Thursday, 2 June 2022

AM — Good news: We bought lots of wheat. Bad news: Stuff is about to get more expensive.

TL;DR

WHAT WE’RE TRACKING TODAY

Well, friends, we’ve made it through another workweek together. We’re capping the week with a pile of news covering everything from the threat of a global “food shock” and a “economic hurricane” to what most expect will be a boost to inflation here at home after the Madbouly government hiked the exchange rate it uses to calculate customs duties.

Want a dose of optimism after digesting all of that? Read this morning’s Coffee With interview with Todd Wilcox, the CEO of HSBC Egypt, who sees us pulling through 2022 — and who’s optimistic about the prospects for a country that his bank has declared a priority market.

^^ We have all of this and more below, in this morning’s news well.

THE BIG STORY ABROAD- Jamie Dimon’s doomsday warning: The chairman of JPMorgan is warning investors to brace for an “economic hurricane” driven by the war in Ukraine and aggressive monetary tightening by the Federal Reserve. “That hurricane is right out there down the road coming our way,” Dimon said at a financial services conference yesterday. “We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”

His comments are everywhere in the financial press this morning: Bloomberg | WSJ | FT | CNBC.

Sheryl Sandberg is leaving Facebook Meta after 14 years of serving as Mark Zuckerberg’s no.2: Becoming the company’s chief operating officer when Zuck was just 23 years old, Sandberg is regarded as being the brains behind the transformation of the social media platform into a bn-USD advertising giant. Everyone’s talking about it: AP | Reuters | WSJ | FT | Washington Post | CNBC.

SIGN OF THE TIMES- Show up to the office or GTFO: That’s Elon Musk’s message to Tesla workers. In an email to executive staff, the tech bn’aire said that employees will have to spend a minimum of 40 hours a week at the office — and if people fail to show their faces, the company “will assume you have resigned.” (FT | WSJ | CNBC | Reuters)

WHAT’S HAPPENING TODAY-

Countdown to Ghazl El Mahalla IPO: Ghazl El Mahalla FC will publish its public subscription notice (PSN) for its upcoming IPO in the local press today. The small, EGP 98 mn retail offering has been approved by the Financial Regulatory Authority, paving the way for the football club to go ahead with the sale later this month. The club has already completed the private placement component of the offering, raising EGP 37 mn from institutional investors back in November. It’s tiny, but as we’ve previously noted, the offering could set a precedent that allows Al Ahly to follow suit — and that could be very interesting indeed.

The Islamic Development Bank’s 2022 annual meetings are continuing today in Sharm El Sheikh and wrap on Saturday. Enterprise is attending the annual meetings and will bring you the details next week.

MARKET WATCH-

“Food shock”: Prepare for more downgrades in emerging markets, S&P warns: The economic and political fallout of the “global food shock” will spell trouble for a raft of countries in the developing world, which could see fresh downgrades in the coming months, ratings agency S&P Global said in a report picked up by the Financial Times. “Rising energy and food prices represent yet further balance-of-payments, fiscal, and growth shocks to the majority of emerging markets. This intensifies strains on their public finances and ratings, which are already impacted negatively by the global pandemic,” said Frank Gill, sovereign specialist for Europe, Middle East and Africa at the firm.

Commodity traders are finding ways to circumvent sanctions on Russian oil: Russian oil is continuing to find its way to Europe and the US thanks to traders who are blending it in refined petroleum such as gasoline, diesel and chemicals, according to the Wall Street Journal. This is despite the US and UK embargoing Russian energy earlier this year, and the EU announcing a partial ban this week.

CIRCLE YOUR CALENDAR-

NEWS TRIGGERS you’ll want to keep an eye on as the new month gets underway:

  • PMI: May’s purchasing managers’ index figures for Egypt and Saudi Arabia will be released on Sunday, 5 June. The UAE’s release is out tomorrow, Friday, 3 June;
  • Foreign reserves figures for May should be announced sometime next week;
  • Inflation figures for May are due out on Saturday, 9 June (from state statistics agency Capmas) and Sunday, 12 June (central bank figures);
  • Capmas’ monthly bulletin covering the price of key building materials is due out on 5 June;
  • The Central Bank of Egypt holds its policy meeting on Thursday, 23 June.

Conference season continues next week:

  • Africa Health ExCon runs from Sunday-Tuesday, 5-7 June at Al Manara International Conference Center, Egypt International Exhibitions Center, and the St. Regis Almasa Hotel in the new administrative capital.
  • Technology conference Tech Invest 4 will take place next Tuesday, 7 June at the Grand Nile Hotel in Cairo.

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

enterprise

Miss Elite will be kicking off its second edition at Somabay from 3-11 June. The international beauty pageant helps contestants showcase and present their nation’s identity, beauty, culture, tradition and ethnicity.

For more information, visit: https://misseliteworld.com/

COMMODITIES

We just bought a lot of wheat

State grain buyer GASC has purchased 465k tons of wheat for shipment in July and August in a fresh international tender, Reuters reported yesterday.

The breakdown: The order by the General Authority for Supply Commodities includes 240k tons of Romanian wheat, 175k tons of Russian wheat and 50k tons of Bulgarian wheat.

This is the biggest buy since the war in Ukraine broke out: GASC bought 350k tons in a tender in April, the only other held since the war started in February. Otherwise, we’ve been purchasing cargoes directly from suppliers, including a 61.5k shipment from India.

And one of the most expensive in years: Traders said GASC paid USD 480 per ton (including freight), up 41% from the last tender before the war. This is down slightly from the USD 490 price GASC paid in its last tender in April, which was the highest price in nearly six years. The Madbouly government in early March said rising wheat prices would cost it an additional EGP 15 bn this fiscal year.

Casting a wider net: This is GASC’s first tender since it reportedly loosened wheat quality rules in a bid to increase supplies. Egypt will allow wheat imports with a moisture content of up to 14% — up from 13.5% — for a year due to supply restrictions in the global market. The move is part of a wider strategy to ensure continued grain supply as Russia’s war in Ukraine stymies supply and pressures global prices. The two countries accounted for some 80% of our imported wheat supply before the conflict broke out.

The fate of that 500k-ton purchase from India remains unknown: Egypt is currently negotiating with India to get an exemption from its recent wheat export ban, which could jeopardize a 500k-ton purchase the government was close to signing off on.

Reserves are looking more robust: The state has so far bought 3 mn tons of local wheat, half of the 6 mn tons it is hoping to acquire this season. Egypt now has enough wheat to last until January 2023, Supply Minister Ali El Moselhy said last week. Remember, though — this may also include purchases rather than just fulfilled deliveries, according to commodity traders.

TRADE

Customs exchange rate raised

Gov’t hikes customs exchange rate: The Customs Authority yesterday raised the USD customs exchange rate to EGP 18.65 from EGP 17.00 in May, it said in a statement. This brings it almost in line with the official exchange rate of EGP 18.66.

The customs rate has been fixed since March: The government re-introduced the monthly customs exchange rate in March after the central bank allowed the EGP to fall 16% against the greenback. The rate was set at EGP 16.00 for imports of basic commodities and materials used for manufacturing.

EGP WATCH- The EGP has now fallen 18% against the USD since March after slipping to EGP 18.66 yesterday.

Bad news for prices? The decision “will have a direct impact on inflation,” Beltone’s Alia Mamdouh told Bloomberg Asharq yesterday.

Cars could get even pricier: Cars from Europe and Asia will be 2% more expensive as a result of the move, while cars from elsewhere will become 6.5% pricier, Alaa El Saba, member of the automotive division at the Federation of Egyptian Chambers of Commerce, told Asharq.

Price increases could be purely academic considering that some importers are struggling to get goods into the country in the first place. Some foreign car manufacturers have suspended sales to Egypt after the switch to using letters of credit (L/Cs) left local dealers unable to purchase vehicles, leaving around 29k vehicles stranded in Egyptian ports.

An official at one high-profile auto dealer we spoke with yesterday said they have zero stock, no visibility on when they would get cars in stock, and that most staff salaries have not been paid in the past two months.

“The biggest problem is that we cannot import now because of banking complications and the lack of easily obtainable hard currency," an anonymous major importer of household appliances told Bloomberg Asharq. The shortage of inventory in some markets became much worse after new rules were handed down in March requiring importers to use letters of credit (L/Cs) to purchase goods, instead of documentary collection, a quicker, more accessible, and less capital-intensive way of facilitating trade.

ENERGY

SCZone signs initial agreement with H2 Industries for waste-to-hydrogen plant

A step closer to our first waste-to-hydrogen plant? The Suez Canal Economic Zone (SCZone) has signed an MoU with H2 Industries to establish Egypt’s first waste-to-hydrogen plant in East Port Said, according to a statement. The plant will cost USD 4 bn to establish, the statement said, without disclosing how it will be financed. A senior company official told us prior to the announcement that the company is in talks for financing, but provided no further detail. H2 Industries will first work on feasibility studies for the project before signing final contracts during COP27 in November in Sharm El Sheikh.

The announcement brings to USD 14 bn the total value of preliminary agreements that international companies have signed with SCZone to produce green hydrogen and green ammonium. We’ll be looking in the months ahead to see how many of these translate into final contracts at (or in time for) COP27 late this fall.

The company will use local “organic waste, including plastic waste” as a feedstock, the statement said. The waste will be “secured at the Mediterranean entrance to the [Suez] canal,” an earlier statement from the company read, without providing further detail.

How does it work? H2-Industries hasn’t disclosed the exact chemistry behind its waste-to-hydrogen technology, describing it as a thermo-chemical process that doesn’t burn waste. H2’s Egypt plant will produce hydrogen and captured CO2.

Background: New York-headquartered energy firm H2-Industries said in February it plans to establish Egypt’s first waste-to-hydrogen plant in East Port Said. The facility is set to produce 300k tons of hydrogen each year, consuming 4 mn tons of municipal solid waste.

Egypt has plans to become a green hydrogen hub: The government is making moves to capitalize on investment momentum ahead of COP27 by establishing the SCZone as a regional green energy hub. Prior to the H2 Industries announcement, major global companies have inked USD 10 bn worth of preliminary agreements for green ammonia and hydrogen projects in Ain Sokhna in the past three months alone — and we’re expecting more where that came from.

Want more on green hydrogen? For the current state of play on our green hydrogen ambitions, check out this week’s Going Green, our weekly deep dive on all things green economy. And stay tuned for next week’s edition to find out more on why Egypt is a particularly appealing location for green hydrogen production, and where the bottlenecks are in getting projects off the ground.

No clue what we’re talking about? Go back to basics with our recent explainer on green hydrogen.

CABINET WATCH

Cabinet to establish automotive policy committee + fund for sustainable transport

A new automotive policy committee and changes to the law governing the Sovereign Fund of Egypt (SFE) were approved during the weekly cabinet meeting yesterday, cabinet said in a statement. The automotive committee will be tasked with setting a policy framework for legislative and administrative reforms in the industry, as well as building relationships with foreign countries regarding auto manufacturing.

We were expecting an announcement on the government’s long-delayed automotive strategy last month: Prime Minister Moustafa Madbouly had said that the government’s strategy to localize the industry would be unveiled before the end of May but we’re still waiting on an announcement. The strategy aims to increase local assembly, grow the component manufacturing industry, up the sector’s competitiveness to become a regional manufacturing hub, and bolster export volumes.

A sustainable transport fund: A new fund will be established to channel finance into environmentally-friendly transport, according to the statement. It will also fund research and development centers and design incentives to stimulate the local industry, it said.

Provisions of the law governing the SFE have been tweaked: The Cabinet approved a number of amendments to the Egypt Fund Law, which set up the Sovereign Fund of Egypt (SFE) in 2018:

  • Sustainable development is now an explicit priority: The law now says that the SFE “aims to contribute to sustainable economic development.”
  • The fund can now hold financial assets: The SFE is able to acquire a broader range of assets after the cabinet expanded its definition. Previously, the rules defined assets as “fixed and movable,” but this has now been changed to “financial instruments, securities, and property transferred to and owned by the fund.”
  • Feasibility studies: The SFE will now have to conduct feasibility studies and forecast the ROI on assets before it can acquire them.

Also approved yesterday: The cabinet approved incentives that will be offered to the Orascom Construction-Engie-Toyota Tsusho for the new Gulf of Suez wind farm. The companies last year signed contracts to develop, construct and operate a 500-MW wind farm in Ras Ghareb. Cabinet did not disclose details on the incentives.

MINING

Gold tenders still on the table after EMRA awards exploration licenses

More details on the latest gold bid round: Egypt awarded eight gold and mineral exploration licenses in the Eastern Desert to four companies in its latest bid round, the Oil Ministry said in a statement yesterday. Canadian miner Lotus Gold won three blocks, the Sawiris-backed Akh Gold and Marine Logistics both got two blocks, and Ankh Resources received one block, the Egyptian Mineral Resources Authority (EMRA) said last week.

The second bid round has been “successful in attracting new investments despite rapid global challenges [triggered by] the covid-19 pandemic and the Russian-Ukrainian crisis,” according to the statement.

Gold tenders are still on the table: The dates of a new auction are set to be announced today, an unnamed EMRA official told Reuters. “Companies that did not win in the concession areas in the last auction can apply again in the new auction,” which reportedly would have dates announced today, according to the official. A report in Bloomberg Asharq claimed this week that the government was considering scrapping bid rounds in favor of direct negotiations following low turnout in the recent tender.

The turnout wasn’t actually that low: Between 13 and 15 companies submitted bids in the tender, according to officials from companies that participated.

Then why did EMRA only hand out eight licenses? The numbers are down markedly from the first bid round in 2020, when 82 gold exploration blocks were distributed among 11 companies. “It seems odd that you wouldn't take the money and run,” Mark Campbell, chairman of Akh Gold, told the newswire. “All you want is for people to come spend money and explore for minerals. You need to be exploring, exploring, exploring.”

M&A WATCH

New pan-African oil giant in town as Tullow, Capricorn merge

Tullow and Capricorn in big oil merger: UK-listed energy firm Tullow Oil is merging with Capricorn Energy — formerly Cairn Energy — in an all-stock transaction that Reuters has valued at some USD 827 mn.

Why do we care? Capricorn has had a presence in Egypt ever since it acquired Shell’s oil and gas assets in the Western Desert with partner Cheiron under an agreement worth up to USD 926 mn. Those assets will form the second largest item on the newly merged company’s balance sheet, after Tullow’s flagship Ghanaian oil fields, according to Reuters. The new, larger group will be an “important supplier of gas in Egypt and Ghana,” the companies said.

How it will work: Capricorn shareholders will receive just under four Tullow shares for each Capricorn share they hold, Tullow announced in a disclosure (pdf) to the London Stock Exchange. Upon completion of the transaction, Tullow shareholders will own 53% of the merged entity, while Capricorn shareholders will hold the remaining 47%.

Business as usual in Egypt: “No changes are expected in the operating asset organizations across the combined group” including Egypt, according to the disclosure.

Egypt a “low-cost, self-funded” market: The group’s portfolio will consist of “incremental high return investment opportunities” in Ghana, Egypt, Gabon and Côte d'Ivoire, according to the statement. Capricorn’s Egypt portfolio offers the chance for “self-funded growth production” through low-cost exploration “whilst championing electrification and decarbonisation initiatives.”

ADVISORS: Morgan Stanley and Rothschild & Co acted as Capricorn’s financial advisers, while PJT Partners and Barclays advised Tullow. Slaughter and May and Shepherd and Wedderburn LLP are legal advisers to Capricorn, and Herbert Smith Freehills LLP is Tullow’s legal adviser.

DEBT WATCH

AT Lease closes EGP 1.6 bn securitization

Shari’ah-compliant leasing company AT Lease has closed its third securitized bond issuance worth EGP 1.6 bn, backed by a receivables portfolio of around EGP 2 bn, a source at the company confirmed to Enterprise, after the company released a statement (pdf).

The firm’s leasing portfolio currently stands at EGP 4 bn, the source said. The company hopes to issue securitized bonds annually, depending on the size of its portfolio, they added.

Who bought in? Banque Misr, NBE, Attijariwafa Bank, Banque du Caire, AAIB, Al Baraka Bank, Ahli United Bank, and the Industrial Development Bank.

Advisors: Misr Capital and Al Ahly Pharos were co-lead managers, financial advisors, and underwriters for the transaction. Its parent Banque Misr acted as arranger, co-underwriter, and custodian. Our friends at ALC Alieldean Weshahi & Partners acted as legal counsel, while Baker Tilly Hilal & Abdel Ghaffar was the auditor.

With AT Lease’s offering included, Egyptian issuers have now sold around EGP 10.8 bn worth of securitized bonds since the start of 2022, by our count. That’s more than two-thirds of the total value of EGP 15.8 bn taken to market last year.

MORE SECURITIZATION IN THE WORKS?- Al Ahly Mortgage Finance could securitize EGP 1 bn of its portfolio this year, Al Mal quoted managing director Hatem Amer as saying. The NBE subsidiary is reportedly in talks with several firms to provide financial and legal advice for the issuance.

EDITOR’S NOTE- Corrected on 2 June to identify Al Ahly Pharos as a co-lead manager, financial advisor, and underwriter.

A MESSAGE FROM

enterprise

Struggling to make sense of a new regulatory development? Eager to engage on a new piece of legislation or policy that could impact operations? Or simply want to sit down with government stakeholders to pitch a partnership that could unlock value for your business?

Get in touch with Moharram & Partners — the public policy and government affairs partner of choice of top companies operating in Egypt and the region — and leave the rest to our experts.

Learn more here.

STARTUP WATCH

Swvl eyes new markets + GrubTech lands in Egypt

Swvl announces expansion plans just days after cutting its workforce by a third: Nasdaq-listed mass transport startup Swvl is planning to start operations in Mexico this month and could kick off in the US during 2H 2022, CFO Youssef Salem told us, confirming a report in Al Mal. The news comes in the same week that the Cairo-born company said it is laying off 32% of its staff — or some 400 employees — across all its markets in a bid to turn cashflow positive by next year.

Why the US and Mexico? They are “very sizable markets with attractive unit economics and strong B2B and SaaS opportunity in line with Swvl’s strategic focus,” Salem said. The company aims to focus more on B2C and SaaS services, areas of the business that are currently turning a profit.

The company is trimming the fat wherever possible: Swvl has a hiring freeze in effect, has cut headcount, imposed salary cuts for leadership, is shedding workspace and eliminating unprofitable routes, all in hopes of turning profitable by 2023, Salem said.

Swvl wants to indirectly raise ticket prices: The firm will slash the value of the discounts it offers users by 10-20% in all its markets, Salem said, telling us to expect local Swvl prices to jump in line with inflation. Earlier this week the company said that it is also looking to end some of its unprofitable intercity routes outside of Egypt as part of its efforts to optimize operations.

Swvl has been on 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 Fed’s rate hike put startups in a vulnerable position: The US Federal Reserve’s monetary tightening is making funding more costly at the same time that venture funding is drying up across Planet Startup. Meanwhile, investors in public equities have pulled back from recently listed startups as part of a general risk-off that has swept global markets. “We are no longer funded by VCs [after going public] but even the public markets where we are being funded are impacted,” 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 — and Swvl’s shares have halved in value since it debuted on the Nasdaq via a SPAC merger in April


IN OTHER STARTUP NEWS-

GrubTech arrives in Egypt: Dubai-based foodtech startup GrubTech has launched in Egypt and plans to invest USD 5 mn over the next 12-18 months into its operations, it said in a statement (pdf) yesterday. Backed by USD 13 mn in series A funding, the company has opened an office in Cairo and plans to use Egypt as a hub to reach other markets in Africa, it said.

About GrubTech: Founded in 2019 by Mohamed Al Fayed (LinkedIn), Omar Rifai (LinkedIn) and Mohamed Hamedi (LinkedIn), GrubTech provides cloud and dark kitchen services to restaurants. Billing itself as an “all-in-one” management tool, restaurants can receive orders, monitor stock and schedule deliveries via the platform, which also provides marketing tools and access to data analytics. The company is currently present in 17 countries.

MOVES- The company has tapped Osama Harfoush (LinkedIn) as its country manager. Harfoush joins the company from Mrsool where he served as the company’s Egypt country manager.

The startup has recently partnered with Paymob to streamline payments for Egypt’s F&B industry, signing a partnership agreement to incorporate digital payments for local restaurants, cafes, and cloud kitchens using GrubTech.


APPETITO UPDATE-

How much did Appetito pay for Lamma? No less than USD 10 mn, Appetito CFO Mark Adeeb told Bloomberg Asharq. Earlier this week, the Cairo-based grocery delivery platform announced that it had acquired its Tunisian competitor, in a move that will give Appetito access to new markets in Tunisia and Morocco.

Appetito has a USD 20-40 mn funding round in the pipeline that it hopes to complete this year, Adeeb said. The startup is set to use the funds for its regional expansion.

CAPITAL MARKETS

EFG back to the top of the EGX brokerage league table in May

EFG Hermes returned to the summit of the EGX’s brokerage league table in May with a market share of 19.2%, according to figures from the EGX (pdf). Rounding out the top five were Beltone (11.4%), Arqaam (10.5%), Cairo Capital Securities (8.3%) and CI Capital (4.8%). CI Capital topped the league table in April, edging out EFG for the first time in months.

EARNINGS WATCH

Palm Hills’ net income rises 44% in 1Q 2022

Palm Hills Developments’ (PHD) bottom line surged 44% y-o-y in 1Q 2022, driven by a strong increase in sales, the real estate developer said in its latest earnings release (pdf). The company reported net income of EGP 295 mn, supported by a 47% increase in revenues which reached EGP 2.9 bn during the January-March period, reflecting increased past sales of primary and secondary homes as well as commercial units.

New sales in 1Q 2022 grew 62% y-o-y to EGP 5.5 bn during the quarter, driven by an increase in average selling prices and a steep rise in volumes, which almost doubled from 1Q 2021. Sales of residential property grew 63% to EGP 4.7 bn, while commercial property sales were up 59% to EGP 853 mn. PHD’s Badya project in Sixth of October accounted for 41% of its residential sales, more than quadrupling to EGP 1.9 bn during the three-month period.

SOUND SMART- In real estate, sales ≠ revenues. Real estate companies book a sale when you sign a contract to buy a home. But they only record (some or all) of the value of the unit it sold you when it (a) delivers the unit to you or (b) hits a percentage completion on a total project. So revenues are composed of sales from past periods, while sales in a given quarter will be recognized as revenues in the future when units are completed or delivered.

The company is confident it will maintain growth through the current economic headwinds: “Real Estate has always been and will continue to be a primary hedging tool against inflation even during periods with attractive interest rates,” Executive Chairman Yasseen Mansour said. The company will continue to ramp up construction spending to counter potential cost inflation and plans to deliver more than 500 units in Badya this year.

COFFEE WITH…

Coffee With: Todd Wilcox (LinkedIn), CEO and deputy chair of HSBC Egypt: In the 40 years since entering Egypt, HSBC has become one of the largest multinational banks in the country. Today, the bank — which first came here as the Hong Kong Egyptian Bank before rebranding to HSBC Egypt in 2001 — caters to clients ranging from the big multinational corporations through to SMEs and women-led businesses.

A self-proclaimed “gym guy,” Wilcox is up at 5am to get his workout in before heading to the office for 8 or 8:30am. He’s been with HSBC for 16 years and was a banker in Canada for 16 years before that, stringing together a career that has taken him from small-town Alberta to Bermuda, Brunei and China. He was named deputy chairman and CEO of HSBC Egypt in July 2020.

He joined us by video from London, where he was on a roadshow as part of the British Egyptian Business Association’s (BEBA) annual business mission to the UK, headlined Road to COP27: bridging the implementation and financing gap.

KEY TAKEAWAYS:

  • HSBC Egypt recently pulled the trigger on a new fintech lending program to fund tech-enabled companies that are feeding into the country’s digital economy;
  • Building green businesses is a key focus right now, and HSBC wants to be the bank of choice for green tech and sustainable projects;
  • The most important first step towards net zero? Having reporting standards to define policy and shape decisionmaking;
  • Policymakers in Egypt get a thumbs-up for their clear response and action to fallout from the war in Ukraine.

ENTERPRISE: How often do roadshows factor into your day?

TODD WILCOX: Frequently. This BEBA business trip is an interesting example: I find myself talking with people who are really interested in the Egypt story, but don’t know where to start. They don’t know how to crack into the market. We’re offering that to them. That’s why we’re coming back to do an event in July with businesses who are interested in ESG-compliant opportunities in Egypt. This type of approach is not something I’ve seen taken at, say, a Canadian bank.

We’re also looking at non-resident Egyptians — reaching out, say, to our head of retail banking in Montreal, which as you know has a large concentration of Egyptian-Canadians. We want to bank them in Canada — and connect them to our platform so, for example, they can instantly move money between Canada and Egypt. We have a really unique global footprint, and that’s what’s driving how we look at growth.

E: How are you tackling the central bank’s SME lending requirement when you focus so heavily on large corporates?

WILCOX: On the SME front, it’s tough for us as a multinational, but we have a couple of specific areas we’re interested in. We can’t compete in that space with local state-owned banks. They have reach through their large branch network and dedicated systems. So we focus on smaller Egyptian companies that are working with multinationals as suppliers — and we look at areas in which our strategic interests and unique advantages collide, including those within the tech and sustainability space in particular.

E: Is it safe to presume that you’re talking about fintech startups there?

WILCOX: Absolutely, Egypt is a clear MENA fintech hub. It was a surprise for us and for me. These are companies we want to bank, these are companies we want to partner with. We’ve put together a lending program to finance and work with fintech players. The scene here is really strong — Egypt has great venture capital firms and accelerators. If you’ve gone through one of those and you’ve gotten funded? Then odds are good you have the governance, the systems and expertise that make you very interesting to us.

The program is open to tech-enabled companies looking to scale up within Egypt’s growing digital economy. We’re targeting business sectors including fintech, e-commerce, retail and mobility, health, education, and software. The program is also prioritizing companies with sustainable development targets embedded in their business plans, particularly as COP27 is coming up in Sharm El Sheikh this November.

The VC industry here is unbelievably sophisticated. They’ve taught me that the companies they back have cross-border aspirations, that they’re pushing into KSA and the UAE — two of our other regional priority markets alongside Egypt. We’re the right bank for that, and that’s why we’re bringing someone in from New York who has good Egypt experience to focus just on tech.

E: You mentioned ESG a few minutes ago.

WILCOX: Another part of what’s coming up is absolutely the ESG space. As an institution we have net zero targets that we want to hit — and a commitment to move our portfolio into the green space. There are new industries and companies being built; I want to be the bank for anybody building green technology and sustainable projects.

E: HSBC just announced it will be lending USD 1 bn to women-led startups in Egypt and 10 other markets over the coming year. Can you give us color on what that means for Egypt?

WILCOX: It’s really exciting. We’re in 64 markets around the world and Egypt is one of 11 that are participating and I’m pretty pleased with that. This program really fits with our strategy in Egypt, where among other things we’re focusing on the intersection of SMEs, female leadership, and entrepreneurship. Obviously I’m happy the program will see us step up lending here, but it’s about much more than that: It includes advisory from our professionals, classes, and really interesting networking events. Egypt is our only market in the Mideast and North Africa that’s participating.

E: VCs and startups in the US are gearing up for nuclear winter. Part of that is startups worried the economy will fall into recession, but a huge piece right now is that limited partners have stopped writing new cheques to VCs. How does the second half of this year look to you when it comes to the startup space here in Egypt?

WILCOX: I’m still reasonably optimistic. The cost of entry to the space here is very low. The capital you need to get an Egyptian company started and funded is so low relative to, say, the United States, and the potential reward is so great — I think there is a good chance we’ll see VCs decide that the risk-reward equation is so favorable that they’ll continue investing here.

E: What’s your take on how Egyptian policymakers have so far responded to fallout from the war in Ukraine?

WILCOX: I’ve worked in countries around the world, and in my two years here so far I’ve come to one conclusion: Egypt has good policymakers, and I have confidence the final policies they come out with are really solid. Ministers here aren’t politicians, they’re subject matter experts. They’re working with what they’ve got and they’re smart — so you’ve got some confidence that they’re working to make things better.

Finance Minister Mohamed Maait was with us in London last month and we had him in to meet with a number of our clients. He went through Egypt’s policy response in such detail. He is an actuary and a risk manager. That went over very well with the clients. Planning Minister Hala El Said’s traffic light system on where the state is pulling back from the economy is clear. The target for proceeds from privatization — the whole idea that you’ll put in numbers and timelines like USD 10 bn per year for the next four years — that’s great. I think the people at the Sovereign Fund of Egypt are really sharp. The specificity with which they speak tells me the vision comes from the top of the house — and that tells me that they mean business. Egypt, like everyone else, will experience short-term bumps, but we are hopeful we’ll get through it.

E: So you’re optimistic.

WILCOX: Everybody around the planet is coping with external shocks right now, but my take is that Egypt is quite resilient. We’ve been through worse — much worse — and we’ve come out the other side. Egypt will get out of this bottleneck, but it’s going to be a rough year for the whole world. Egypt is one of our three priority markets in this region next to the UAE and Saudi — it’s a market to which we’re committing fresh investment and in which we’re hiring new people.

TAP OR CLICK HERE to read the full interview, including HSBC’s stance on climate in the run-up to COP27 and what’s driving growth at the bank here in Egypt.

KUDOS

The formidable 13-year-old Egyptian-Hungarian violinist Mariam Abouzahra won the Golden Note — a televised classical music competition run by the Austrian Broadcasting Corporation. The young musician reached the finals with eight other performers between the age of 10 and 16, according to Ahram Online.

Ins. startup Amanleek has won Orange’s Fintech Startup Seed Challenge 2022, and is receiving USD 200k to invest in the growth of its business, the telecoms firm said in a press release. The competition was run by Orange Egypt and Orange Ventures, the VC arm of the global company.

Unicef and the Minya Water and Wastewater Company will provide zero-interest loans to low-income families to help them cover the EGP 2k it costs to connect houses to the water grid. (Unicef)

Emaar Misr is donating EGP 1 bn to the Decent Life Initiative (aka Hayah Karima) to help finance its sustainable development projects as part of a cooperation protocol. (Statement, pdf)

enterprise

LAST NIGHT’S SHOWS

Leading the airwaves yesterday: The Customs Authority’s decision to hike the USD customs exchange rate to EGP 18.65 this month had everyone talking on the airwaves.

Prepare for more inflation: Prices of imported products will rise 7-9% due to the decision, Emad El Qenawy, head of the importers division at the Federation of Egyptian Chambers of Commerce (FEDCOC), told Yahduth Fi Masr (watch, runtime: 6:06). “The rise would come on the back of a hike in the cost of [imported] goods plus [existing] VAT,” El Qenawy said on the decision.

With prices sky high, demand is already low: People aren’t buying imported electronics, Ashraf Helal, head of the electrical appliances division at FEDCOC, told Ala Mas’ouleety’s Ahmed Moussa, describing the market as in “recession” (watch, runtime: 2:12).

L/Cs are already making things difficult enough: Many cargoes are stuck in customs due to difficulties in opening letters of credit (L/Cs), Helal said. New rules introduced by the central bank in March require importers to use L/Cs to import goods, instead of documentary collection. L/Cs are a more expensive, complex, and harder-to-access form of trade finance than documentary collection.

Also opining on the news last night: Mohamed El Bahy, head of the Federation of Egyptian Industries’ tax and custom committee, was on Masaa DMC (watch, runtime: 6:49), while Alaa Al-Sabaa, member of the automotive division at FEDCOC, phoned in to Ala Mas’ouleety (watch, runtime: 4:32).

Also on the airwaves last night:

  • Development finance: The Japan International Cooperation Agency (JICA) will assist with the rollout of the government’s universal health insurance system under a two-year agreement signed yesterday. (Al Hayah Al Youm | watch, runtime: 3:23)
  • Mining: The awarding of eight gold and mineral exploration licenses in the Eastern Desert earned a mention. (Al Hayah Al Youm | watch, runtime: 3:01)
  • Presidential pardons: Yahia Hussein Abdel Hady yesterday became the latest detainee to receive a presidential pardon following years of being held in pre-trial detention. A new list of names will be released today. (Al Hayah Al Youm | watch, runtime: 7:31) (Yahduth Fe Masr | watch, runtime: 5:16)

PLANET FINANCE

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EFG Hermes - https://efghermes.com/

No IPO winter in the GCC, thanks to rising oil prices: Gulf IPOs are on course for a record first half as surging oil prices and foreign inflows protect the energy-rich region from the turbulence that has threatened listing in other parts of the world, Bloomberg reported. Companies in the region have already raised USD 11.4 bn so far this year, beating out any other first-half in just the first five months, according to data compiled by the business newswire.

This is set to rise further: Abu Dhabi-based petrochemicals firm Borouge will start trading on the ADX on Monday after raising USD 2 bn in its IPO this week.

Thank the international investors, too: “IPOs have held up very well in the GCC due to high interest from international and regional investors in recent offerings and in the upcoming ECM pipeline,” said Citigroup’s Rudy Saadi. “We’ve seen continuous net foreign inflows across all GCC exchanges, even during the recent selloff.”

Down

EGX30

10,084

-0.7% (YTD: -15.6%)

Up

USD (CBE)

Buy 18.58

Sell 18.66

Up

USD at CIB

Buy 18.60

Sell 18.66

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

12,766

-1.2% (YTD: +13.2%)

Down

ADX

9,895

-1.6% (YTD: +16.6%)

Up

DFM

3,407

+1.8% (YTD: +6.6%)

Down

S&P 500

4,101

-0.8% (YTD: -14.0%)

Down

FTSE 100

7,533

-1.0% (YTD: +2.0%)

Down

Euro Stoxx 50

3,759

-0.8% (YTD: -12.5%)

Up

Brent crude

USD 115.90

+0.3%

Up

Natural gas (Nymex)

USD 8.70

+6.8%

None

Gold

USD 1,848.70

0.0%

Down

BTC

USD 29,564

-6.7% (YTD: -35.8%)

THE CLOSING BELL-

The EGX30 fell 0.7% at yesterday’s close on turnover of EGP 653 mn (22.6% below the 90-day average). Foreign investors were net sellers. The index is down 15.6% YTD.

In the green: Palm Hills Development (+5.5%), Cleopatra Hospital (+4.6%) and Rameda (+1.9%).

In the red: Ibn Sina Pharma (-4.3%), MM Group (-3.8%) and GB Auto (-3.7%).

DIPLOMACY

President Abdel Fattah El Sisi discussed the challenges facing Egypt due to the war in Ukraine with EU Commissioner for Neighbourhood and Enlargement Olivér Várhelyi yesterday, according to an Ittihadiya statement. The EU-Egypt partnership is “key for the stability and security of Europe & Middle East-North Africa region,” Várhelyi wrote on social media following the meeting. The “EU needs long-term and reliable energy partners like Egypt.” The two sides also discussed the Grand Ethiopian Renaissance Dam (GERD) crisis, which El Sisi described as an “existential issue” for Egypt. Várhelyi also discussed the food crisis and energy cooperation with Foreign Minister Sameh Shoukry, the Foreign Ministry said.

CALENDAR

OUR CALENDAR APPEARS in two sections:

  • Events with specific dates or months are right here up top
  • Events happening in a quarter or other range of time with no specific date / month appear at the bottom of the calendar.

MAY

27 May-3 June (Friday-Friday): El Gouna International Squash Open 2022.

JUNE

1-4 June (Wednesday-Saturday): The Islamic Development Bank will hold its 2022 annual meetings in Sharm El Sheikh.

2-3 June (Thursday-Friday): Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) will hold two high-level parallel meetings on climate action and digital transformation during IsDB’s 2022 annual meetings in Sharm.

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.

5 June (Sunday): GB Auto is hosting an extraordinary general assembly meeting (pdf).

7 June (Tuesday): Technology conference Tech Invest 4, Grand Nile Hotel, in Cairo.

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

9 June (Thursday): Digital Transformation Summit, The Nile Ritz-Carlton, Cairo

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): EU-Egypt Sustainable Food Value Chain conference, Grand Nile Tower Hotel, Cairo.

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

21-22 June (Tuesday-Wednesday): Aswan Forum for Sustainable Peace and Development, Cairo.

21-23 June (Tuesday-Thursday): Commonwealth Business Forum, Kigali, Rwanda.

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

26 June (Sunday): The deadline for private companies to pre-register ahead of bidding for the second phase of the PPP national project to establish and operate 1k language schools.

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

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

30 June (Thursday): Deadline for bids for National Democratic Party HQ redevelopment contract.

June: Egypt will launch a unified ticketing system for all means of transport at the Adly Mansour Interchange Station.

June: Polish President Andrzej Duda will visit Egypt to coordinate ways to ship Ukrainian wheat to Egypt amid the war in Ukraine.

JULY

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

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

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

1 July (Friday): Official rollout of e-receipt system 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

August: Work to extend the capacity of the Egypt-Sudan electricity interconnection to 600 MW to be completed.

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

SEPTEMBER

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.

18 September (Sunday): Deadline for brokerage firms, asset managers and financial advisors to register with the Egyptian Securities Federation.

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

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

26–27 September (Monday-Tuesday): The Africa Women Innovation and Entrepreneurship Forum (AWIEF) at the Cairo Marriott Hotel.

OCTOBER

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

1 October (Saturday): Use of Nafeza becomes compulsory for air freight.

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

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

10-16 October (Monday-Sunday): World Bank and IMF annual meetings, Washington, DC, chaired by CBE Governor Tarek Amer

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

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.

3-5 November (Thursday-Saturday): Egypt Fashion Week.

4-6 November (Friday-Sunday): 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.

DECEMBER

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

JANUARY 2023

January 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.

MAY 2023

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

EVENTS WITH NO SET DATE

2Q2022: The Sovereign Fund of Egypt will invest in two companies in the financial inclusion and non-banking financial services sectors.

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

End of 2Q2022: Door for bidding for the contract to redevelop the site of the former National Democratic Party HQ to close.

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.

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 its first financing product.

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

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

**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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.