing system? 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.

More than 70k companies have registered for the e-invoicing system so far and have sent north of 200 mn e-invoices, FinMin said.

PSA #3- Some Indomie noodles pulled from the shelves over safety concerns: Indomie Egypt has 48 hours from yesterday to recall all its chicken and vegetable flavored instant noodles, as well as those with chili packets, from the Egyptian market, after the National Food Safety Authority declared them unfit for consumption due to the presence of aflatoxins and pesticide residues in unsafe quantities, state-owned news portal Ahram Gate reports. Indomie was also ordered to remove claims from its packaging that products contain vitamin B, iron, zinc, and calcium. The company has already recalled more than 770k products following the decision.

SO, WHEN DO WE EAT? You’ll be breaking your fast at 6:30pm CLT this evening in the capital city, and fajr prayers are at 3:42am.

FROM THE DEPT. OF GOOD NEWS- The majority of Egyptian adults are now banked. More than 56% of Egyptian adults — nearly 37 mn people — held a bank account, mobile wallet or pre-paid card at the end of 2021, up from almost 53% the year before, according to central bank figures (pdf) released yesterday. The figure has more than doubled since 2016, when just north of a quarter of over-16s owned a “transactional” account, a definition that includes bank accounts as well as Post Office savings accounts. That includes some 16 mn women — up 171% since 2016. It’s a far cry from the “two-thirds of the country is unbanked” figure that had held for a decade prior to the CBE’s financial inclusion drive.

SIGN OF THE TIMES- Nearly seven in 10 payment transactions in the Middle East and North Africa will be digital in 2023. So says the MENA Fintech Association in a new report (pdf) that anticipates the rise of cashless payments to accelerate this year and the next. Digital payments are growing at a 20% CAGR, putting them on track to surpass USD 20 bn next year, more than double what was spent digitally in 2019. The report doesn’t break out Egypt-specific figures.

Driving the acceleration: Greater smartphone adoption in the region, a growing number of young, tech-literate demographics, and the increasing numbers of POS devices and fintechs offering services like buy-now-pay-later (BNPL) and closed loop payments .

DATA POINT- Those 18% CDs are still being snapped up: Investors have now poured some EGP 600 bn into 18% CDs at Banque Misr and the National Bank of Egypt — that’s EGP 23 bn in inflows in the past seven days, according to our math. Some EGP 410 bn is in deposits at the NBE, while the remainder is parked at Banque Misr, Al Mal reports. The CDs launched last month, following the central bank’s 100-bps interest rate hike.

THE BIG STORY ABROAD this morning is the weaponization of energy in Europe, after Poland and Bulgaria announced that Russia will completely cut off gas exports to the two countries from 8am CLT today. Ukraine’s government said the move hailed the beginning of Russia’s “gas blackmail of Europe.” Moscow earlier this month said it would demand payment in RUB for its key gas exports to “unfriendly countries” (read: pretty much all of Europe). Meanwhile, concerns that the war is escalating were further stoked by reports of military attacks in a pro-Russian breakaway region of neighboring Moldova. Reuters, the Financial Times, and Bloomberg all have more.

INFLATION WATCH-

High food and energy prices are set to stick around for years, the World Bank has warned in its latest commodities report (pdf). While the medium-term outlook will hang heavily on how long war continues in major food and fertilizer exporter Ukraine, prices are set to “remain elevated” through 2023-2024 compared with the last five years, the WB says. Energy prices had more than quadrupled by March 2022 from their April 2020 low, fertilizer prices have tripled, and food prices are up 84% — leading to “major humanitarian and economic impacts and exacerbating food insecurity and inflation in many countries,” the lender writes.

ON THE BRIGHT(ISH) SIDE- Indonesia’s ban on exports of palm oil is not as comprehensive as first reported. Indonesia has clarified that its export ban on palm oil only encompasses processed products like cooking and frying oil, and not crude palm oil. Indonesia accounts for some 30-40% of the world’s supply of processed palm oil, so the restrictions will still have a major impact on the global edibles oil market — which is already reeling from the war in Ukraine — when they come into effect on 28 April, Bloomberg writes.

That’s probably not going to be a source of comfort to Egyptian firms: UN data shows that the bulk of the palm oil imported by Egyptian companies last year was not crude. Egypt is one of the largest buyers of palm oil in the world, and Indonesia accounted for almost 90% of our supply in 2020.

CIRCLE YOUR CALENDAR-

Businesses have four days left to file their corporate tax returns. Companies with financial years ending 31 December have to file their returns by Saturday, 30 April.

Also on the final day of the month: The fixed customs exchange rate introduced last month following the EGP devaluation will be lifted. Greenbacks used for importing essential items such as basic commodities and materials used for manufacturing are currently changing hands at a fixed rate of EGP 16, a move introduced to minimize exchange rate volatility in the wake of the deval.

ITIDA has begun accepting applications for its annual Export IT program: The program is designed to encourage local IT companies to boost exports while reducing related costs. Interested companies have until 31 May to send in their applications, and can check the details here.

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: Like other infrastructure players, Egypt’s real estate sector is taking a hit from rising raw and building material prices off the back of the war in Ukraine, along with higher borrowing costs, and the Central Bank of Egypt’s decision to let the EGP slide against the USD, sources tell us. Still, developers with more advanced projects that have amassed land and inventory will likely be well positioned to absorb cost increases and recoup losses, they add — particularly over multi-year project cycles.

The state wants to attract USD 10 bn in fresh investment annually over an unspecified four-year period by opening the door to “private sector participation in state-owned assets,” President Abdel Fattah El Sisi said in a televised speech yesterday at the Egyptian Family Iftar event. You can catch the full speech here: (watch, runtime: 1:00:25). El Sisi did not offer further details in the speech, which is getting wide attention in the domestic press as well as a pickup from Reuters.

The president also used the speech to direct the Madbouly government to list military-owned firms on the EGX by the end of this year. Smart money is on bottled-water maker Safi and filling station operator Wataniya, which are currently being prepared for public or private offerings before summer, Sovereign Fund of Egypt chief Ayman Soliman said earlier this week. El Sisi also wants to see the government offer for sale stakes in other state-owned companies that have no military shareholders.

LOOK FOR MORE DETAILS as early as next week after Eid: The government is set to announce its strategy to privatize state-owned firms and boost private-sector participation in the economy at a press conference after the Eid El Fitr holiday.

What to watch for: The government has previously signaled it will bring new assets to market, including fresh IPOs; sales of additional stakes in already-listed, state-controlled companies; and shares in military-owned companies — and had hoped to sell shares in as many as ten state-owned companies on the EGX in 2022, before Russia’s invasion of Ukraine upended the global economy.

ON A RELATED NOTE- The Madbouly gov’t wants state institutional investors to pour more into the EGX, particularly through pension and ins. funds, according to a cabinet statement. Prime Minister Mostafa Madbouly said the move would boost liquidity and bring more foreign investment to the bourse. The PM was quoted after meeting with EGX boss Mohamed Farid, public and private pension and ins. fund managers, and representatives of other government agencies.

What to watch for: Fund managers are set to receive guidance on how to up their EGX investments and the advantages of doing so, the statement read. Earlier this year, Sovereign Fund of Egypt (SFE) CEO Ayman Soliman said that pushing ins. funds’ investments in EGX-listed stocks to 10% could “revive” the market.

BACKGROUND- The Madbouly government has been looking for years now to sell state assets as part of a revived privatization program, but has run into obstacles including a global selloff from emerging markets (2018 and into 2019) and then covid (2020, 2021). It has managed so far to sell an additional stake in already-listed Eastern Company, the state tobacco monopoly, and successfully took fintech and payments company e-Finance to market last fall.

ALSO FROM EL SISI’S SPEECH-

• El Sisi said he has directed the gov’t to hold a press conference on its plans to deal with the ongoing global economic crisis. Egypt has already made significant moves in response to the war’s fallout, including allowing the EGP to devalue, introducing an emergency 100 bps interest rate hike, announcing a raft of stimulus measures, bringing in support from the GCC, and reaching out to the IMF for another potential round of emergency assistance.

• The latest local wheat harvest will cover domestic consumption for around nine months and we could reach self-sufficiency in sugar by the end of the year, El Sisi said. The government is working to maximize the local harvest after the war in Ukraine put around 80% of Egypt’s wheat imports at risk and sent global grain markets spiraling.

Cairo-born mass transit firm Swvl is continuing its buying spree, announcing this week an agreement to purchase Turkish firm Volt Lines in what is the company’s fourth acquisition in the past eight months.

The details: The acquisition will be executed with a mix of cash and shares, with the “vast majority” of purchase being paid for with shares linked to earnout targets, Swvl CFO Youssef Salem told Enterprise. The transaction could value Volt at almost USD 40 mn should it reach its targets in the next two or three years, he said. Salem expects the transaction to close this quarter (2Q 2022) and Swvl will follow it up with a USD 25 mn investment to expand the business’s footprint in Turkey, he added.

About Volt Lines: Founded in 2018, the company provides monthly subscriptions to employees of over 110 companies for shared bus commutes in Istanbul and Ankara. CEO Ali Halibi will remain at the company’s helm, Swvl said in the statement.

"The acquisition of Volt Lines expands on Swvl’s position as a leader of mobility solutions, with a clear [chance] to scale the platform globally. Volt Lines brings an extensive list of multinational customers that we are excited to continue to grow relationships with as we provide them with the transportation solutions they need,” Salem said in the statement.

This is Swvl’s fourth acquisition since last August, when it acquired mobility platform Shotl, a Spanish firm that operates in 10 countries including Brazil and Japan. Swvl in November took a controlling stake in transit company Viapool, which operates in Argentina and Chile, and recently entered Central Europe with its acquisition of German company Door2Door, which it expects to finalize later this quarter.

Swvl made its Nasdaq debut earlier this month after it concluded its SPAC merger with Queen’s Gambit Growth Capital. The company offered a 35% stake to investors in a sale that originally valued it at USD 1.5 bn.

Swvl’s shares are mounting a comeback after a volatile start to their life on the Nasdaq. Its stock fell almost 60% in the three weeks its debut, but has rallied over the past week and is now some 36% below its IPO price. The tech-heavy Nasdaq is itself down 23% from its most recent high — well into bear market territory — as traders pivot from growth stocks due to risk-off sentiment triggered by the war in Ukraine, inflationary pressure, and rising interest rates.

Saudi PIF subsidiary ups stake in Rameda: The Saudi Seventh Investment Company (SSIC) has purchased another 6.5% of Rameda Pharma, raising its total stake to 11.01%, the EGX announced (pdf) yesterday. SSIC, a subsidiary of the Public Investment Fund (PIF, KSA’s sovereign wealth fund), purchased 65 mn shares for EGP 135.2 mn on Thursday, less than two months after first investing in the company. SSIC purchased a 4.51% stake at the beginning of March as part of a block transaction with Rameda’s largest shareholder, Equinox, Rameda’s head of institutional investor relations, Yasmine Negm, confirmed to Enterprise. Negm declined to disclose who sold the shares.

PIF loves Egypt: SSIC’s latest share buy came after KSA and Egypt inked an agreement last month that would see the sovereign fund invest up to USD 10 bn in Egypt’s healthcare, education, agriculture and financial services sectors, part of a raft of support measures from our friends in the Gulf to help shore up Egypt’s fiscal position amid global volatility triggered by the war in Ukraine. As we noted yesterday, the Saudi cabinet and Shura Council have both signed off on the PIF ramping up investment here.

ADIB Egypt sells National Glass and Crystal Co. to El Garhy Steel

A subsidiary of El Garhy Steel has acquired a majority stake in the National Glass and Steel Co. from ADIB Egypt, according to a regulatory filing (pdf). Garhy Steel unit El Wehda Industrial Development bought around 13.3 mn shares at EGP 2.25 per share for a total of EGP 30 mn, Al Borsa reports, citing EGX trading data. ADIB announced plans to offload its 88.3% stake in the glassmaker earlier this year.

El Wehda upped its offer: El Wehda had submitted a mandatory tender offer to buy 100% of the National Company for Glass and Crystal at EGP 1.35 per share, before upping its offer in the face of competition. ADIB received an offer from another firm — identified by local media as Kandil Steel — of EGP 2.40 per share. The Emirati bank will make up the EGP 0.15 difference for any minority shareholders who wish to exercise their option to also sell their shares to El Garhy, it said.

Saudi food startup closes blockbuster series C round: Saudi restaurant management platform Foodics has raised USD 170 mn in the biggest software-as-a-service (SaaS) series C funding round in the MENA region, it said in a press release last Wednesday. The round was led by global tech investor Prosus and Sanabil Investments, an investment company owned by the Saudi sovereign wealth fund. Foodics also received backing from Sequoia Capital India and existing investors including STV, Endeavor Catalyst, and Vision Ventures.

Where the money’s going: The funding will back the platform’s international expansion and help finance acquisitions to deepen its market penetration, the company said. It is also looking to launch new fintech, micro-lending and supply chain management services, as well as “non-food micro-retail outlets.”

Mobile network operator Etisalat Misr reported revenues of AED 1.3 bn (c. EGP 6.55 bn) in 1Q 2022, up 15% from the same quarter last year, according to parent company e& (etisalat and)’s earnings release (pdf). Top line growth was mainly driven by an increase in subscribers and mobile data and voice revenues.

The company’s subscriber base in Egypt grew 6% y-o-y to reach 28.1 mn. Egyptian users accounted for almost 20% of the company’s total subscribers at the end of the quarter.

Etisalat Misr spent AED 0.3 bn (c. USD 82 mn or EGP 1.5 bn) acquiring spectrum in 1Q, according to the release. The company bought 40 MHz of new bandwidth from the National Telecommunications Regulatory Authority (NTRA) in February for an undisclosed sum. In total, Etisalat Misr more than tripled its capex to AED 600 mn, including new spending on 4G and network capacity.

Across the entire group: e&’s revenues inched up 0.8% y-o-y to AED 13.3 bn in line with the company’s 2022 guidance. Strong performance in the UAE and Egypt helped to offset “unfavorable exchange rates” in Egypt, Pakistan and Morocco, which the company said had “impacted” 1Q revenues. The results are a “testament to the effectiveness” of the company’s operations, Group CEO Hatem Dowidar said.

Private equity firm B Investments’ net income fell 63% in 2021 to EGP 105.3 mn, according to the company’s consolidated financial statements (pdf). Revenues dropped 56% to EGP 162.7 mn during the year.

Our friends at public policy firm Moharram & Partners have been tapped as one of the vice-chairs of the US-Egypt Business Council (USEBC) according to a statement (pdf). Bechtel, BP, and PepsiCo are also vice-chairs on the council, which is chaired by oil producer Apache. Moharram & Partners, founded by Moustafa Moharram (who also acts as CEO), specializes “in all aspects of political/policy risk analysis, public policy, government relations, and strategic corporate communications in the Middle East and Africa.” Moharram said the firm aims to drive “stronger trade and foreign direct investment relationships between our two nations.” In the same statement, USEBC Executive Director Steve Lutes noted that M&P is a “platinum sponsor of the USEBC centennial celebration.”

What’s USEBC? Founded in 1979 by President Anwar Sadat and and US President Jimmy Carter, the USEBC calls itself “​​the leading advocacy organization representing America’s top companies doing business in Egypt.”

President Abdel Fattah El Sisi’s speech at the “Egyptian family iftar” dominated the airwaves last night. El Sisi used the speech (watch, runtime: 1:00:25) to signpost a few key priorities for the country looking forward, including plans to boost the role of the private sector in state-owned enterprises. We have all the details in the newswell, above.

Human rights is getting more attention: The AP reports that several political activists, journalists and lawyers have been released from detention as part of the government’s pre-Eid amnesty, which saw more than three dozen prisoners freed. Meanwhile, Human Rights Watch wants late economist Ayman Hadhoud’s autopsy to be made public to allow for further investigation from independent forensic experts to determine whether he was tortured in custody.

Restoration and preservation are also trending in the international press this morning: Egyptian volunteers are reviving Egypt’s Jewish heritage, Haaretz reports. Meanwhile, this Associated Press photo essay documents car enthusiast Mohamed Wahdan’s work to restore vintage cars to their former greatness. And archaeologists have uncovered the remains of a temple to Greek god Zeus in the Tell el-Farma archaeological site in northwest Sinai, say the AP and Xinhua.

WATCH THIS SPACE- The planned demolition of a large part of Cairo’s oldest cemetery, the City of the Dead, to make way for a flyover bridge linking central Cairo to the new administrative capital, receives criticism from both historians and Egyptians with ancestors buried in the area. Photographer Heba Khamis’ accompanying images are fantastic. (New York Times)

Also making headlines:

• The gig economy is providing jobs but at what cost? Delivering more than 1 mn orders a day, workers are being “bled dry left and right,” one driver says. (AFP)
• Former MP sent to prison for smuggling antiquities: An Egyptian court has sentenced former MP Alaa Hassanein and four others to 10 years in prison for smuggling antiquities, while 18 others, including businessman Hassan Rateb, were sentenced to five years. (Associated Press)
• Can Cairo become a safe haven for Russian oligarchs? The Nidaa Masr party is urging the government to follow in Dubai’s footsteps and welcome Russian b’naires to Egypt so the country can benefit from their exile from Western markets. (Al Monitor)

The Madbouly government is in talks with an international automaker to produce vehicles to replace tuk-tuks, Public Enterprises Minister Hisham Tawfik said last week, without providing further details. Industry observers are closely watching to see what class of vehicles (and which incentives) the government authorizes to replace tuk-tuks, which largely serve peri-urban areas with streets too narrow or congested for standard four-wheeled vehicles.

ALSO- Automotive industry players are still waiting for news of the so-called “automotive directive” — a long-in-the-works package of incentives and regulations designed to spur investment in vehicle assembly and manufacturing in Egypt. Our Inside Industry vertical, presented in association with our friends at IDG, had a deep dive last month into what you can expect.

MEANWHILE- ABB will soon open an EGP 180 mn factory in Tenth of Ramadan City that will manufacture components for electric trains. It will source up to 40% of its components from local suppliers, and sell some 25% of its products to the local market. (Al Mal)

AND- Cabinet approved amendments to the Anti-Money Laundering Act that would see an independent money laundering and terrorist financing unit set up at the Central Bank of Egypt. (Statement)

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

• Cabinet approved a USD 373 mn funding agreement with the Arab Monetary Fund to support the government in overcoming the effects of the covid pandemic, and a USD 60.6 mn financing agreement from the South Korean government to upgrade the signaling systems on the Luxor-High Dam railway line. (Statement)
• Banks opened letters of credit worth USD 11.6 bn in the six weeks since 1 March, when the CBE’s new rule requiring businesses to use L/Cs to import goods came into effect. (AMAY)
• The 2016 crash of Paris-Cairo EgyptAir flight MS804 was the result of a fire sparked by a cigarette, according to a report conducted by French aviation experts that Italian paper Corriere della Sera claims to have seen. British newspaper the Telegraph also has the story.
• German development bank KfW has agreed to lend us EUR 26 mn to finance the renovation of hydropower stations in Aswan. (Statement)
• The Women Entrepreneurs Finance Initiative (We-Fi) has allocated USD 15 mn to the African Development Bank to extend digital services and training to women-owned SMEs in Egypt, Cameroon, Kenya, Mozambique and Nigeria. (Statement)

USAID’s Samantha Power, Al Mashat discuss food security, COP27: USAID wants to help Egypt mitigate the impact of rising food prices amid war in Ukraine, agency administrator Samantha Power told International Cooperation Minister Rania Al Mashat during talks on Monday, USAID said in an official statement. The two sides also discussed Egypt's preparations to host the COP27 climate summit and human rights.

“Egypt condemned the incursion of the Israeli occupying forces into Al Aqsa Mosque and called for respecting the status quo in East Jerusalem” in a UN Security Council meeting yesterday, Egypt's Permanent Representative to the UN Osama Abdel Khalek said in a tweet. Tensions have been running high in the Israeli-Palestinian conflict in recent weeks amid a spate of clashes at Jerusalem’s Al Aqsa mosque.