AM — 18% CDs are a thing of the past.
Plus: Swvl slashes staff and we go deep into green hydrogen

Good morning, wonderful people, and welcome to the last business day of May. It’s another busy news day, with the National Bank of Egypt and Banque Misr’s decision to take their 18% CDs off the market leading this morning’s headlines. Denizens of Planet Startup will also want to take note of Swvl’s decision to slash its headcount by a third in a bid to cut operating costs and hit break-even in cashflow terms.

SOUND SMART- Whether or not you understand it right now, you need to know about green hydrogen, which many around the world are touting as the fuel of tomorrow. So far this year, international investors have inked early agreements to build green hydrogen plants worth at least USD 10 bn here in Egypt. Going Green, our weekly deep dive into the green economy, unpacks what green hydrogen is all about, who’s building what, where the money may be coming from, and what signposts to look for that will suggest it is all real.

ALSO- Cześć and dzień dobry to our Polish readers this morning. You folks are the stars of the diplomatic show this morning after President Andrzej Duda’s visit to Cairo yesterday for talks with President Abdel Fattah El Sisi and other senior government officials. From the resumption of direct flights to talks about investment and food security as well as the launch of a new business council, there was a lot of news.

PSA #1- It’s the last day for EGX-listed companies to file their earnings for 1Q2022, after the Financial Regulatory Authority granted listed companies a two-week deadline extension.

PSA #2- Today is also the application deadline for ITIDA’s annual Export IT program. The program is designed to encourage local IT companies to boost exports while reducing related costs.

WE LOVE THIS- Now, let’s not collectively [redact] it up: Cairo is finally getting a bike-sharing program. Cairo Bike will make its debut on the streets of Cairo in mid-July, according to a statement shared by the biking community Go Bike. The project, backed by UN-Habitat and Swiss nonprofit the Drosos Foundation, will launch with 250 bikes across 26 stations scattered around downtown Cairo, Zamalek and Garden City. The number of bikes will double to 500 in mid-September when another 19 stations go live. The program will charge bikers EGP 1/hour and will be accessible through its designated app. Formerly known as Bicicletta, the project has been years in the making and was originally slated for a March launch.

WHAT’S HAPPENING TODAY-

Shoukry is back on COP duty: Foreign Minister and COP27 President Sameh Shoukry is in Sweden today to attend UN climate talks in preparation for this year’s COP summit in Sharm El Sheikh, the Foreign Ministry said in a statement.

Operation Free Ukrainian Wheat: The EU is holding talks today to discuss how to get mns of tons of wheat out of the country and evade Russia’s blockade on the world’s breadbasket, according to the Financial Times. We have more on this in this morning’s Commodities section, below.

El Gouna International Squash Open 2022 continues today and wraps on Friday. The competition features some of Egypt’s top seeds including world #1 Nouran Gohar and world #2 Ali Farag (who just took home the PSA squash championship cup). The prize pool for each of the men’s and women’s competitions is USD 180k.

THE BIG STORY ABROAD-

EU agrees ban on Russian oil: EU leaders have agreed to ban most imports of Russian oil by the end of the year, breaking weeks of deadlock with Hungary, which had refused to sign on to the embargo. The sanctions will immediately cut off 60% of the bloc’s imports, which are delivered via sea, and will increase to 90% by the end of the year when Germany and Poland stop buying oil via the Druzhba pipeline. The move will allow the EU to impose sanctions on Russia’s biggest bank, Sberbank, diplomats said.

The news sent oil prices up during trading in Asia today, with US crude rising 2% and Brent futures edging up 0.6% to a bit over USD 122 per barrel.

The news is everywhere on the global front pages this morning: Reuters | AP | Bloomberg | WSJ | FT | NYT | Washington Post.

Meanwhile: Russia just cut the gas to another European country. Gazprom will today stop shipping gas to the Netherlands after Dutch gas trader GasTerra rejected Moscow’s demand to pay in RUB, Reuters reports. The company said that complying with the Russian mechanism risked violating EU sanctions and posed financial and operational risks. Gas accounts for 44% of the country’s energy mix, but it only imports 15% of this from Russia. The Netherlands is the third country to have its gas cut by Gazprom after Poland and Bulgaria last month.

Denmark is also expected to take a hit: Its biggest gas supplier Ørsted yesterday warned of a “risk” that Gazprom would shut off supplies because of the Danish firm’s decision to continue payments in EUR ahead of its end of month payment deadline, the Financial Times reports.

CIRCLE YOUR CALENDAR-

The Islamic Development Bank’s 2022 annual meetings kick off tomorrow and wrap this Saturday, 4 June in Sharm El Sheikh. Enterprise will be attending the annual meetings and bringing you updates from there.

The Islamic Corporation for the Ins. of Investment and Export Credit will hold two high-level parallel meetings on climate action and digital transformation during IsDB’s annual meetings.

The Greek Campus is holding a workshop tomorrow headlined “Transitioning to e-mobility” that will look at the electric vehicle industry in Egypt (and worldwide). The workshop will run from 6-9pm and will be led by Ayman Mohamed and Ahmed El Hosseny, co-founders of local EV marketplace Electrified.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Global interest in green hydrogen production has been gathering steam over the last year — and nowhere more so than in Egypt, where the government has begun making moves to capitalize on the investment momentum ahead of COP27 by establishing the Suez Canal Economic Zone (SCZone) as a regional green energy hub. In a new two-part series, we look at Egypt’s nascent green hydrogen industry and how policymakers can capitalize on the global trend.

NBE, Banque Misr suspend sales of 18% CDs: State-owned National Bank of Egypt (NBE) and Banque Misr will no longer be selling one-year, 18% certificates of deposit (CDs) introduced after the Central Bank of Egypt’s devalued the EGP on 22 March, according to a statement (pdf) from Banque Misr and remarks by NBE to the local press.

Savers have poured c. EGP 750 bn into the CDs since their launch 10 weeks ago in a bid to pull EGP liquidity into the banking system.

It was only a matter of time: Both banks are paying an “extremely high cost” for the CDs, Banque Misr Chairman Mohamed El Etreby told Sky News Arabia earlier this month.

Looking for an instrument into which to park some liquidity? Both banks have now increased the rate on three-year certificates to 14% from 11%. CIB is offering a three-year CD at 13.5%.

MEANWHILE- Prime Minister Moustafa Madbouly held talks with CBE head Tarek Amer about the central bank’s new import rules and funding purchases of strategic goods, cabinet said in a statement. In March, the central bank began requiring businesses to use letters of credit (L/Cs) to import goods rather than documentary collection, a move that attracted criticism from trade and industry associations.

Swvl cuts headcount by a third: Nasdaq-listed mass transport startup Swvl is laying off 32% of its staff in a bid to turn cash flow positive by next year, it said in a statement yesterday. Around 400 jobs will be cut as the company looks to reduce costs, CFO Youssef Salem told us.

Many (many) in Silicon Valley are preparing for the worst: Swvl’s decision comes just weeks after high-profile Silicon Valley incubator Y Combinator warned founders to consider drastic action ahead of what many fear could be a recession in the US (and many other markets) and a slowdown in global economic growth. We’ve noted in the past month nearly a dozen high-profile US startups that have left people go — from PayPal to Snap and Instacart. TechCrunch estimates that more than 15k people at startups were let go this past month.

Where will the axe fall at Swvl? The layoffs will take place in the company’s engineering and product and support functions, where many roles can now be automated, the company said. All employees affected have all been notified of their termination and the company said it is offering support to help them “transition” to new jobs.

The cuts are happening “proportionately” across its markets, with a slightly higher percentage of layoffs in Pakistan, Salem said. The company’s Egypt office is currently its largest, with more than 500 employees. It employs 300 people in Pakistan, and more than 150 at its headquarters in Dubai.

Swvl is also cutting routes: The company plans to end some of its unprofitable intercity routes — outside of Egypt — as part of its efforts to optimize operations, Salem said.

Keep calm: “The company will not be shutting down any markets,” Salem said, reiterating that the decision is “less about putting a certain number of people in an office, and more about trying to find as much efficiency in terms of optimization and automation as possible.” Its transport-as-a-service (TaaS) and software-as-a-service (SaaS) segments are “growing rapidly,” and it will continue to focus on its B2C activities in Egypt and Pakistan, which contribute the most to the company’s B2C revenues, the statement said.

Earnings watch: Swvl had previously planned to turn to the black by 2024, but has moved up its timeline to next year since listing on the Nasdaq, Salem said. The company’s revenues are expected to reach USD 141 mn this year, an almost 80% y-o-y increase from 2021, before almost tripling y-o-y in 2023.

A buying spree: Swvl recently expanded into Europe with its acquisition of Turkish firm Volt Lines and mobility platform Shotl. It also recently took a controlling stake in transit company Viapool, which operates in Argentina and Chile, and entered Central Europe with its acquisition of German company Door2Door.

The shift towards profitability has become important to the company in light of the powerful headwinds currently affecting global markets, Salem said. Tech companies and blank-check firms have been particularly hard hit this year as rising interest rates reverse the easy conditions of the covid era and put pressure on growth stocks. US-listed stock stocks have plunged into a bear market in what has become the worst year on record for the Nasdaq.

Swvl has not been spared: Swvl’s shares have halved in value since it debuted on the Nasdaq via a SPAC merger in April. The company’s share price fell 0.6% to USD 4.89 on Friday, leaving it down 50% from its USD 9.95 IPO price.

The SPAC-opalypse only seems to be getting worse: More than 10% of all the SPACs that listed during the so-called SPAC boom — between 2020 and 2021 — have issued “going-concern” warnings, which indicates that they are likely to go bust within 12 months.

The Financial Regulatory Authority (FRA) wants to see the EGX’s market cap more than double to EGP 1.6 tn by 2026, according to its new four-year strategy (pdf) published yesterday.

This will require almost EGP 1 tn to enter the market over the next four years: The bourse’s current market cap — across stocks, bonds, funds, OTC trades, and the SME market — is around EGP 660 bn.

This aligns with a recent policy statement from the president: President Abdel Fattah El Sisi said recently that the government is working on a set of measures aimed at doubling the size of the bourse. This is part of a wider economic strategy announced by the president, which also includes bringing in USD 40 bn in fresh investment over the next four years and reducing the public debt and the deficit by 2026.

Where’s the money coming from? The FRA thinks that the sale of state assets could push the EGX’s market cap as high as EGP 2.6 tn — and name-checks the potential IPO of the state-owned new capital developer, the Administrative Capital for Urban Development. The government wants to list a number of state- and military-owned companies on the bourse before the end of the year as part of its new privatization strategy.

The target isn’t new: The FRA had originally hoped to hit the EGP 1.6 tn mark by this year, according to its previous strategy in 2018.

Why did we miss our target? Look no further than covid-19. The regulator now expects market conditions to stabilize as the pandemic recedes and more people get vaccinated, it said.

Covid isn’t the issue right now: Egypt hasn’t been immune to this year’s global market sell-off, which has hit equities in developed and emerging markets alike. The EGX’s market cap has fallen 13% since the start of the year due to the global risk-off caused by rising interest rates and the war in Ukraine.

The government tried to draw fresh inflows into the bourse last year: It exempted foreign investors from paying the new capital gains tax (CGT) on stock trades and passed a set of tax cuts and fee deductions to keep local investors in the market.

And support trading following the EGP devaluation in March: In response to the EGP devaluation, the government slashed CGT on gains from IPOs by 50% for the next two years and pledged to reduce the withholding tax on dividends.

FUTURE FLOW SECURITIZATION IS ABOUT TO GET REAL

On the brink of our first future flow issuance? The regulator has received a request from an unidentified firm to issue EGP 2 bn worth of securities backed by expected future cashflows, Bloomberg Asharq quotes FRA head Mohamed Omran as saying. Omran did not give an exact timeframe for the expected issuance, saying only that it is “imminent.”

We know of two companies keen to sell future flow securities: EGX-listed private sector education outfit CIRA is reportedly in talks with the FRA to issue EGP 1.5 bn worth of future flow securities and could take its issuance to market within four months, a source previously told us, adding that talks remain at an early stage. Contact Financial Holding is also in talks with the FRA to securitize future flows in 2H 2022 on behalf of “one of the largest corporate firms in Egypt,” CFO Ayman Elsawy told us earlier this year.

Future flummoxed? Check out our fresh explainer on all things future flow here.

NOBODY WANTS TO LAUNCH A NEW RATINGS AGENCY?

The FRA has not received any requests for licenses to operate credit rating agencies since it loosened restrictions to encourage local players to set up shop, Al Borsa quotes Omran as saying.

Step up, IPF: Omran urged the Investor Protection Fund to apply to set up an agency to help keep pace with growing demand from companies to issue securities in the local debt market.

BACKGROUND: The FRA in February scrapped a requirement for credit rating agencies to be at least 10% owned by international firms in a move meant to increase the number of local credit-rating firms and boost our non-banking financial sector. FRA Deputy Chairman Islam Azzam said then that an unidentified company was in talks with the regulator over gaining a license and could launch soon, though the firm in question hadn’t officially submitted any documents to the regulator at the time.

Egypt has only one local credit rating agency right now: MERIS (Middle East Rating & Investors Service) is a joint venture between Moody’s and Finance and Banking Consultants International (FinBi), and provides ratings for financial institutions, corporate issuers, and structured finance transactions.

PM spearheads fair competition push to boost privatization plans: Prime Minister Mostafa Madbouly will head a new ministerial committee to shore up competition policy and ensure all businesses are playing on a level field, according to a cabinet statement. The committee will work with the Egyptian Competition Authority (ECA) to make sure the Sisi administration’s policies encourage fair competition and to “correct regulations in markets that suffer from a lack of competitiveness.”

What’s this “competitive neutrality” of which the statement speaks? It’s a key concept in competition law that holds that state-owned enterprises should not hold unfair advantages over their private-sector competitors.

Stronger competition rules were mentioned in the early version of the government’s privatization strategy: According to the copy of the state ownership document obtained by the press last month, the government intends to hand the ECA new powers to prevent state entities from interfering in the economy and blocking private sector players from entering markets.

Some state-owned enterprises continue to have unfair advantages, such as tax privileges and preferential access to finance from state banks, while the absence of publicly-available information and the lack of separation of commercial from non-commercial activities makes it difficult to assess their finances and market activity.

The ECA doesn’t have enforcement powers to penalize anti-competitive practices by the state or, in some respects, the private sector. The ECA is also lacks teeth to regulate mergers and acquisitions that could have an impact on competition — but that hasn’t stopped it from (a) angling for the power to block and M&A before it goes through or (b) publicly weighing in potential transactions it doesn’t like. The current law gives ECA no power over public utilities and allows the agency to grant exemptions to state-owned companies.

Amendments to the Competition Act have been in limbo for over a year: Legal changes that would give the ECA the power to reject mergers and acquisitions were being discussed in the House last year, but were never put to a final vote in the general assembly.

This could be among the keys to the success of the state’s renewed privatization push, which includes plans to double the private sector’s role in the economy, bring in USD 40 bn in fresh investment through sales of state-owned assets by 2026, and fully withdraw from as many as 79 industries over the next three years.

No breakthrough on wheat during Polish president’s visit: A meeting between President Abdel Fattah El Sisi and Polish President Andrzej Duda in Cairo yesterday ended without an announcement on a partnership to ship Ukrainian wheat to Egypt. Reports ahead of the visit had suggested the two sides would discuss ways that Poland could help skirt the Russian blockade, but according to the Financial Times EU countries are having trouble finding ways of getting wheat out of the country using European infrastructure.

To Egypt, via rail: Supply Minister Ali El Moselhy suggested last week that Poland could receive the shipments from Ukraine via rail, raising hopes that the two leaders could agree on a mechanism to deliver the grain to Egypt’s shores.

Here’s why that’s a lot more difficult than it sounds: Ukraine’s Soviet-era rail network uses tracks with a wider gauge than in Europe, the FT says. Cargoes from Ukrainian trains would need to be changed over before they could enter the EU. Alternative plans for Poland to build a Soviet-style line to Lithuania or to use the Ukraine-Lithuania line via Belarus are also unlikely.

That could be why we didn’t hear much from the meeting yesterday: A Polish readout of the meeting said that the food crisis was the main topic of conversation, but didn’t offer further details. At a post-meeting press conference, Duda said he and El Sisi had discussed “exporting Polish food” to Egypt but didn’t elaborate. A statement from Ittihadiya following the meeting didn’t mention the subject.

Egypt has a lot of wheat stuck in Ukraine: Some 25 mn tons are currently stranded at the country’s Black Sea ports due to the blockade, 300k of which were reportedly booked by Egypt.

LNG was also on the agenda: Duda said that the two discussed raising Egyptian LNG exports to Europe, noting that Poland has an LNG terminal which it is expanding. “We absolutely support the negotiations that are currently taking place between Egypt and the European Commission on the supply of LNG to the EU,” he said.

A PIZ ALONGSIDE THE RIZ?

Egyptian-Polish Business Forum gives Madbouly another opportunity to pitch to investors: Prime Minister Moustafa Madbouly advertised the government’s pro-business reforms and investment opportunities in Egypt to Polish business representatives yesterday, according to a cabinet statement.

There has been talk of a Polish industrial zone for a while now: The Suez Canal Economic Zone signed an initial agreement last year with a Polish special economic zone to set up an industrial area for Polish companies that would produce food, electronics and car parts. In a speech to the Egyptian-Polish Business Forum yesterday, the PM said that the zone would open the door for new investments if the plans go ahead — and spoke about the tax incentives and infrastructure on offer at the SCZone.

The PM has been talking to a lot of investors lately: Madbouly’s speech comes amid government efforts to lure new investment into the country in response to Russia’s war in Ukraine. Officials have met with US, UAE and French investors in past days to promote the government’s economic reforms and Egypt as an investment destination.

Also during the forum: General Authority for Investment and Free Zones (GAFI) head Mohamed Abdel Wahab discussed investment in green energy and “environmentally-friendly industries” with Polish companies, and signed an MoU with the Polish Investment and Trade Agency to “strengthen investment ties.”

YOU CAN NOW FLY DIRECT TO WARSAW-

Flights between Egypt and Poland resume today: Poland has decided to resume direct flights with Egypt, El Sisi announced yesterday during his press conference with Duda. The flights will run five times a week between Cairo and Warsaw, Duda said.

SIDC to establish factories in Sokhna alongside Indian investors: Orascom Construction subsidiary Suez Industrial Development Company (SIDC) has signed preliminary agreements with three Indian investors who are looking to build three factories in SIDC’s industrial park in Ain Sokhna, CEO Amr El Batrik told Enterprise. El Batrik declined to name the investors.

On the production lines: The new facilities include one to manufacture pressure vessels used in pipes, another to produce packaging materials, and a third in the petrochemical sector, El Batrik said. Petrochemicals and packaging materials are among nine industries that the government wants to localize as it attempts to reduce its reliance on imports and cut the trade deficit.

How much is this all going to cost? The expected investment values will be determined once the investors complete the feasibility studies on the facilities, El Batrik said.

Cairo Angels Syndicate Fund (CASF) is making a USD six-figure investment in Africa-focused fintech startup Finclusion Group, which uses AI to provide financial services products, according to a statement (pdf). This is CASF’s second investment outside of Egypt and their third fintech investment, according to the release.

About Finclusion: The startup is looking to drive financial inclusion by providing financial tools such as earned-wage access (which gives employees access to their pay as soon as they’ve earned it), buy-now-pay-later options, and direct credit to its clients in South Africa, Eswatini, Namibia, Kenya, and Tanzania. Finclusion also hopes to build the first pan-African neo bank, according to the statement.

The company has raised USD 40 mn since September: Earlier this year, the company raised USD 20 mn in debt and equity pre-series A financing, just four months after closing a USD 20 mn funding round led by fintech debt financing provider Lendable.

This is CASF’s third investment this year, by our count: The VC fund participated in Orcas’ USD 2.1 mn pre-series A round and made a second investment in scientific research startup Nawah Scientific.

Leading the airwaves last night: Yesterday’s talks between President Abdel Fattah El Sisi and his Polish counterpart Andrzej Duda in Cairo led the conversation on the talk shows last night. The two sides discussed the war in Ukraine and its impact on global food supply. Al Hayah Al Youm (watch, runtime: 5:23), Ala Mas’ouleety (watch, runtime: 7:32) and Salet El Tahrir (watch, runtime: 8:23) had coverage, among others. We have more in this morning’s Commodities section, below.

The formation of a business council between the two countries also received attention: Osama El Said, the head of the newly-formed Egyptian-Polish Business Forum, telling Salet El Tahrir’s Azza Mostafa (watch, runtime: 8:32) that the council will focus on investments in gas and agricultural machinery, and exports of Egyptian citrus fruit and other agricultural products.

A major archaeological discovery was everywhere: The unveiling of 250 sarcophagi at the Saqqara necropolis received coverage on Masaa DMC (watch, runtime: 14:05), Al Hayah Al Youm (watch, runtime: 3:21) and Salet El Tahrir (watch, runtime: 2:07), among others.

The GEM will be finished in the next three months: Secretary-general of the Supreme Council for Antiquities Mostafa Waziri told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 2:54) that construction of the Grand Egyptian Museum is now complete and officials will begin moving artifacts from the beginning of June. This will allow the museum to be fully finished within three months, he said.

But when’s it opening? The inauguration date would be determined by “global conditions,” Waziri said.

More prisoners pardoned: Masaa DMC (watch, runtime: 5:37), Kelma Akhira (watch, runtime: 9:32) and Al Hayah Al Youm (watch, runtime: 1:16) all covered the news that more detainees received a presidential pardon yesterday, and more will be released Thursday.

Ancient artifacts are catching the eye of the foreign press this morning, after the Supreme Council of Antiquities unveiled 250 sarcophagi, 150 small bronze statues of gods and goddesses, and other antiquities recently discovered in a major find at the Saqqara necropolis. (The National | AP | ABC News | AFP | NY Post)

Also making headlines:

• Emigration Minister Nabila Makram has made a statement about double homicide charges filed against her son in the US. “We are going through a difficult time,” she wrote on social media. (The National)
• Abdel Moneim Aboul Fotouh’s sentencing: Reuters picks up the news of the 15-year prison sentence handed to the former Islamist leader and presidential candidate for spreading false news and inciting against the state. (Reuters)

Israel is in talks with the US and Gulf countries about a possible rapprochement with Saudi Arabia but recognizes that it will be a “long, slow process,” Israeli Foreign Minister Yair Lapid said yesterday, according to Bloomberg.

We’re reportedly in the mix: His statements come nearly a week after Axios reported that the White House is working with Egypt and Saudi Arabia to finalize the transfer of sovereignty of the Tiran and Sanafir islands to Riyadh. The Biden administration’s thinking is that this could help pave the way for Israel and Saudi Arabia to normalize relations.