AM — World Bank revises upwards its Egypt growth estimate for FY 2021-22, sounds alarm on global stagflation threat

Good morning, lovely people, and welcome to almost-THURSDAY, the only name we know of for this day of the week.

The BIG STORY ABROAD and the BIG STORY here at home are in sync this morning: The World Bank is warning that things could be about to get very That ‘70s Show for the global economy, as the lender took an an axe to its global growth forecast for 2022 on the back of the threat of stagflation. US Treasury Secretary Janet Yellen (once a stalwart of the “inflation is transitory” camp) is also warning that elevated price hikes could stick around for some time.

A recession will be “hard to avoid” for most countries, the World Bank says. The New York Times, Reuters, and Bloomberg all have more on the global picture.

Egypt is something of a bright spot (for now), with the WB revising its projection for growth this fiscal year upwards to 6.1% — but global headwinds are likely to make themselves felt as we move into FY 2022-2023. We have the full rundown in the newswell, below.

Elsewhere here at home, we have another round of positive IPO, M&A and investment news:

• EFG Hermes’ Vortex renewables fund has invested EUR 225 mn so far into Spanish solar firm Ignis Energia;
• Big names in Qatari business are eyeing potential investment in our market;
• The public placement for Ghazl El Mahalla’s IPO kicks off this Sunday; and
• IT infrastructure player Benya Group wants to raise USD 150 mn in a private placement this quarter.

PLUS- The House of Representatives gave its final nod to a raft of changes to customs tariffs meant to boost local industry. Scroll on for the details.

WATCH THIS PORT- One charger to rule them all: All new electronics sold in the EU will need to be equipped with a USB-C charging port by 2024 — including mobile phones, tablets, cameras, games consoles, headphones, and speakers, the European Commission said in a statement. Laptop-makers have until 2026 to comply with the decision, which lawmakers said would save consumers a total EUR 250 mn annually and bring environmental benefits.

Get ready for more redesigns, iSheep: The move will spell the end of Apple’s Lightning charger in the bloc — but Apple shares responded well to the news, rising 0.9% in morning trading. Analysts told Reuters the changes would drive sales of new devices with updated ports in 2024. Apple has reportedly already been testing iPhones with USB-C ports.

CIRCLE YOUR CALENDAR-

The Digital Transformation Summit gets underway this Thursday, 9 June, bringing together public and private sector players in the tech industries to share and discuss views on the current landscape of the market, recent tech innovations, and proposed strategies.

NEWS TRIGGERS you’ll want to keep an eye on this month:

• Inflation figures for May are due out on Saturday, 11 June (from state statistics agency Capmas) and Sunday, 12 June (central bank figures);
• The Central Bank of Egypt holds its policy meeting on Thursday, 23 June.

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: How infrastructure players performed in 1Q2022 amid rising prices + EGP depreciation: Economic headwinds have hit infrastructure firms listed on the EGX in 1Q2022, with operating costs and material prices soaring from the war in Ukraine and domestic inflation. We look at how the global economic backdrop has impacted EGX-listed infrastructure players’ earnings this past quarter, and the outlook for these firms as the year progresses.

The World Bank has again revised upwards its projection for Egypt’s GDP growth by 0.6 percentage points to 6.1% for FY 2021-2022. The bank in January expected growth to come in at 5.5%, but “stronger-than-expected activity for the first half of the fiscal year” saw it hike its forecast in its latest Global Economic Prospects report.

The forecast tallies with gov’t projections: The government has revised upwards its 2021-2022 growth outlook to 6.2% on the back of figures for 3Q 2021-2022, which saw the economy grow at a 5.4% clip. The Planning Ministry had in March cut its full-year forecast to 5.7% due to the war.

You can read the full report (pdf) here, or visit the landing page here.

The impact of war in Ukraine won’t be fully felt this fiscal year: The first half of the fiscal year (July-December 2021) saw a “boom” in growth that was “only partly offset by repercussions from the war in Ukraine,” the World Bank wrote. Growth began to slow in early 2022, the lender added.

Growth is set to moderate going into next fiscal year: The bank cut its forecast for Egypt’s growth next fiscal year to 4.8%, down from the 5.5% it predicted in January, as “rising food and energy inflation slows income growth and raises input costs in key sectors, and tourism flows moderate.” Inflation rose to a near three-year high in April as rising food costs and the devaluation of the EGP in March caused consumer prices to grow at a faster pace.

We’re vulnerable on food security, the WB notes: Our reliance on wheat imports from Russia and Ukraine (which usually account for more than 8% of our imported grain) exposes us to rising food prices, the report says. (Remember: We could soon be in line for some USD 500 mn from the World Bank for wheat imports and other food security measures).

On the upside: Gas exports + remittances will bring us a boost. Elevated prices in the gas extractives sector, remittances from the GCC, and “continued reform momentum” will support local growth looking ahead, the WB said.

ZOOMING OUT- The lender upped its forecast for GDP growth across the MENA region by 0.9 percentage points to 5.3%, thanks to soaring oil prices, as well as structural reforms in economies including our own, the KSA, and the UAE, and the diminishing adverse impacts of covid-19.

That’s the fastest pace of growth the region has seen in a decade — but it “could have been even stronger had it not been for the detrimental impact of Russia’s invasion of Ukraine on oil importers,” the lender said. Growth is expected to slow to 3.6% in 2023 and 3.2% in 2024.

Globally, things aren’t looking great as recession looms: The WB cut its global growth projections by almost a third to 2.9% in 2022, and down from 5.7% in 2021. “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank Group President David Malpass said.

Stagflation is a real threat: The combination of prolonged high inflation and subdued growth could throw the global economy back into a 1970s-style stagflation situation, Malpass warned. “The danger of stagflation is considerable today,” he said, adding that “subdued growth will likely persist throughout the decade because of weak investment in most of the world.”

Vortex Energy has made more than a third of its planned EUR 625 mn investment in Ignis Energia: EFG Hermes’ energy investment platform Vortex Energy has so far invested EUR 222 mn of equity capital into Ignis Energia, Vortex said in a press release (pdf) yesterday. Vortex plans to eventually invest EUR 625 mn in Ignis under an agreement signed with the Spanish solar developer in October, in return for what was reported by Reuters to be a 49% equity stake. The company didn’t disclose its current holdings in Ignis when Enterprise asked yesterday.

There’s more where that came from: Vortex plans to double its investment in Ignis by 2023, with a c. EUR 46 mn investment planned for 4Q 2022, and a c. EUR 176 mn injection in 1Q 2023. The remaining c. EUR 181 mn will come over the course of next year, Vortex Energy CEO Karim Moussa told Enterprise.

Ignis is using the funds to expand its portfolio: Since partnering with Vortex, Ignis has secured permits to add more than 1 GW of capacity and will begin construction on around half of that in the next few months, most of which are solar projects in Spain, Moussa told Enterprise. One of the largest solar developers in Spain, the company has been involved in developing some 14 GW of solar and wind projects inside the country and c. 11 GW elsewhere around the world, primarily in Italy, the US and the UK, he said.

What they said: “We are extremely delighted with the achievements of Ignis in such a short period of time and during these challenging market conditions,” Moussa said. “Ignis’ management skills and quality of its portfolio continue to solidify its market position.”

About Vortex: The renewables-focused investment platform has invested some USD 1.6 bn in green energy across the UK, EU, and US. It last year reached its first USD 200 mn close on its fourth fund, Vortex Energy IV, and plans to reach a second close worth about USD 550 mn on the fund within the next two years. We sat down with Moussa last year to talk all things Vortex.

ALSO FROM EFG- EFG Hermes’ e-payments subsidiary PayTabs announced the launch of its new unified payments platform, PayTabs SwitchOn, in a press release yesterday.

Qatari companies have an appetite for Egyptian investments: A number of Qatari companies have expressed interest in investing in Egypt during meetings with GAFI head Mohamed Abdel Wahab, who is on a multi-day visit to Doha to pitch Egypt as an attractive investment destination, according to a cabinet statement out yesterday. Qatar has committed to invest USD 5 bn in Egypt to support the economy as it grapples with the impact of surging commodity prices and rising interest rates.

Two of the MENA region’s biggest real estate developers may want in:

• Ezdan Holding wants to establish a number of hotels in Egypt and enter the financial services sector, founder Sheikh Thani Bin Abdullah Al Thani told Abdel Wahab. A delegation from the company will soon make its way to Egypt to study the market and locate potential areas for investment.
• The CEO of Qatari Diar discussed the possibility of expanding the company’s footprint in Egypt. The real estate firm has finally launched the EGP 1 bn first phase of its CityGate development, after the New Urban Communities Authority (NUCA) approved the company’s license to continue work on the project following a four-year dispute.

Juhayna’s new shareholder could expand into new sectors: Power International Holding (PIH) — which operates in general contracting, agriculture and food industries, and real estate — is interested in investing in our healthcare, agriculture, tourism and retail sectors, Chairman Ramez Al Khayat told Abdel Wahab. The holding company has in recent months built up a 10.14% stake in EGX-listed dairy company Juhayna via its dairy subsidiary Baladna.

Also interested:

• Alfardan Group, whose portfolio spans financial services, property, hospitality, investments, marine services and healthcare, could set up a hotel;
• Cooling services provider Qatar Cool is looking to establish a central cooling project in the new administrative capital;
• Just Real Estate is studying the establishment of a company to export gas and produce electricity and a project to recycle waste.

Qatari investors also have an eye on our green projects: The head of the Qatar Investment Authority said Qatari investors want to invest in local new and renewable energy projects, especially solar and wind.

Qatar is just the latest country we’ve pitched to: Officials have held meetings with investors from the UAE, the US, France, and Poland in recent weeks in a bid to drum up interest in the government’s infrastructure plans and draw new foreign direct investment.

OTHER INVESTMENT NEWS-

Pfizer could invest in R&D in Egypt under a MoU the company will sign with the government, Hapi Journal reported, quoting Pfizer country manager Yousri Nawar. The agreement will also cover tech transfer.

The public placement for Ghazl El Mahalla FC’s IPO will begin on Sunday, 12 June and last until Friday, 1 July, according to a press release (pdf) out yesterday. The club has set its share price at EGP 1.02, and investors buying in must purchase between 1k and 2 mn shares each.

Ghazl El Mahalla wants to raise EGP 135 mn in the sale: The club hopes to raise EGP 98 mn from the retail offering, after having already received EGP 37 mn from institutional investors in the private placement back in November.

Refresher: Ghazl El Mahalla is offering a 67.5% stake on the EGX, marking the first time a football club is publicly traded in the Arab world. The sale is small, but could pave the way to more clubs going public. Football giant Al Ahly has also expressed interest in listing on the EGX.

IT infrastructure contractor Benya Group is looking to raise USD 150 mn via a private placement before the end of 2Q2022, CEO Ahmed Mekky told CNBC Arabia yesterday. The new capital would primarily go towards financing the company’s expansion plans in Africa, he added.

A group of investors have already expressed interest in participating, Mekky said, adding that the private placement is getting “serious” attention from international investment funds, including investors from the Gulf, without identifying them. Meetings with the potential investors are ongoing, he said. This comes after Benya’s recently announced plans to set up an investment arm in Saudi Arabia by the end of the year, marking its first expansion in the Gulf region.

Round two will take place early next year: Benya is planning a second, larger capital increase at the beginning of 2023, Mekky said. This will happen ahead of the company’s plans for a dual listing on the EGX and a foreign bourse, he said, without disclosing further details. Benya in November said it would soon complete studies on a potential IPO in Egypt, after which it would decide on the second market and the timing of the offering.

The Egyptian company has been pushing into Africa. Benya is currently awaiting a license to build and extend a telecom network in the Democratic Republic of the Congo; has applied for a separate license to set up a company to construct and operate shared mobile towers in the DRC; and has started working with contractors who will supply fiber cables as part of an ongoing USD 500 mn agreement to set up a national fiber optic network in the country. The company also recently launched a USD 50 mn venture capital fund, dubbed Benya Ventures, that will focus primarily on tech, IoT and AI startups in Africa.

House gives the nod to amended customs tariffs: The House of Representatives yesterday gave its final approval to a presidential decree amending customs duties on hundreds of imports.

All part of the localization push: The changes in tariffs came to promote investment, boost exports, and protect local industries, according to Yasser Omar, deputy chairman of the House’s Budget Committee. “It is important to change the import tariffs from time to time to tackle local and international economic developments and in a way that can create a more investment-friendly climate in Egypt,” Omar said. “Within this context, the new changes aim to protect local industries from foreign harmful practices that might negatively impact their competitive edge.”

Who’s getting tax breaks? Tariffs were reduced on more than 150 raw materials imports for local manufacturers, with a focus on the automotive industry, Omar said. Tariffs were also lowered on medical equipment, while natural-gas powered vehicles saw a 35% reduction in tariffs.

Incentivizing the use of local components: Under the decree, manufacturers who use at least 60% local components in their products will get a 40% discount on customs duties for imported components.

On the automotive side of things: A 2% import tariff will be levied on equipment to operate electric vehicle charging stations and natgas-powered vehicle fuelling stations, as well as on electric motors, batteries, control units, and ventilation systems used in electric buses.

Also seeing amended tariffs:

• Hotels and tourism firms will pay a 20% tariff on imported equipment.
• Renewable energy projects will also see a 2% levy on imported equipment.
• Manufacturing imports for baby formula will be charged a 2% tariff.
• The Arab Petroleum Pipelines Company (SUMED) will pay a 2% tariff on imported equipment, tools and spare parts.
• Arab Organization for Industrialization (AOI) affiliates will pay a 5% tariff on imported parts for train locomotives.

We’re also getting a new council to handle all of this: Finance Minister Mohamed Maait will head an import tariffs council, which will be tasked with proposing amendments to the tariffs as the economic situation develops.

BACKGROUND: This is all about lowering imports of finished goods, boosting local industry, and upping exports. The Trade and Industry Ministry is working on growing local manufacturing to limit imports across 4.8k industrial categories. The government is also aiming to increase exports to USD 100 bn a year by 2025 as part of its plan to increase the private sector’s role in the economy.

Key to localization plans is the soon-to-be-released automotive strategy, which seeks to increase local assembly, grow the component manufacturing industry, up the sector’s competitiveness to become a regional manufacturing hub, and bolster export volumes.

ALSO FROM THE HOUSE YESTERDAY-

Tawfik comes with receipts on El Nasr: Public Enterprises Minister Hisham Tawfik has submitted to the House a detailed report on El Nasr for Coke and Chemicals’ financial and administrative situation, according to Parliamentary Affairs Minister Alaa Fouad. MPs had requested the report after disputing that the company’s financials warranted liquidation, after Tawfik in January announced plans to dissolve the financially-stricken firm.

And the mud tax suspension moves forward — potentially for even longer than planned: The House approved in principle a draft bill from the government to extend the suspension of the 14% tax on agricultural land (known as “mud tax”) for an additional year to July 2023. A final vote on the bill has been delayed to a later session, after “a large number of MPs” expressed their desire to see the tax postponed for another three years rather than just one, “to relieve tax burdens on farmers and stimulate them to increase agricultural production,” House Speaker Hanafi Gibali said.

Shalateen’s gold areas up for grabs: State-owned Shalateen Mining Company plans to launch an international gold and minerals exploration auction for at least five areas in the Eastern Desert in the coming weeks, Bloomberg Asharq reported Monday, citing sources it says are in the know. The company has already sent the tender proposal to the Oil Ministry for final approvals on the areas offered and the date of the tender, one of the sources said.

Bidders will be hoping for another Iqat: Among the areas that could be tendered is part of the Iqat region, home to a deposit being developed by the Egyptian Mineral Resources Authority and Shalateen that could hold more than 1 mn oz of gold. Oil Minister Tarek El Molla said in April that the companies could soon begin initial production at the mine, in which authorities say more than USD 1 bn could be invested over the next 10 years.

The government recently awarded eight gold and mineral exploration licenses in the Eastern Desert to four companies in its latest bid round. 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, EMRA said last month.

HSBC Egypt will lend EGP 1 bn to tech startups: HSBC Egypt is launching a EGP 1 bn loans program that will provide funding to tech entrepreneurs looking to scale their businesses, the bank announced in a statement (pdf) yesterday.

Who is eligible? The Technology Entrepreneurs Lending Program will target companies working in fintech, e-commerce, retail and mobility, health, education and software. Priority will go to those that integrate sustainable development in their business mission, in a nod to the upcoming COP27 conference, the bank said.

What they said: “The exponential growth of venture capital funding in this market reflects the quality of local talent and the scale of the opportunity, which is why we have developed a dedicated lending initiative for technology entrepreneurs,” said Deputy Chairman and CEO Todd Wilcox. We sat down for coffee with Wilcox last week, when he shared his views on Egypt’s fintech scene, ESG, and the economic problems triggered by the war in Ukraine.

This is HSBC’s third SME-focused growth initiative in six months. Last month, the bank announced it will lend USD 1 bn to female-led startups in Egypt and 10 other markets over the next year via a Female Entrepreneur Fund. The bank also launched an EGP 3 bn fund to support SMEs in Egypt, dubbed the Foras Fund, with a special focus on the industrial and service sectors.

It was a quiet night on the airwaves last night — but we did get some business news, as the Egyptian General Company for Tourism and Hotels (EGOTH) and Talaat Moustafa Group (TMG) broke ground on their Four Seasons-branded Luxor hotel. TMG CEO Hisham Talaat Mostafa called Kelma Akhira’s Lamees El Hadidi (watch, runtime: 18:55) to talk about the PPP project, which is set to open by the end of 2024. TMG will invest EGP 2.5 bn in the new hotel, he said.

Also on the airwaves last night:

• More women on the Maglis El Dawla: President Abdel Fattah El Sisi has appointed 39 more women to judicial positions in the Council of State (Maglis El Dawla). (Al Hayah Al Youm | watch, runtime: 2:18)
• Reminder to private schools: Tuition fees aren’t due yet. The Education Ministry has warned private schools against attempting to collect tuition fees for the new academic year before September. (Mas’aa DMC | watch, runtime: 1:31)

It’s an econ-heavy morning in the foreign press: The Financial Times and China’s CGTN both look at Egypt’s efforts to increase its supply of local wheat. Meanwhile, Goldman Sachs MENA research analyst Farouk Soussa talks to Bloomberg’s Manus Cranny about his predictions for the EGP, interest rates and inflation (watch, runtime: 5:25).

The Public Enterprises Ministry is currently in talks with two local companies to manufacture a prototype battery for electric vehicles, Al Mal quotes Minister Hisham Tawfik as saying. The company that succeeds will establish a battery factory, he said.

Talks over EV tuk tuks + microbuses: The government is in discussions with an Indian-Korean company to produce electric tuk tuks, Tawfik said. The company would initially assemble 50k vehicles using only local components, and 100k by the second year after the factory comes online. There are also talks with a European company to participate in the government’s plans to produce 10k electric microbuses, he said, without disclosing the identity of the firm.

Several Italian rail companies are interested in getting involved in Egypt’s rail network, according to a Transport Ministry statement that provides few details. MERMEC is interested in “railway safety” and Firema wants to discuss the options for producing rolling stock, it says. This came during a meeting between Transport Minister Kamel El Wazir, MERMEC officials and Italian Ambassador Michele Quaroni.

Maritime transport cooperation is also on the agenda: The two sides discussed establishing a roll on, roll off (ro-ro) transport line for agricultural products between the Italian port of Trieste and Alexandria.

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

• The National Bank of Egypt (NBE) will allow customers to purchase mutual funds online. (Al Mal)
• Luxury real estate firm Sotheby’s International Realty has opened a local branch, marking its second North African office. (Statement)
• USAID has launched a USD 39 mn women’s empowerment program to improve access to jobs and services for 200k Egyptian women. (US embassy statement | International Cooperation Ministry statement)
• The Communications Ministry’s ITIDA and its Spanish counterpart renewed their Egyptian-Spanish IT Innovation Program, senior officials told Enterprise.

CORRECTION- We incorrectly stated in yesterday’s EnterpriseAM that companies in the telecoms sector would be given access to the central bank’s soft loans scheme for tourism companies. The CBE has extended the programme to cover telecoms maintenance and upgrade costs for tourism companies. The story has since been corrected on our website.

Shoukry discusses boosting cooperation with Iraqi PM and Jordanian FM in Baghdad: Foreign Minister Sameh Shoukry met his Iraqi and Jordanian counterparts in Baghdad to discuss bilateral ties, the ministry said Monday, without providing further details. The three countries have sought to deepen economic, trade and commercial ties in recent months, signing a spate of infrastructure, energy and investment agreements.

The UAE’s central bank has signed MoUs with its Egyptian and Jordanian counterparts to strengthen cooperation on fintech, payments, and training, a press release by the CBUAE read. The agreement between the Central Bank of Egypt (CBE) and the Central Bank of the UAE (CBUAE) will see the two banks work together on a sandbox project and to upskill staff. The MoUs come as part of the Egypt-UAE-Jordan industrial partnership signed at the end of May, which will see Abu Dhabi sovereign wealth fund ADQ invest USD 10 bn in industrial projects in the three countries.