Wednesday, 8 June 2022

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.


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.


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:


World Bank revises FY 2021-22 growth forecast up to 6.1%

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.”


EFG’s Vortex Energy invests EUR 222 mn so far in Spanish solar firm

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 are looking to pour investments into Egypt

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.


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.


Ghazl El Mahalla’s public offering begins next Sunday

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.


Benya to sell equity stake in USD 150 mn private placement

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.



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.


House gives final nod to amended customs tariffs in bid to localize industry

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.


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 Mining to launch international gold tender for at least five Eastern Desert concessions

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 launches loans for tech entrepreneurs looking to scale

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:

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.


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The value of global IPOs has plummeted so far in 2022, falling 71% y-o-y in the first five months of the year as rising interest rates, soaring inflation and geopolitical uncertainty fuel volatility in the financial markets, the Financial Times reports, citing data from Dealogic. Companies raised USD 81 bn during the five-month period, down from USD 283 bn in 2021, while the number of listings has dropped from over 1.2k to 596.

It’s even worse in the US and Europe: The amount raised in IPOs in the US and Europe has plunged 90% to USD 17.9 bn, with just 157 companies going public compared to 628 last year.

“People are not abandoning ship — they are pausing,” said one lawyer who provides advice on IPOs. “Once things stabilize, we will see a return of activity, even if it does not reach last year’s levels.”

Investors are swapping Wall Street for Abu Dhabi: International investors have flocked to the GCC this year, where IPOs are on course for a record first half as surging oil prices and foreign inflows protect the energy-rich region from the turbulence in the global markets.


The rebound in emerging-market stocks last month is already in reverse as heightened inflation and hawkish central bank policies prolong the global risk-off, Bloomberg says. The MSCI Emerging Markets Index had rebounded nearly 8% from a two-year low earlier in May, but this month the gauge has reverted to underperforming against developed-market stocks. “It’s too early to say this is the bottom — too early to say the only way is up,” one strategist said.

Also worth noting:

  • DP World sells stake to Canadian fund in bid to reduce debt: Dubai logistics company DP World is selling a 22% stake in some of its key assets to Canadian investment fund CDPQ. The fund will invest USD 5 bn in total, with half the amount financed by debt. (Statement)
  • Exxon and TotalEnergies are among a group of Western companies close to securing a multi-bn USD Qatari gas project, slated to be one of the largest ever in the industry. Qatar could announce the winners as soon as this weekend. (Bloomberg)
  • Binance looking the other way? The world’s largest crypto exchange played host to the laundering of c. USD 2.35 bn in illicit funds in recent years. (Reuters)
  • American taps Morgan Stanley: Americana Group, which operates KFC and Pizza Hut in MENA, has added Morgan Stanley to work on its planned IPO, which could take the form of a dual listing in Riyadh and Abu Dhabi. (Bloomberg)




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The EGX30 rose 0.6% at yesterday’s close on turnover of EGP 511 mn (38.8% below the 90-day average). Local investors were net buyers. The index is down 15.9% YTD.

In the green: GB Auto (+8.5%), Palm Hills Development (+3.4%) and MM Group (+2.7%).

In the red: Housing and Development Bank (-1.3%), Eastern Company (-1.1%) and Rameda Pharma (-0.94%).

Asian markets are largely up in early trading this morning. Futures suggest Wall Street is set to open in the red across the board, while it’s a more mixed picture across the Atlantic, though most major European indices are poised to open in the green.


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.


How infrastructure players performed in 1Q2022 amid rising prices + EGP depreciation: Plenty of economic headwinds have hit infrastructure firms listed on the EGX this past quarter, with operating costs and material prices soaring from the war in Ukraine and domestic inflation. Add to that the CBE’s 300 bps rate hikes and the EGP depreciation in March, and companies have faced mounting margin pressures. The EGP has now fallen 18% against the USD since March after slipping to EGP 18.66 last week. While some infrastructure players (including traditional contractors, as well as telecom and financial infrastructure companies) have benefited from rising prices, others’ revenues were hit hard.

The real impact came after the war in Ukraine began at the end of February, which means that 75% of the quarter was unscathed, Noaman Khalid, associate director at Arqaam Capital, tells Enterprise. “The local and global factors at play as a result of the war are not fully reflected in companies’ 1Q 2022 earnings,” he said, adding that its impacts will be more apparent in 2Q and 3Q figures. A lot of the problems contractors have had to face — like the raw materials shortage — were also not exclusive to 1Q, but rather were inherited from late last year and exacerbated by the war, Mohamed Saad, vice president of research at Prime Securities, tells Enterprise.

Contractors with European exposure suffered in 1Q: EGX-listed heavyweight Orascom Construction reported a 45% fall in its net income, citing deepening losses at the Belgian Besix group, in which Orascom holds a 50% stake. The group’s losses widened to USD 11.0 mn from USD 1.4 mn in 1Q 2022, as European contractors suffered the brunt of the fallout from the war, which included raw material shortages and rising energy prices.

Others were resilient — largely with the help of diversified portfolios: Elsewedy Electric’s net income was up 9% y-o-y to EGP 760.9 mn during the quarter, according to the company’s latest earnings release (pdf). The company’s diversified portfolio — which extends beyond turnkey projects — managed to offset any margin pressures on the company, with its wires and cables segment bringing in nearly half of its revenues. OC’s diversified portfolio also helped mitigate the impact of its losses (which were primarily due to Besix losses), Saad said.

More pressure on working capital = more debt: “Contractors are not seeing a massive slowdown to their performance, but their working capital is inflated,” EFG Hermes Associate Vice President Ali Afifi said. “This prompts companies to take on more short-term facilities and debt, and make decisions like revisiting their dividend plans, which is what Elsewedy Electric did,” Afifi added. Elsewedy has not paid out any interim dividends ahead of its financials, and its debt position for the quarter rose near EGP 9.1 bn, compared to EGP 6.12 bn as of 4Q2022.

And more contingency planning: Rising debt levels were attributed to “contingency planning,” which included measures like bulk buying raw materials, making large advance payments, and coverage of rising freight costs, “in an effort to curb delays in commodity deliveries and supply-chain disruptions that could negatively impact operations,” Elsewedy wrote.

Large contractors’ earnings could be negatively impacted if public spending on infrastructure development is reduced after budget revisions, Khalid said. MPs have been calling for an expansion in spending for subsidy and social safety nets, which Khalid noted could impact infrastructure allocations. Infrastructure represents the single largest recipient of public investments in the draft FY 2022-2023 budget. We don’t know yet if the government will make changes to its budget, but it has said that the figures in the draft budget are “tentative” and could be changed.

This could mean longer implementation periods for national projects, Khalid explained, as one of the only ways for companies to handle investment cuts will be to extend payment term durations. This could impact earnings down the road as these projects stretch and their costs pile up, Saad said, but this was not reflected in companies’ performance during the first quarter, because it’s more of a long-term impact.

Contractors’ stock performance is a reflection of all of these pressures, Khalid said. Elsewedy’s shares are down 27.8% YTD, while OC’s shares are down 13.6%.

On the bright side: “A lot of evidence points to us currently hovering around the peak of the global commodities cycle in terms of prices, whether we’re talking about oil or other commodities like cement and steel,” Khalid said. This next period will be marked by a slowdown and relative stability or normalization, he added.

Telecom players were impacted by the rising FX rate: State-owned landline monopoly Telecom Egypt performed well, but its net income fell 36% y-o-y on the back of Vodafone Egypt’s one-offs, Saad explained. Its normalized income — which excludes Vodafone Egypt’s one-offs, the effect of the rising FX rate, provisions, and impairments — stayed flat y-o-y at EGP 1.7 bn. The company’s weaker performance this quarter was also attributed to rising operating expenses and FX rate, Beltone said in an emailed note. Telecom’s shares are down 9.7% YTD.

Financial infrastructure players had it better: State-owned e-Finance’s net income jumped 40.6% y-o-y in 1Q2022 to EGP 200.3 mn, with the company’s digital operations accounting for 90% of total revenues. The government has been working on measures to advance financial inclusion through expanding fintech infrastructure — a lot of which is through e-Finance’s digital infrastructure — since before the war, but this has become even more important since the war began, CI Capital equity analyst Enjy Heshmat told Enterprise. That means that if anything, the war’s impacts will be a boon for the company moving forward, especially in light of the additional spending expected from the government to cushion the war’s economic impact, a large portion of which e-Finance processes, Heshmat added.

Still, Fawry + e-Finance’s shares have fallen this year: e-Finance’s shares are down 21.1% YTD, but this could be as the market awaits a consecutive set of solid results before they gain confidence in the stock, Heshmat explained. e-Finance completed its blockbuster IPO last October, and has since only reported financials for 9M2021 and 1Q2022. Fawry’s share price is down nearly 70% YTD, but this is attributed to a slate of one-off events that have a short-term impact on share price but should bring about better results down the line, Heshmat explained. These include its recent EGP 800 mn capital increase and a recently-introduced employee stock ownership plan (ESOP), both of which can dilute the company's share value and can prompt some investors to exit the stock, Heshmat said. “The market is now waiting to see how these measures will translate into better performance,” Heshmat said. The company has not yet reported its 1Q earnings.

Your top infrastructure stories for the week:

  • Etisalat gets an infrastructure boost from Telecom Egypt: Our friends at Etisalat Misr signed six agreements worth EGP 17 bn with Telecom Egypt to expand its transmission and fiber optic infrastructure.
  • Israel could increase gas exports to Egypt and Jordan in the coming months as it moves to start production at the disputed Karish gas field in the eastern Mediterranean.
  • EU funding to bolster wheat storage capacity, small farmers: The EUR 100 mn in food security funding announced by the EU in April will go towards upgrading Egypt’s wheat storage capacity and supporting SMEs in the agricultural sector.


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.


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: Egypt and Israel will sign an agreement with the EU to increase LNG exports.


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

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

July: Actis’ expected sale of its majority stake in Lekela to Infinity and Masdar’s Infinity Power.

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: 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: 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: 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: 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.


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


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.


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.

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