AM — Maait: Ukraine war could cost us another USD 10 bn in wheat + oil imports.

Good morning, ladies and gentlemen, and welcome to another issue of the government and the private sector playing whack-a-mole with the impact of the Ukraine-Russia war.

THE BIG STORY TODAY- Finance Minister Mohamed Maait’s estimate of a USD 10 bn extra burden from rising wheat and oil prices on the country next fiscal year is leading the local news.

More UAE investment news: Elsewhere, First Abu Dhabi Bank completed the merger of Bank Audi Egypt and rebrands its local operations to FABMisr, while our friends at Chimera become the latest to make a play for a controlling stake in Beltone Financial.

Investment roadshow continues: Finance Minister Mohamed Maait has invited South Korean companies to invest in our agriculture, industry, transportation, energy, and water sectors, according to a statement by the Finance Ministry. Maait laid out the government’s privatization strategy in a meeting with South Korean companies’ local representatives, saying that the government is ready to help remove obstacles for investors as part of efforts to lure USD 10 bn in foreign direct investment (FDI) annually.

Officials from our government have been meeting with foreign and Arab investors in the past few weeks under efforts to promote the country as an investment-friendly destination as the state doubles down on its privatization push.

Some good news from the senate: The Senate has approved the state’s draft 2022-2023 sustainable development plan (pdf). It should now be on its way to the House of Representatives for final approval, Al Borsa reports.

WHAT’S HAPPENING TODAY-

Latvian FM + business delegation in town for talks: Latvian Foreign Minister Edgars Rinkēvičs is accompanying a business delegation to Cairo, which kicked off its three-day visit yesterday. The trip is aiming to “strengthen political and trade relations … particularly in digital and logistics sectors,” Rinkēvičs wrote on social media Saturday. The minister held talks with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry yesterday, which focused on the war in Ukraine, its impact on the global economy, and illegal immigration, in additon to deepening cooperation in IT, education and tourism, according to an Ittihadiya readout of the meeting.

Information and cyber security conference Caisec gets underway today at the Kempinski in New Cairo. The two-day event brings together industry decision makers, CEOs and CIOs from leading local and international tech companies, as well as government figures, including six ministers. Attendees will discuss cybersecurity issues including securing digital banking services, building critical infrastructure systems, and the role of artificial intelligence and machine learning.

MARKET WATCH-

Efforts to unlock Ukrainian grain seem to be facing hurdles: Ukraine is exporting grain via two routes through Poland and Romania but bottlenecks are slowing down the process, Ukrainian Deputy Foreign Minister Dmytro Senik told Reuters yesterday. Russia’s blockade of the Black Sea ports has trapped some 30 mn tons of grain inside Ukraine, and forced Kyiv to turn to rail, road and river transport to get it out of the country. Senik did not disclose how much grain has been — or is set to be — transported through the two countries.

The problem: There’s no simple or cheap way for Ukraine to export grain over land. Shipments need to be transferred to different trains at the Polish border — where there are few loading or storage facilities — because the country’s Soviet-era railway network uses a different gauge to the rest of Europe. Taking the Romania route involves transporting shipments by rail to the Danube river where they are loaded onto barges and sent to the port of Constanta.

Things could get a bit easier in the coming weeks: Ukraine is currently talking to countries in the Baltic to add a third corridor, Senik said.

There’s little chance of a breakthrough in the Black Sea: Neither Ukraine nor Russia appear likely to sign on to a UN- and Turkey-backed plan to reopen the port of Odessa and ease the global food crisis. Wary of a potential attack on its final coastal stronghold, Ukraine is refusing to demine the port, while Moscow is demanding a relaxation of sanctions before it allows ships to exit the Black Sea.

There’s no one BIG STORY ABROAD this morning as the slow news day at home is mirrored in the pages of the international press. That said, everyone is paying attention to the passing of a bipartisan bill in the US meant to address gun violence by limiting access to some kinds of firearms. While modest in scope, the legislation is the first gun reform to get past US lawmakers in decades, despite years of calls for action on the back of successive school shootings. The impetus for this latest push was the murder of nineteen children and two adults at a Texas school last month. The Wall Street Journal, New York Times, Washington Post, AP, and Reuters have more.

FROM THE DEPT. OF D’UH- WTO head warns of “bumpy and rocky” road as high-level meeting enters its second day: More than 100 trade ministers are discussing whether to ease food export restrictions and waive covid vaccine patents at the four-day ministerial meeting of the World Trade Organization (WTO) in a potentially significant moment for the escalating global food crisis, and for accelerating the rollout of vaccines in the developing world.

Just a few landmines? “The road will be bumpy and rocky. There may be a few landmines on the way,” the AP quotes WTO head Ngozi Okonjo-Iweala as saying yesterday.

The sticking points: G7 countries are pushing for an end to food export restrictions, clashing with India, which wants to maintain its ban on wheat exports to protect its population from food shortages and rapidly rising prices. India, along with South Africa, has also been one of the main proponents of scrapping patents on covid vaccines, a proposal which has been rejected by most western governments which have sided with the pharma industry.

HAPPENING THIS WEEK-

It could be a big week for our gas export ambitions: Hopes are high that Egypt can ink an agreement to increase exports to the EU when EU Commission President Ursula von der Leyen lands in Cairo for talks with President Abdel Fattah El Sisi. According to a draft document seen by Bloomberg earlier this month, the EU is expected to sign an MoU with Egypt and Israel that will see more Israeli gas shipped to Egypt’s LNG facilities where it will be exported across the Mediterranean.

All eyes on the Fed: Further afield, the Federal Reserve will meet tomorrow and Wednesday to decide on interest rates amid US inflation accelerated to a fresh 40-year high in May. This has raised fears among traders that the Federal Reserve will turn even more hawkish when it meets this week.

The question now becomes by how much: will it be 50 bps or 75 bps? We have more on that in Planet Finance below.

Egypt is the guest of honor at this year’s St. Petersburg International Economic Forum (SPIEF), which takes place on 15-18 June in the Russian city. Trade Minister Nevine Gamea will participate in several panels on Thursday, including a session on Egyptian-Russian relations where she’ll be joined by SCZone VP Waleid Gamaleldien, the head of the Egyptian Exporters Associated Mohamed Kassem, and Tourism Ministry undersecretary Ahmed Youssef.

CIRCLE YOUR CALENDAR-

El Sisi, Amer attending Afreximbank annual meetings: The African Export-Import Bank’s (Afreximbank) annual meetings start Wednesday at the new capital’s St. Regis Almasa Hotel. President Abdel Fattah El Sisi, Central Bank of Egypt Governor Tarek Amer, and Afreximbank President Benedict Oramah will give keynote speeches at the event, which will focus primarily on implementing the Africa freetrade agreement that came into force in 2021.

There’s a handful of conferences coming up:

• The EU-Egypt Sustainable Food Value Chain conference, which will take place at Grand Nile Tower Hotel this Thursday.
• The Aswan Forum for Sustainable Peace and Development will take place in Cairo later this month on 21-22 June (Tuesday-Wednesday).
• The Big 5 Construct Egypt (pdf) construction industry exhibition runs from 25-27 June at the Egypt International Exhibition Center (EIEC) in Cairo.

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

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: After a trial year appears to have not gone over well with students and universities, the Higher Education Ministry’s Supreme Council for Private Universities has decided to overhaul its centralized admissions system for private and nonprofit universities. The system, which was launched last year, imposed a Tansik-style process (the same process used for public universities in Egypt) on private university admissions by allocating students to available seats based primarily on their grade points.

Egypt will need around USD 10 bn next fiscal year for wheat + oil: Egypt could face an extra USD 10.2 bn burden next fiscal year if wheat and oil prices remain at their current elevated levels, Finance Minister Mohamed Maait told CNBC Arabia in an interview.

On wheat: Some USD 3 bn more would be needed for imported wheat in FY2022-23, split equally between public and private purchases, Maait said. Maait puts current prices at around USD 500 per ton — around double the upper range of what wheat had cost us on the international markets before the recent price squeeze, he says. Multiply the USD 250-per ton difference by around 12 mn tons we import in a year (split equally between public and private-sector purchases) for the USD 3 bn figure.

On oil: He estimates that additional oil import costs could come in at around USD 7.2 bn. It’s the same story as with wheat — prices have doubled on the USD 60/bbl price that the government had penciled in for this fiscal year. We import around 120 mn barrels of oil a year, making for an EGP 7.2 bn additional annual cost. Brent crude closed at USD 122 per barrel yesterday.

REMEMBER- The government has already estimated rising global wheat prices on the back of the war to cost it an additional EGP 15 bn this fiscal year, penciling in the cost at around USD 350 per ton. We should get clarity on when the budget for this fiscal year closes (we estimate sometime in the coming months).

The consequences: Rising wheat prices don’t only add an additional burden on the state budget, but pressure prices in the wider market and the local currency, Maait noted.

The figures are higher than those penciled in for the draft FY2022-2023 budget, which is currently making its way through the House of Representatives. The budget assumes an average price of USD 330 per ton of wheat (up from USD 255 this fiscal year) — and USD 80 per barrel of oil — estimates that came in for criticism from some MPs as leading to unrealistically low allocations for state purchases in the budget. The allocations are tentative and could still be changed up until the budget is passed (most likely sometime before the new fiscal year begins in July.)

War in Ukraine has sent commodities prices rocketing — and we’re particularly vulnerable to the impacts: The world’s largest importer of wheat, we usually source north of 80% of our grain imports from Russia and Ukraine. We’re also a net oil importer, leaving us vulnerable to the price squeeze that began as a result of a demand-supply imbalance during the post-pandemic recovery and has been exacerbated by the war, which has seen Europe pledge to wean itself off Russian fossil fuels.

KUDOS to Maait and the gov’t for continuing their policy of speaking transparently about the effects of global economic headwinds here at home. As Maait noted, this crisis is not the result of “interior politics” but of market forces beyond our borders — and communicating clearly will be key to riding them out.

Meanwhile, the French are stepping up: Some 63k tonnes of French wheat has landed at Red Sea’s Safaga Port, Al Masry Al Youm reported. The shipment is part of the 350k tons of wheat from France, Russia, and Bulgaria that GASC bought in April, in its first successful tender since war broke out in Europe’s breadbasket. The French wheat is now being tested for quality, according to Al Masry Al Youm.

IN OTHER COMMODITIES NEWS-

The Oil Ministry plans to build a EGP 1.8 bn crude oil storage facility south of Cairo, which would receive crude from Ain Sokhna and transfer it to the Assiut oil refinery, according to a statement.

UAE’s Chimera puts in an offer for Beltone: Our friends at Abu-Dhabi based investment firm Chimera Investments have submitted a non-binding offer to acquire a controlling stake in Beltone Financial, according to a statement (pdf) by the Financial Regulatory Authority (FRA) and disclosures by Chimera (pdf) and Beltone (pdf).

The breakdown: Chimera is bidding to acquire 51-90% of Beltone at an initial price of EGP 1.49 per share, valuing the firm at some EGP 690 mn by our math.

This is the second acquisition offer Beltone has fielded in as many weeks: An investor alliance led by WM Consultancy last week put in its own offer to acquire a 51-90% stake in Beltone at EGP 1.35 a piece.

Chimera has pitched its offer exactly 10% higher than WM’s bid, and at more than a 40% premium to Beltone’s share price before the news of WM’s offer broke.

Beltone’s shares fell 0.96% to EGP 1.138 yesterday. Shares are still up more than 9% since WM’s bid was announced at the start of last week.

What’s next: A final offer is pending regulatory approvals in Egypt and the UAE, according to the statements.

Beltone has already given the green light for the WM-led consortium to conduct due diligence, it said last week. The consortium will need approval from the FRA before it can start due diligence. WM Consultancy is led by former Beltone exec Wael Mahgary.

Who owns Beltone today? Orascom Financial Holding (OFH) currently owns 58% of Beltone, with the rest in freefloat, according to the company’s website. OFH has been lowering its stake in Beltone over the past couple of years, after holding a majority of 74.5% of the company in 2020.

This comes on the back of another loss making year for Beltone: The company’s net losses widened to EGP 169.8 mn in 2021, from EGP 132.4 mn the previous year, according to the firm’s financial statement. Revenues rose 27.1% y-o-y in 2021, recording EGP 351.7 mn.

Advisors: Chimera has tapped Matouk Bassiouny & Hennawy as legal counsel to the Abu Dhabi-based fund, according to its statement.

First Abu Dhabi Bank (FAB) has completed the merger of Bank Audi Egypt and rebranded its Egypt operations as FABMisr, a year after it acquired 100% of the Lebanese bank’s local unit, the Emirati lender said in a statement (pdf) yesterday. The bank has received all the regulatory approvals for the merger, including from the Central Bank of Egypt (CBE) and the General Authority for Investment & Freezones (GAFI), it said. The value of the transaction has not been made public.

A new big fish: FABMisr is expected to launch in 4Q, and will more than quadruple its branch count to 69 from a prior 17. This will make FABMisr one of the largest foreign banks in Egypt, with more than EGP 185 bn in assets.

Exodus: The Lebanese lender was forced to put its businesses in Egypt, Jordan and Iraq up for sale in 2020 due to the financial and economic crisis in its home country. Fellow Lebanese bank Blom also offloaded its Egypt unit last year, selling a 99.5% stake to Bahrain’s Bank ABC.

Advisors: FAB and UBS AG were buy-side financial advisors, while EFG Hermes was the sole sell-side financial advisor. Freshfields Bruckhaus Deringer and Matouk Bassiouny & Hennawy were legal advisors to FAB on the transaction, while Dechert as well as Zulficar and Partners were counsel to Bank Audi. JPMorgan gave Bank Audi a fairness opinion, while Broadgate Advisors also offered advisory services to the bank.

Contact Financial Holding’s consumer financing arm is earmarking EGP 2 bn for tuition financing in 2H2022, Contact CEO and Managing Director Said Zater told Enterprise, confirming reports from Hapi. The company already has agreements with some schools and universities to offer fee payment plans, Zater said, adding that parents can also get financing for tuition fees through direct agreements with Contact.

Contact is also eyeing healthcare financing in 2H2022, Zater said — especially dental care. The company is currently in talks with several companies on financing medical equipment, and is set to finalize a factoring agreement with online dental marketplace Toothpick within days.

The company is also looking into agriculture financing, including for irrigation equipment, solar power plants on large farms, and seeds, Zater said.

This comes on the back of a strong first quarter for Contact Financial Holding: The company’s net income jumped 40% y-o-y to EGP 154 mn in 1Q2022. Net income from Contact’s financing business rose 46% y-o-y to EGP 141 mn. The company saw a near five-fold increase in new consumer finance, driven by growth in home interior, club membership, and education financing.

Leading the airwaves yesterday: Arab League Secretary General Ahmed Aboul Gheit discussed the GERD crisis, as well as the war in Ukraine and its impact on the region, in a wide-ranging interview with Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 1:39:33)

Ethiopia wants to “suffocate downstream countries Egypt and Sudan'' by filling the Grand Ethiopian Renaissance Dam without having reached an agreement with Cairo and Khartoum, Aboul Gheit told Moussa (watch, runtime: 3:06). The way the UN Security Council has dealt with the Ethiopian dam crisis is “regrettable”, he added.

The council has repeatedly declined to weigh in on the dispute despite concerted lobbying by Egypt and Sudan for a stronger stance against Ethiopia.

The crisis in Ukraine is the driving force behind US President Joe Biden’s mooted visit to the region, Aboul Gheit says (watch, runtime: 6:00), as Western allies attempt to shore up energy supplies to Europe to replace Russian fossil fuels. Europe is currently reliant on Russia for some 40% of its natural gas. “Regions able to provide gas supplies [to Europe] are the Gulf, West Africa and Algeria or Latin America’s Venezuela,” according to Aboul Gheit.

MEANWHILE IN TOURISM-

• State-owned hotels do allow women under 40 to stay alone, Assistant Tourism Minister Abdel Fattah Al Assi told Salet El Tahrir (watch, runtime: 11:48), in response to a debate on social media over hotels that allegedly have a policy of turning unaccompanied women away.
• Unaccompanied children under the age of 16 must show ID to enter archaeological sites and museums on weekends and national holidays, Secretary-General of the Supreme Council for Antiquities Mostafa Waziri told El Hekaya’s Amr Adib (watch, runtime: 7:58). The decision comes after a group of boys harassed two female tourists at the Giza Pyramids in May.

Hear that? It’s the sound of the foreign press with nothing to say about Egypt this morning. Take a breather and enjoy it while you can.

Alameda hospitals to get new equipment + operating systems in partnership with Medtronic: Alameda Healthcare has signed an MoU with the Egyptian arm of medtech firm Medtronic that will give Alameda hospitals access to Medtronic’s full portfolio of “cutting-edge medical devices, including newly launched and premium products,” according to a press release by Alameda (pdf). The agreement will also see Alameda’s four Cairo hospitals use Medtronic management software to boost their operational efficiency.

Focus on neurosurgery: Under the agreement, new Medtronic spinal surgery tech will be installed at Alameda’s As Salam International Hospital in Maadi, “contributing to [Alameda’s] growth and development as a center of excellence in the field of neurosurgery,” the release read.

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

• UNHCR and the Health Ministry have opened mental health clinics and inpatient wards in Cairo and Alexandria. The UN refugee agency donated 100 new beds to Abbaseya hospital, and gave office and electronic equipment to outpatient clinics. (UNHCR)
• President Abdel Fattah El Sisi has signed into law a bill regulating Hajj trips and setting up an online portal for the pilgrimage. (MENA)

Rival Libyan lawmakers are back in Cairo for another round of UN-brokered talks, which will end on 19 June, according to the Associated Press. The most recent round of talks concluded in April without reaching an agreement on a way forward to national elections.