AM — Egypt to sign gas agreement with the EU + Israel today.
Plus: It’s the biggest Fed day since March ’20

Good morning, ladies and gentlemen, to another commodities-heavy issue. Energy and wheat continue to drive the conversation at home and abroad. And with inflation being where it is, the all too critical Fed meeting today is continuing to weigh on markets, so strap in.

THE BIG STORY AT HOME- Is a potential gas export agreement with us, Israel and the EU coming today? EU Commission President Ursula von der Leyen and Israeli energy minister Karine Elharrar will be in Cairo today to potentially seal an agreement that would see an increase in the export of Israeli gas to Europe through our LNG facilities. We break down the details in the news well below.

WATCH THIS SPACE- US, EU energy diplomacy will feature heavily this summer as US President Joe Biden Joe is reportedly landing in KSA in mid-July for two days of meetings with Saudi officials, including with Crown Prince Mohammed Bin Salman, NBC reported, citing three sources with knowledge of the matter. Uncle Joe’s plans to visit Riyadh come as his administration fights to get domestic fuel prices under control, which have soared on the back of the war in Ukraine. Relations between the two countries have been strained since the beginning of Biden’s presidency when he labelled the country a “pariah” due to the 2018 murder of Saudi journalist Jamal Khashoggi.

Also on the agenda: Saudi-Israeli rapprochement. Axios reported last month that Biden could use the trip to push forward his administration’s efforts to get Saudi Arabia and Israel to normalize ties. The plan — which reportedly involves finalizing the transfer of Tiran and Sanafir to Saudi — has reportedly received the green light in Israel, potentially putting Biden in reach of his first major foreign policy breakthrough.

It’s a mini regional gathering in Jeddah: Biden will also meet with President Abdel Fattah El Sisi during his stay in Jeddah, as well as leaders of the other GCC nations, Iraq and Jordan, the president’s aides told the New York Times.

All eyes will be on the Fed this afternoon as the central bank makes perhaps its biggest policy decision since it intervened to stop the covid-induced market meltdown in March 2020. Following last week’s horrible inflation data, the market’s base case is now for policymakers to agree to a huge 75-bps rate hike — a step that was almost unthinkable just a few days ago, and if it comes to pass would be the biggest increase since 1994.

Market volatility continued yesterday: US stocks fell further into a bear market yesterday and the bond sell-off continued as traders awaited the Fed’s decision. The S&P 500 saw its fifth-straight day of losses, ending the day 0.4% in the red and extending its descent further into bear territory. In the bond market, yields on US two-years hitting their highest level since 2007 while 10-years rose towards 3.5%, a level not seen since 2011.

If history is anything to go by, the bears are here to stay: The current S&P 500 selloff — which has left the index 22% beneath its January peak — could take a lot longer to bottom out before recovering, analysts say, according to Bloomberg. “This drawdown could extend to 35% and last over a year before the trough is reached,” an analyst at Saxo Bank wrote in a note, comparing the current downturn to the dotcom bust and the bear market triggered by the oil crisis in 1973.

Chinese shares are alone in seeing gains this morning, with most other Asian indexes in the red ahead of the Fed meeting. Stock futures have US benchmarks rising at the opening bell, while over in Europe only the FTSE 100, the Euro Stoxx and the Dax will open higher.

Everyone in the global business press is Fed-watching this morning: Bloomberg | FT | WSJ | CNBC | Reuters | Associated Press.

WHAT’S HAPPENING TODAY-

The African Export-Import Bank’s (Afreximbank) annual meetings will take place today 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.

FOR TOMORROW- The EU-Egypt Sustainable Food Value Chain conference takes place at Grand Nile Tower Hotel tomorrow.

CIRCLE YOUR CALENDAR-

The first workshop in the government’s public consultations on its ambitious state ownership policy document begins next Sunday, according to the online platform for the consultations. Every Sunday and Tuesday will see workshops on specific industries, starting with an agriculture-focused workshop next Sunday and a food industries-focused workshop on Tuesday. Each Thursday is reserved for workshops with the House of Representatives or the Senate, along with think tanks.

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: We sit down with Ahmed Ashour, co-founder and CEO of infrastructure management platform Pylon, to discuss the ins and outs of how the company’s data-driven software is bringing more efficiency to our traditional infrastructure — electricity and water distribution — and helping reduce substantial revenue losses.

Egypt, Israel and the EU could sign an agreement to increase gas export across the Mediterranean in Cairo today. EU Commission President Ursula von der Leyen and Israeli energy minister Karine Elharrar will be in the capital today to seal the agreement, which is expected to pave the way for more Israeli gas to be exported to Europe via Egypt’s LNG facilities. “Tomorrow we’ll take an important step, with the signing of a trilateral agreement on gas between Israel, the EU and Egypt,” von der Leyen wrote on Twitter yesterday following a meeting with Israeli PM Naftali Bennett.

Expect to hear more details later today: Draft documents picked up by the press have suggested that the EU could help finance new energy infrastructure ⁠— which would come in handy as the government solicits funds for new LNG terminals ⁠— and work with Egypt and Israel to curb methane gas emissions.

The signing will coincide with a meeting of the East Mediterranean Gas Forum (EMGF), which will bring together officials from the eight founding countries, as well as observers the EU, the US and the World Bank.

This is precisely what we had been banking on as far as our regional gas hub ambitions go: Since its inception, the EMGF has been a key foreign policy initiative of Cairo — where the forum is headquartered — that would see us be the LNG export hub for the region’s gas reserves. Apart from Israel, Egypt has agreements with Cyprus and Greece on pipelines that would see their gas sent to our facilities for re-export.

Israel has ambitions to become a regional gas hub of its own: The EU is continuing to study the planned EastMed pipeline, which would ship 10 bn cubic meters of Israeli gas a year from the Mediterranean straight to Greece, von der Leyen said yesterday.

Gazprom reminded us yesterday of why the EU is so keen for EastMed gas: The Russian gas giant — which provides around 40% of Europe’s consumption — curbed supplies through the major Nord Stream 1 pipeline by 40% yesterday, blaming Siemens for malfunctions at its Baltic station. Russia has already cut off gas supplies to the Netherlands, Denmark, Poland and Bulgaria for failing to pay in RUB, threatening to intensify Europe’s energy crisis at a time when it is trying to reduce its reliance on Russian hydrocarbons.

Egypt saw foreign direct investment inflows fall 12% in 2021 but remained the second-largest recipient of FDI in Africa after South Africa, according to the UN. Figures in the 2022 World Investment Report (pdf) show that the country received USD 5.12 bn of FDI last year, down from USD 5.9 bn in 2020. Accounting for the USD 367 mn in outflows, Egypt received net FDI of USD 4.8 bn during the year, down from USD 5.5 bn in 2021.

FDI had been on an upwards trend until the pandemic hit, rising from USD 4.3 bn in 2013 to USD 9 bn in 2019.

Signs are looking more promising this year, with USD 22 bn in Gulf money expected to enter the country in what the report says “may boost FDI going forward.” The UAE, Saudi Arabia and Qatar pledged to provide bns of USD in investments and central bank deposits earlier this year to provide emergency liquidity and economic support to mitigate the fallout from Russia’s war in Ukraine.

Greenfield projects have begun to recover: The value of greenfield projects more than tripled to USD 5.6 bn last year, but remained far below the USD 13.7 bn pre-pandemic in 2019. Sixty-five new greenfield projects were announced during the year, up from 52 the year before but below the 140 seen in 2019 before the pandemic. The report name-checks Abu Dhabi-based Reportage Properties’ USD 1.5 bn real estate project with Al Ahly Sabbour as one of the major greenfield investments announced last year.

The Madbouly government has also been on a drive for fresh FDI, with officials 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.

This could see us buck a global FDI decline in 2022: Global greenfield project numbers have already fallen 21% in 1Q and the trend looks set to continue as the war in Ukraine, rising interest rates, and increasing fears of recession in the US and Europe weigh on the global economy. “The fallout of the war in Ukraine with the triple food, fuel and finance crises, along with the ongoing covid-19 pandemic and climate disruption, are adding stresses, particularly in developing countries,” the report wrote. Investor uncertainty and risk aversion could also put “significant downward pressure” on global FDI this year, it adds.

But until then, flows into Africa more than doubled to USD 83 bn in 2021 though much of this was due to a single transaction, without which FDI growth would have been more moderate. European investors remain the largest holders of foreign assets in Africa, with the UK leading the pack with USD 65 bn in investments, and France coming in second with USD 60 bn.

Most areas of the world saw a recovery of FDI inflows in 2021 following exceptionally low levels the previous year. Global flows rose 64% to USD 1.58 tn on the back of booming M&A and international project finance thanks to loose financial conditions and huge infrastructure stimulus packages.

Sawiris-backed Altus Strategies is merging with Toronto-listed gold royalty company Elemental Royalties in an all-stock transaction, the companies said in an LSE disclosure (pdf) yesterday. In what they’re dubbing a “merger of equals,” the transaction will see Elemental give Altus shareholders 0.594 shares in the new company for every Altus share they hold. This will give Elemental shareholders 52.9% of the firm and Altus shareholders the remaining 47.1%.

Bigger + more diverse: The merged entity will have a combined portfolio of 69, primarily gold assets across 13 top-tier jurisdictions, 11 of which are in production. The company will have an estimated combined revenue of USD 19.6 mn in 2022 and USD 24.6 mn next year.

Sawiris owns shares in both companies: Naguib Sawiris’ La Mancha fund holds significant stakes in Altus and Elemental. It acquired a 35% stake in Altus in 2020 and 9.3% of Elemental in April.

And backs the merger: La Mancha and other institutional investors from both sides are supporting the merger.

What they said: “Our enlarged scale and combined revenues will not only enhance our access to further high-quality royalties, but will also potentially reduce our cost of capital going forward,” Altus CEO Steven Poulton said. “As we succeed, we look forward to targeting medium-term capital distributions, as well as participating in further accretive consolidation opportunities in the royalty sector,” he added. Poulton will become the executive chair of the new company, while current Elemental chief executive Frederick Bell will be the CEO.

Altus has a footprint in Egypt: Altus subsidiary Akh Gold has four gold concessions across the Eastern Desert in Egypt, two of which were just awarded to the firm last month. The company said the two blocks cover 349 sq km, bringing the company’s total land holding to 1.9k sq km. The company said last month that it made multiple “high grade” gold discoveries of up to 100g of gold per ton.

The market reaction: Altus shares fell 5.4% in London yesterday while Elemental stock slipped 0.7% in Toronto.

SODIC subsidiary to borrow EGP 600 mn from Ahli United Bank: Ahli United Bank has agreed to provide SODIC subsidiary Six of October For Development & Real Estate Projects (SOREAL) with a EGP 600 mn discounting facility, enabling the real estate company to borrow against future repayments from its East Cairo project, Eastown Residences, according to a statement (pdf) yesterday.

Why go through with it: “This agreement comes in line with SODIC’s continuous efforts to diversify our funding sources to enable growth and support ongoing operations while maintaining the strength and liquidity of our balance sheet and financial position,” SODIC’s CFO Omar Elhamawy said.

Account receivables financing: A primer. Accounts receivable financing is a short-term funding method that allows companies to receive early payment of future income. It can come in handy when there’s a timing mismatch between the cash inflows and outflows of a company, giving it access to early payments.

A group of investors has applied to obtain a fintech investment banking license from the Financial Regulatory Authority (FRA) for an M&A-focused firm, the investors’ legal advisor, Dreny & Partners, said in a press release (pdf). The investors include Mohamed Aboulnaga Nagaty, founder of M&A advisory outfit Pie Consulting and co-founder of Halan (now MNT-Halan), founding partner of Amer Group Omar Amer, and Omar and Adham Wagdy, founders of Basita Holding for Financial Investments.

The group is also working to establish a holding company that will encompass Pie Consulting and its subsidiary Exits, an online M&A marketplace Pie recently acquired, Dreny & Partners founding partner Moataz El Dreny told Enterprise. El Dreny expects the license to be obtained within a couple of months.

IN OTHER FINTECH NEWS-

• Fintech company Raqamyat is launching its operations and will offer e-payment solutions for e-commerce businesses and online retailers, it said.
• Fintech player Lucky received the greenlight from the Central Bank of Egypt to launch its Lucky One Card, which allows customers to access cashback rewards, pay mobile bills, and withdraw and deposit funds. (Statement, pdf)

EDITOR’S NOTE- Corrected on 16 June, 2022

An earlier version of this story had identified Mohamed Aboulnaga Nagaty as the CEO and co-founder of Egypt-based Klivvr. The story has been updated to reflect the fact that Nagaty no longer holds this position.

Lafarge has appointed Jimmy Khan (LinkedIn) as the company’s new Egypt CEO, succeeding Solomon Baumgartner Aviles (My Morning Routine), according to a statement (pdf). Khan has been the CEO of Lafarge Zambia since 2018, and previously served as CEO for Lafarge Mauritius and Seychelles. He has worked with the group for the past 18 years.

Global markets could miss out on three consecutive Ukrainian wheat harvests, Ukraine’s Agriculture Minister Mykola Solskyi told Reuters. “We cannot take out [to export] last year’s crop, we cannot harvest and take out the current one, and we do not particularly want to sow the next one,” Solskyi said. Ukraine’s wheat is usually sowed in the fall and harvested during July and August, suggesting that the shortage could last until mid-2024.

What about this season’s crop? Ukraine is currently unable to harvest at least 5 mn tons of wheat from its 2022 crop, which have been planted on currently-occupied territory and cannot be harvested. Ukraine has some 30 mn tons of grain trapped in its silos, taking up half of the grain storage capacity that is still under its control. And with Russia blocking its ports, the best part of the 60 mn tons of grain and oilseed surpluses could end up trashed with nowhere to go.

The problem: Russia’s blockade of the Black Sea ports has forced Kyiv to turn to rail, road, and river transport to get its grain out of the country. Recently, Ukraine started exporting grain via two routes through Poland and Romania, but the process is slow and expensive due to logistical difficulties. A shipment of Ukrainian wheat will soon make its way to Egypt from Romania, marking the first of its kind since the war broke out.

Is the Baltic Sea the answer? Exporters in Ukraine have opened a new route via the Baltic Sea in a step that could help get agricultural commodities out of the country, according to Bloomberg. A shipment of Ukrainian corn sent from Poland arrived in Spain on Monday, raising hopes that the country will begin to clear its huge backlogs.

All of this has heightened global food insecurity …: Russia and Ukraine provide around a third of the world’s wheat and Prior to the war, Ukraine’s monthly grain exports used to reach 6 mn tons, but that number has been significantly slashed since the war broke out. The country exported 300k tons of grain in March and 1 mn tons in April. Solskyi is expecting exports to exceed 2 mn tons this month.

What this means for us: Russia and Ukraine together accounted for around 80% of Egypt’s wheat imports. 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 said this week. The prospects of the continued war has us looking elsewhere for wheat, including from India — with whom we could still do trade in a potential wheat-for-fertilizer pact that has drawn criticism from some other nations.

Both India and Egypt are backing policies that would see them bar potential exports of critical wheat crops that is being opposed at the WTO meetings, with us extending our own ban on wheat exports.

G7 countries have restated their support to help ease Egypt’s food crisis: “The G7 is standing by their commitment to support Egypt through this crisis caused by Russia’s war,” G7 ambassadors to Egypt said in a statement yesterday. The group is increasing support to the World Food Programme’s operations in Egypt and is offering bilateral assistance, they said, adding that they are “closely consulting” with the government on the crisis.

Goodbye wheat, hello sunflower? Ukrainian farmers could soon substitute their wheat crops with something lighter — making it cheaper to ship — and more expensive to sell, like sunflower, which farmers are already substituting for corn crops, the minister said.

The government’s auto strategy took center stage on the airwaves last night: Prime Minister Moustasfa Madbouly’s speech on the government’s automotive strategy and a number of MoUs signed on the sidelines led the conversation on the airwaves last night, with Masaa DMC (watch, runtime: 1:49), Al Hayah Al Youm (watch, runtime: 8:01), Yahduth Fi Masr (watch, runtime: 8:51), and Ala Mas’ouleety (watch, runtime: 30:15) all covering the news.

The drive to localize: Speaking at the East Port Said Industrial Zone, the PM said that the government’s goal is to expand the local production of vehicles and localize supply chains by supporting domestic feeder industries. The country has spent USD 4 bn on importing cars over the past year, which is not sustainable should car ownership continue to rise in the coming years, he said.

One of the PM’s advisors gave a bit more clarity on Yahduth Fi Masr, telling show host Sherif Amer that incentives will be provided based on the level of investment and production, the quantity of local components used, and the adoption of eco-friendly technologies (watch, runtime: 8:51).

We’ve already seen some parts of the strategy in action: Changes to customs duties on hundreds of imported goods were passed by the House earlier this month. Included in these were tax breaks for manufacturers who source at least 60% of components from local suppliers, and a 2% tariff on equipment used for EV charging stations and natgas filling stations, as well as a number of components used in electric buses.

Want a primer on the strategy and what auto players want to see from it? Read our in depth Inside Industry poll here.

A number of agreements were signed at the event:

• A new car assembly factory: Egyptian International Motors, the Suez Canal Economic Zone (SC Zone), the Sovereign Fund of Egypt (SFE) and the East Port Said Development Company (EP) signed an MoU to explore building a factory capable of producing 75k cars a year.
• The study that could make it happen: UK engineering consultancy PAC Group signed an MoU to conduct a feasibility study on the proposed factory.

Fury as the Pharaohs collapse in 4-1 loss to South Korea: The national team’s 4-1 loss to South Korea got the talk show heads furious, with Ala Mas’ouleety’s Ahmed Moussa slamming the team for their bad performance and describing the game as a “disgrace” (watch, runtime: 4:54). He said no resignations were yet made from the Egyptian Football Association (EFA) after a week of disappointing performances, the latest being the Pharaohs' embarrassing 2-0 loss to Ethiopia. The EFA will announce several decisions on Thursday, Moussa said, expecting the association to name a new coach for both the national and olympic football teams among other decisions. Al Hayah Al Youm (watch, runtime: 19:03), Masaa DMC (watch, runtime: 11:22), and Kelma Akhira (watch, runtime: 7:23) also covered the result.

Uncle Joe goes to Riyadh: Yesterday’s news that President Joe Biden will make his first visit to the region next month got wide coverage: Kelma Akhira (watch, runtime: 19:20), Ala Mas’ouleety (watch, runtime: 4:48) and Yahduth Fi Masr (watch, runtime: 3:23).

There’s nothing to see here this morning, folks. Move along.

Telecom Egypt (TE) and Aqua Comms inked a crossing and landing agreement for the Europe Middle-East India Connect 1 (EMIC-1) subsea cable in Egypt. The cable will connect Barcelona to Mumbai and transit Egypt on land between Ras Ghareb and Port Said, TE said in a statement yesterday.

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

• Petcare provider Vetwork has raised a bridge round from members of the Alexandria Angel Network and undisclosed Saudi investors, according to a release (pdf).
• Amazon Egypt is launching its premium membership program Amazon Prime, offering delivery without charge, discounts and access to its streaming and gaming services. (Statement, pdf)
• US IT infrastructure provider Kyndryl will provide cloud services to Qalaa Holdings’ Taqa Arabia. (Press release)
• Authorities have released 24 pretrial detainees charged with joining an outlawed group and disseminating false news in separate cases, human rights lawyer Khaled Ali wrote on social media. (Facebook)
• An Egyptian-German archeological mission uncovered granite stone blocks from King Khufu’s reign in Heliopolis. (Statement)