Wednesday, 22 June 2022

AM — KSA firms sign to invest USD bns in Egyptian energy, tech, food, pharma and more

TL;DR

WHAT WE’RE TRACKING TODAY

It’s a packed issue today, ladies and gentlemen, as we hit the dash to the weekend. Our friends from the GCC continue to come through for us, with KSA leading the pack.

THE BIG STORY here at home: the Saudis making it rain. We bring you an unofficial KSA-themed issue this morning, as the local press digests the news of the USD 7.7 bn worth of Saudi investment that was signed off on yesterday to coincide with Crown Prince Mohammed bin Salman’s trip to Cairo.

MbS bid us farewell with a promise that the KSA will lead on bringing some USD 30 bn of investments. We have all the details below.

We also have an approved budget for the next fiscal year, courtesy of the House of Representatives, who put their grandstanding aside and got the job done before 30 June.

PRIVATIZATION WATCH- Public consultations continue: The government yesterday held the second of a series of public consultations over its state ownership policy document laying out privatization plans, according to a cabinet statement.

This time, the focus was on food industries, with industry reps laying out their recommendations on how best and where to start bringing the private sector on board as well as their views and issues.

Look for an expanded coverage of the sessions this week and in our weekly industry features.

Also guiding the conversation locally is the prospect of the Central Bank of Egypt raising interest rates tomorrow. Finance Minister Mohamed Maait yesterday said he is “worried” about the economic impact of any potential further rate hikes. A majority of analysts and economists we surveyed expect policymakers to leave rates unchanged, according to our customary poll, More on that in our Economy section, below.


THE BIG STORY ABROAD Are we or are we not in contraction territory? The chorus of voices predicting an oncoming recession in the US and Europe is getting louder, with Goldman Sachs, tech bn’aire Elon Musk and economist Nouriel Roubini all joining in this week, Bloomberg reports. Goldman sees a 30% probability of entering a recession over the next year, while Roubini expects a US recession by the end of the year. The Tesla boss said he would lay off 10% of salaried employees over three months in anticipation of the downturn.

Germany is also likely facing a recession — particularly if Russia severs all gas supplies into the country as it has seemingly been threatening to do lately, an industry body said in a statement cited by Reuters.

Finance Minister Mohamed Maait attempted to address that question for Egypt. You can catch highlights in the news well below.

MARKET WATCH-

The US wants to impose a price cap on Russian oil: The US is in talks with its allies to apply a price cap on Russian oil in efforts to “push down the price of Russian oil and depress Putin's revenues, while allowing more oil supply to reach the global market,” Treasury Secretary Janet Yellen said yesterday (watch, runtime: 1:09).

The EU isn’t happy: Introducing a price cap would force the EU to once again put up its sanctions package up for discussion, after spending weeks bringing all 27 nations onboard, people familiar with the matter tell Bloomberg. Italy appears to be the exception, saying a price cap is the “only solution” to rising prices, according to Bloomberg.

Price cap or no price cap, we could be looking at three to five years of oil market turbulence as investors continue to shy away from the sector, Exxon Mobil CEO Darren Woods said during the Qatar Economic Forum, according to Bloomberg. Woods said that oil companies will need time to up investments and thereby increase supply.

Could the region help ease the squeeze? Middle Eastern refiners are working to expand their capacity over the next year, Bloomberg writes. The International Energy Agency now forecasts refiners to process 8.8 mn barrels of crude per day next year, 1 mn more than in 2019. This would be enough to plug the shortfall of diesel in Europe, the business newswire writes.

CIRCLE YOUR CALENDAR-

The two-day Aswan Forum for Sustainable Peace and Development concludes today.

The Big 5 Construct Egypt (pdf) construction industry exhibition runs from 25-27 June at the Egypt International Exhibition Center (EIEC) in Cairo.

Amcham AGM next week: Our friends over at Amcham will hold their annual general meeting on Monday 27 June at the St. Regis Cairo Hotel. Finance Minister Mohamed Maait will address the gathering.

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

enterprise

*** 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 an operator fund hopes to harmonize Egypt’s healthcare industry: Investment banking outfit Elevate Capital’s Elevate Healthcare fund is one of the region’s largest specialist funds of its kind and aims to help fill the gaps in Egypt’s healthcare industry. We sat down with CEO Tarek Moharram to talk about the fund’s strategy, which involves nontraditional consolidation methods, franchising leading global healthcare institutions and investing in tech that can disrupt the industry.

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INVESTMENT WATCH

USD 8 bn from KSA and much more…Possibly USD 30 bn more.

Egypt signed 14 investment agreements with Saudi Arabia worth USD 7.7 bn during Crown Prince Mohamed bin Salman’s visit to Cairo yesterday, the Madbouly cabinet said in a statement yesterday. The agreements cover key sectors including energy, tech, food, and pharma and were signed during a meeting of Egyptian and Saudi companies and key officials.

And there’s plenty more where that came from: Saudi Arabia intends to “lead” USD 30 bn in investments in Egypt, the two countries wrote in a joint final communique marking the end of bin Salman’s visit, without giving any further details.

REMEMBER- Saudi Arabia recently pledged USD 15 bn to support Egypt: In March, Saudi deposited USD 5 bn with the Central Bank of Egypt (CBE), to help shore up our finances amid global fallout from Russia’s war in Ukraine. In parallel, the Saudi sovereign wealth fund said it was looking to invest USD 10 bn in Egypt’s healthcare, education, agriculture and financial services sectors.

Here’s the breakdown on where that USD 7.7 bn of KSA money is headed:

ENERGY- Ajlan & Bros to build oil storage complex: Saudi conglomerate Ajlan & Bros inked a USD 3.3 bn agreement to build a facility for storing petroleum products with the Egyptian Arab Supply Chain Group Company, according to Arab News. The storage complex made up more than 40% of the value agreements signed with KSA yesterday. The company signed six agreements worth a total of almost USD 5 bn yesterday, Chairman Ajlan Al Ajlan told CNBC Arabia.

One of the largest onshore wind farms in the world: Saudi Arabia’s ACWA Power and Hassan Allam Holding signed a 25-year power purchase agreement (PPA) with the Egyptian Electricity Transmission Company (EETC) to develop a 1.1 GW wind farm in the Gulf of Suez, it announced in a statement and in a Tadawul filing. The USD 1.5 bn project will be one of the largest onshore wind farms in the world, and the largest in the Middle East, the company said.

The details: The project will be built under a build-own-operate framework, and ACWA will also be responsible for obtaining financing, it said. Hassan Allam will work alongside the company to prepare the site and secure financing.

The project is expected to reach financial close by 4Q 2024 and begin commercial operations by the end of 2026.

KSA industrial conglomerate Alfanar is also getting involved in Egypt’s wind + green hydro sectors: Alfanar signed an agreement with the Arab Organization for Industrialization (AOI) for the production of wind energy and green hydrogen, the cabinet said.

TECH + FINTECH- Benya and Al Fanar to set up tech-focused JV: Al Fanar signed an agreement with IT infrastructure contractor Benya Group to set up a USD 200 mn joint venture in Saudi Arabia that will focus on data centers, smart cities, and cybersecurity, Benya Chairman Ahmed Mekky told Bloomberg Asharq. The companies plan to increase investments in the next five years to reach USD 1 bn, he added. The final agreement will take place in 3Q, and the company will begin operating before the end of the year. Benya had previously told Enterprise it plans to set up a Saudi investment arm by the end of 2022.

Fawry for remittances? Saudi business development company T2 signed an investment agreement with Fawry to develop fintech solutions for trade and money transfers between the two countries, the cabinet statement read.

Also in fintech: Saudi VC Khwarizmi Ventures and local startup Khazna signed an investment agreement that could see Khazna expand to provide mobile financial services for employees in the kingdom, cabinet said.

PHARMA- Pharco to set up pharma complex in Saudi: Egyptian pharma player Pharco will establish a USD 150 mn pharma manufacturing complex in Medina, Chairman Sherine Helmy told Bloomberg Asharq. The company will start working immediately to set up the city, and has plans to produce medicines and vaccines. Production is expected to begin within two years, he said.

FOOD- Saudi’s Albaik might be coming here: The fried chicken chain’s products could be manufactured locally by the Egyptian subsidiary of Saudi’s Halwani Bros and sold to local franchisees, the company said in a filing to the Saudi stock exchange. Halwani Bros signed a non-binding agreement with Albaik sister firm Aquat Food Industries on the possible partnership. Aquat is conducting a technical and logistical evaluation of Halwani Bros’ factories in Egypt, with investments for the plan estimated at EGP 1 bn (USD 53 mn).

More food investment coming our way: Hadhim Dates plans to invest here and work with private-sector companies to cultivate palm trees in Al Wadi Al Gadeed governorate, head of the company Abdulaziz Al Tuwaijri told Al Borsa.

And that’s not all, folks: The Saudi investment ministry tweeted a handy infographic of every company involved in the investments announced yesterday, and we expect more details to trickle through in the coming days.

The story is getting coverage in international business press, including: Reuters | Bloomberg | The National | AP.

BUDGET WATCH

No more grandstanding. And right in the nick of time.

MPs give the green light to FY 2022-2023 budget: The House of Representatives approved in a plenary session yesterday the state’s budget for the upcoming fiscal year that begins in July. The final spending plan passed yesterday is unchanged from the one Finance Minister Mohamed Maait and Planning Minister Hala El Said presented to the House last month, despite MPs raising concerns about borrowing plans, social safety net allocations, and the government’s forecasted wheat and oil prices.

Breaking down the budget: The budget — which was redrafted in March on instructions from Prime Minister Moustafa Madbouly following Russia’s invasion of Ukraine — sees the government spending EGP 2.07 tn in the upcoming fiscal year, up 12% y-o-y. Revenues are expected to increase 11% to EGP 1.52 tn, which will widen the budget deficit to EGP 558.2 bn from EGP 475.6 bn in FY 2021-2022. The government plans to increase healthcare and education spending, while rising commodity prices will force our hand and push up the subsidy bill. The budget is prioritizing bread subsidy spending, Maait told MPs yesterday.

MPs had complained that gov’t wasn’t planning to spend enough — and then that it was spending too much: Members of the House Planning and Budgeting Committee had suggested that spending plans on commodity subsidies and social safety programs were not sufficient, while MPs also raised concerns that the government’s forecasted wheat price was too low considering current market prices. Earlier this week, the criticism took a different direction, with some MPs saying the government plans to borrow and spend too much and should double down on austerity measures to cut the public debt.

It’s official: No mud tax for another year — and likely another year after that. The House gave its final approval to suspend the 14% agricultural land tax (known as “mud tax”) for another year to July 2023, and granted the option to cabinet to extend the suspension again until July 2024. A final vote on the bill was delayed earlier this month, after a number of MPs urged that the tax be postponed for another three years rather than just one in a bid to support farmers amid the current food supply squeeze. The House approved in 2020 a two-year suspension of the tax, extending an existing three-year suspension approved in 2017.

The House also approved the state’s sustainable development plan for FY2022-2023… Catch our breakdown of the key spending targets in the plan for education and infrastructure development.

WHAT’S NEXT- President Abdel Fattah El Sisi is expected to ratify the budget before the start of the fiscal year on 1 July.

ECONOMY

Recession is “inevitable” if the economy continues in this direction -Maait

We‘re not in a recession — but the risk is very much there, says Maait: “We are not yet in a recession” despite the World Bank, IMF, and others have reduced their expectations for economic growth, Finance Minister Maait said in an interview with Bloomberg TV (watch, runtime: 10:02) on the sidelines of the Qatar Economic Forum in Doha. “But if the current direction continues and even escalates, I believe that inevitably we will go for recession,” Maait said, without putting a timeframe on the prediction.

Maait pinpointed “elements leading us to recession,” including years-high inflation, high financing costs, food security issues, concern about the war in Ukraine, and pressure on many developing countries globally.

Maait is “worried” that the CBE could hike rates yet further tomorrow: Maait expressed his concern that the central bank could push interest rates yet higher to curb inflationary pressures. “Yes, I am worried [about further significant rate hikes] and I hope that we can let the Egyptian economy grow. The high cost of financing will be a problem for industry, for the economy.”

A majority of analysts and economists we surveyed expect central bank policymakers to leave rates unchanged when they meet tomorrow to discuss interest rates. A separate poll from Reuters suggests the CBE could enact a 50 bps rate hike in the face of persistent inflationary pressures.

Each 100 bps hike in rates costs the public purse around EGP 30 bn, Maait told Bloomberg Asharq in a separate interview (watch, runtime: 11:24).

But inflation needs to be brought under control: “Inflation control is part of the core business of the central bank,” Maait said, adding that inflation has not peaked and he expects prices to continue to rise on the back of higher costs for imported food and fuel.

ALSO FROM MAAIT-

Green bonds don’t come cheap: Maait reiterated his statements from earlier this month that green bonds cost the country more than traditional eurobonds, Maait said during a panel at the Qatar Economic Forum organized by Bloomberg (watch, runtime: 20:58) . “There was no advantage from green bonds, it was the opposite. Egypt had to do a lot of additional work [which] cost me more than the traditional eurobonds,” he said. Reuters also had the story.

ENERGY

Egypt, Lebanon + Syria sign gas import agreement

We’re one step closer to shipping natural gas to Lebanon: Egypt, Lebanon and Syria have inked an agreement to import gas from Egypt to Lebanon under an emergency US-backed plan to ease the country’s electricity shortage, the three countries announced at a press conference yesterday.

The pact will see Egypt ship 650 mn cubic meters of gas per year via the newly-renovated Arab Gas pipeline, which transits Jordan and Syria into northern Lebanon. The gas shipments would allow an extra four hours of electricity a day to be generated in Lebanon, which has been suffering crippling electricity shortages after its central bank lifted fuel subsidies last year as the country grapples with a devastating economic crisis.

The sides did not disclose how much Lebanon will be paying for the gas but Magdy Galal, chairman of Egypt’s state-owned gas company EGAS, said that Egypt would “offer an appropriate and preferential price.”

It’s all in Washington’s hands now: The US government and the World Bank still need to give their blessings to the agreement before the gas can begin to flow, Lebanon’s caretaker energy minister Walid Fayad told Reuters. Washington will assess whether the arrangement is in breach of its sanctions on the Syrian government, while the Bank is waiting on Beirut to implement electricity reforms before it agrees to help finance the initiative. “As soon as they [the World Bank and the US] approve the financing we're good to go,” Fayad said.

enterprise

DEBT WATCH

EFG Hermes closes the first securitization for an Egyptian mortgage firm

EFG Hermes has closed an EGP 651.2 mn securitized bond issuance on behalf of mortgage provider Bedaya, it said in a statement (pdf) yesterday. The eight-tranche bond is backed by a mortgage portfolio of around EGP 1.02 bn, and is the first ever for a real estate mortgage firm in Egypt, according to the statement. This is the first issuance of a EGP 3 bn securitization program, which EFG expects to complete in the next three years depending on the business’ operational needs, sources tell us.

Who bought in? The National Bank of Egypt (NBE), Banque du Caire (BdC), and Baraka Bank, Mai Hamdy, head of debt capital markets at EFG, told us.

What they said: “We are proud to have advised on the first real estate mortgage securitization transaction in the Egyptian market, which has been met with extensive interest from investors, bearing in mind the almost 10-year tenor notwithstanding the current market uncertainty,” Hamdy said.

By our count, Bedaya’s offering takes the total value of securitized bonds sold this year to almost EGP 11.5 bn. That’s nearly three-quarters of the total value of EGP 15.8 bn taken to market last year.

Advisors: EFG Hermes acted as the sole financial advisor, sole transaction manager, bookrunner, underwriter, and arranger on the issuance. NBE and BdC acted as underwriters, while Baraka Bank was the subscription bank. The legal advisor for the issuance was Dreny and Partners and the auditor was KPMG.

About Bedaya: The mortgage provider is a joint venture between EFG Hermes Holding, Talaat Moustafa Group, and GB Capital.

enterprise

M&A WATCH

Chimera makes official offer for Beltone Financial

The Financial Regulatory Authority (FRA) has received an official offer by Chimera Investments to acquire up to 90% of Beltone Financial, the regulator said in a disclosure to the EGX (pdf) yesterday. The Abu Dhabi-based investment firm has offered to purchase up to 417.1 mn shares in the financial services company for EGP 1.485 a piece in a mandatory tender offer, the regulator said, valuing the company at around EGP 690 mn by our math. Chimera will need to acquire a minimum 51% stake in Beltone for the offer — which will trigger an MTO — to go through, the statement reads.

Is WM Consultancy out of the picture? This comes a week after Chimera first lodged its interest in acquiring Beltone with a bid that offered a 10% premium on the offer made by WM Consultancy a week earlier. The consultancy — helmed by a former Beltone exec and representing an unidentified consortium of investors — had offered to purchase the shares for EGP 1.35 apiece. The financial services firm initially gave WM the go-ahead to start due diligence but asked the FRA to halt the process after receiving Chimera’s rival bid.

The regulator is mulling it over: The FRA is currently studying Chimera’s offer, it said yesterday.

STARTUP WATCH

Local AI startup snags USD 2 mn+ pre-series A round

Local AI tech startup Synapse Analytics has raised over USD 2 mn in a pre-series A round, it said in a press release (pdf). The round was led by Egypt Ventures, with participation from Cloudera founder Amr Awadallah, Africa Platform founder Simon Rowlands, and existing investors.

Synapse wants to accelerate AI adoption for companies, aiming to “building trust between AI and the businesses trying to adopt machine learning in their operations,” the statement read. Founded by Ahmed Abaza and Galal El Beshbishy in 2018, the company advises firms in industries including financial services, logistics and fast-moving consumer goods (FMCG) on how best to infuse AI into their businesses.

ICYMI- Synapse co-founder Ahmed Abaza participated in our recent roundtable discussion on how companies can best leverage their AI potential. Read it here, or listen to the discussion as a podcast on our website (runtime: 44:01) or via your favorite podcasting platform.

EARNINGS WATCH

Arab Investment Bank (aiBank) bounced back from losses last year to generate a net income of EGP 140 mn in 1Q2022, it announced in a statement (pdf) yesterday. The bank had reported a EGP 1 mn loss in the same period in 2021 but entered the black this year on the back of a 41% rise in net interest income. The bank also attributed the improved performance to its restructuring and EFG Hermes and the Sovereign Fund of Egypt’s acquisition of a controlling stake late last year. The bank’s growth in profitability “reflects the success of the bank's new strategy,” said CEO and Managing Director Tamer Seif El Din.

enterprise

LAST NIGHT’S TALK SHOWS

It was Saudi Arabia-mania on the airwaves last night: News of the USD 7 bn and more in investment agreements signed between Egypt and Saudi Arabia on Crown Prince Mohammed bin Salman’s visit to Cairo dominated the airwaves last night. Kelma Akhira (watch, runtime: 14:48), Masa’a DMC (watch, runtime: 7:43), and Ala Mas’ouleety (watch, runtime: 6:16) were among those with in-depth coverage.

A privatization tie-in: Almost all the agreements signed yesterday were between private Egyptian and Saudi firms, General Authority for Investment and Freezones (GAFI) chief Mohamed Abdel Wahab told Kelma Akhira’s Lamis El Hadidi (watch, runtime: 14:48). The state’s role was to “witness and support,” Abdel Wahab said.

The fresh economic agreements are a “natural outcome of historical trade relations between the two countries,” Saudi Ambassador to Cairo Osama El Nokaly told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 6:16).

EGYPT IN THE NEWS

The international press had plenty to say this morning on the USD bns in new Saudi investments headed our way (catch all the details in the newswell, above).

Beyond that, Reuters reports that Russia’s war in Ukraine is taking its toll on Egypt’s Sharm El Sheikh, once a top destination for tourists from both countries.

And UK Foreign Secretary Liz Truss told lawmakers she is working on securing the release of imprisoned dual-national activist Alaa Abdel Fattah, according to the BBC.

ALSO ON OUR RADAR

Abou Ghaly looks to EBRD for EV funding: Abou Ghaly Motors (AGM) could receive up to EGP 175 mn (EUR 9 mn) from the European Bank for Reconstruction and Development (EBRD) to fund the acquisition of electric vehicles (EVs), according to the lender’s website.

The money will finance the electrification of AGM’s entire London Cab fleet, Chief Operating Officer Tamer Kotb told Enterprise. The cabs are used to provide taxi services as well as airport transfers in Cairo, Sharm El Sheikh and Hurghada. The company aims to transform 350 cars into EVs by November of this year ahead of the COP27 summit in Sharm El Sheikh, Kotb said.

The total cost of the project is expected to be EGP 325.5 mn: The EBRD said that its loan is expected to be joined by an investment grant from another international donor, while AGM will contribute some of its own capital, Kotb told us. The loan has passed the EBRD’s concept review, and is now pending final review in July.

IN COMMODITIES- Portugal has become the latest country to be added to Egypt’s list of wheat suppliers: Egypt has added Portugal as a country of origin for wheat imports, Supply Minister Al El Moselhy reportedly told Reuters. This comes a few months after Egypt first added India to the list as it went in search for new suppliers following the outbreak of war in Ukraine.

India is still considering exporting up to 500k tons of wheat to Egypt and Jordan and exempting the two countries from its ban on wheat exports due to rising food insecurity, officials in the country’s food ministry told S&P Global Commodity Insights.

PLANET FINANCE

Powered by
EFG Hermes - https://efghermes.com/

Africa’s rich are about to get richer, thanks to tech: As African businesses ramp up their use of technology to raise efficiency, the wealth of business owners is also set to climb, according to Bloomberg. The tech-savvy second generation of family-owned firms are driving wealth accumulation as they take over management. "There’ll be a boom of ultra high net worth individuals in Africa over the next five to 10 years," said Faizal Bhana, the director for the Middle East, Africa and India at Jersey Finance. "They’re still farming, they’re still doing infrastructure projects, but increasingly using technology."

Domino’s in high demand in Saudi: Shares offered in the USD 325 mn Saudi IPO of Alamar Foods, which operates the Middle East Domino's Pizza franchise, were fully booked within hours of subscription opening, Bloomberg reports.

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THE CLOSING BELL-

The EGX30 rose 0.2% at yesterday’s close on turnover of EGP 642 mn (23.3% below the 90-day average). Foreign investors were net sellers. The index is down 18.9% YTD.

In the green: Heliopolis Housing (+4.7%), e-Finance (+2.2%) and Housing and Development Bank (+2.2%).

In the red: Abu Dhabi Islamic Bank Egypt (-4.0%), Telecom Egypt (-3.0%) and Eastern Company (-1.7%).

Asian markets are checkered in early trading this morning, while futures suggest the major European and US benchmarks are set to open in the red later on today.

DIPLOMACY

Egypt-Qatar business ties continue to grow: Trade and Industry Minister Nevine Gamea invited Qatari companies to visit Egypt to discuss potential investments during talks in Doha this week that saw the two sides revive a joint business council eight years after it was suspended, the ministry said in a statement Monday.

We’re expecting bns of USD in fresh investment from the Gulf state: Qatar has joined the UAE and Saudi Arabia in offering to invest bns of USD to help Egypt’s economy and public finances withstand the impact of the war in Ukraine and rising interest rates. The Gulf state said in March that it would invest USD 5 bn, and earlier this month a number companies, including two of the country’s biggest real estate developers Ezdan Holding and Qatari Diar⁠, expressed interest in investing.

ALSO IN DIPLO-

  • Egypt holds EastMed security talks: Defense Minister Mohamed Zaki discussed security issues in the Eastern Mediterranean with his Greek and Cypriot counterparts in Cairo on Monday. (Statement)
  • An Egyptian delegation is in Iraq to study the establishment of a water treatment plant on the Euphrates River similar to our EGP 18 bn Bahr El Baqar wastewater treatment plant. (Cabinet statement)
  • (A trade delegation of execs from the local textile and clothing industries made a rare visit to Israel. (AFP)
hardhat

How an operator fund hopes to harmonize Egypt’s healthcare industry: Enterprise sits down with Elevate’s Tarek Moharram. Investment banking outfit Elevate Capital’s fund, Elevate Healthcare, is one of the region’s largest specialist funds of its kind. The fund is looking to capitalize on its managers’ expertise in strategic management in healthcare to help fill the gaps in Egypt’s healthcare industry, accelerate the adoption of disruptive technologies, and introduce a more synergetic approach to the industry that can see patients receive affordable, end-to-end healthcare services.

The fund, which has a target size of USD 380 mn, aims to invest in verticals spanning hospitals, pharma, medical education and healthtech in Egypt and sub-Saharan Africa. The fund is looking at a USD 150 mn first close, of which USD 75 mn has already been raised, Moharram tells Enterprise. The remaining USD 75 mn have been secured as soft commitments, he says.

Here’s what’s different about this fund: Elevate Healthcare is the only operator fund in Africa. Operator funds are managed by people who have management experience in the sector in which they aim to invest, giving them direct knowledge of the growth cycles and funding stages of their businesses, Operator Collective writes. These funds tend to be much more involved in helping businesses scale up than regular investors or funds, it adds. Elevate Healthcare already has a private equity track record with “strategic management” of fast-growing diagnostics outfit Nile Scan & Labs Co, which delivered a four-year revenue CAGR of 38%.

The fund knows what the industry needs — and that’s primarily more specialized beds. The healthcare sector is suffering from a massive shortfall in hospital bed capacity, Moharram tells Enterprise. Egypt currently has 1.3 beds per 1k citizens, based on the latest data from 2019. That’s well below the 4.4 beds per 1k capita for most OECD countries during the same year. “The missing beds are not just generic hospital beds, it’s a specialized oncology bed for cancer treatment, or a neurosurgical bed or a cardiac bed,” Moharram said.

That’s why Elevate is focusing on building centers of excellence, rather than hospitals: Bringing international franchises that build specialized centers of excellence for specialties like cancer treatment and cardiovascular health is crucial to Elevate’s strategy. The fund has already signed technology transfer agreements with institutes like leading cancer research hospital Gustave Roussy and several other international institutions with different specializations, to help build branches of these leading institutes in Egypt under a single holding company it plans to establish. These agreements span five to seven years, and will see these facilities share know-how in everything from design and clinical processes to admin and training.

It’s not really consolidation as we know it: While Elevate Healthcare is still making acquisitions, it is mostly focusing on acquiring brownfield hospitals that it can then develop into centers of excellence, Moharram explained. “We don’t want to go through the full process of construction and licensing so we’d like to have a little head start,” he said. This diverts from the trend of consolidations that most healthcare players in Egypt have veered towards in the past years, which saw many healthcare players consolidating and directly acquiring other local clinics and hospitals. The healthcare sector accounted for the bulk of M&A activity in terms of value last year, with some USD 1.6 bn in M&A taking place, according to a report by Baker Mackenzie.

The logic is to invest in adding capacity, rather than consolidating existing capacity. “We want to add capacity to the system, so we’d rather be adding beds to the ecosystem than just consolidating the available beds,” Moharram said. This segment will account for the bulk (40%) of the fund’s investments, he said.

The rest of the breakdown: Some 30% of investments will go towards diagnostics (through expansions and acquisitions made via Nile Scan), while acquisitions and investments in ins. and primary healthcare clinics will represent the rest, Moharram said, adding that these allocations might change in the future.

By covering different verticals, Elevate is looking to streamline the healthcare experience for patients: “We want to create a one-stop shop, where we can offer diagnosis, imaging and pathology, and then the actual treatment through the best affiliations,” Moharram said. This helps make it easier for patients to seek treatment by providing a single point of referral, he noted.

Elevate is also looking at Egypt’s (relatively small) ins. industry: Potential amendments to the Ins. Act that could see the minimum paid-in capital requirement for ins. companies raised to EGP 250 mn from a current EGP 150 mn could trigger a wave of sell-offs and consolidations for smaller players, which Elevate hopes to be at the heart of, Moharram said. The amendments have already received a final nod from the Senate, and are now pending final approval from the House of Representatives.

But again, Elevate wants to leverage its management expertise instead of directly entering the market: “We want to be third-party administrators (TPA), where we manage the ins. process for certain companies and players,” Moharram explained. The fund is weeks away from acquiring a TPA to help it enter the market, he added. TPAs typically help streamline admin processes and can help make the ins. process more efficient.

A second fund could come soon: “We do plan to launch a second fund for healthcare after we’re sure that our first fund is well deployed and monitored to realize the best returns for our investors,” he said.

Elevate Capital also runs an impact-focused VC — and healthcare is at its core: “We’re eyeing 5-6 telehealth startups for investments,” Moharram said, adding that one of the startups caters to rural areas in Upper Egypt and Sinai. “Telehealth startups have seen adoption rates skyrocketing during the pandemic, but they are going through a post-covid slowdown now, though we believe this is temporary,” he said. Elevate has already operated and managed a telehealth startup, Paire Health, and has recently acquired a stake in Doxx by participating in a USD 1.5 mn seed round.

And once it’s time for an exit, IPOs are Elevate’s preferred flavor: “We’re believers in listing; that’s why we work on governance and digitization very early on,” Moharram said. “When an investment reaches a size where it’s listable, that’s definitely our preferred route.”

The company is also working on providing healthcare players with alternative financing solutions: Elevate recently landed approval in principle from the Financial Regulatory Authority to set up a financial leasing arm. “Growing companies need one of two things: Either equity or debt,” Moharram explained. “Given that equity partnerships can be tricky sometimes, we wanted a leasing arm to be able to make our offering more comprehensive,” he added. The leasing arm will focus on multiple impact-focused verticals, including healthcare.


Your top infrastructure stories for the week:

  • A regulatory overhaul cometh to real estate developers: The Madbouly cabinet imposed a slate of new regulations for real estate players yesterday designed to protect consumers and reduce market risk
  • Egypt, Israel and the EU sign gas export agreement: Egypt and Israel will increase gas exports to the EU, as the continent looks to phase out its reliance on Russian fossil fuels.
  • EGAS signed an MoU with Chevron to explore ways to transport, import, liquefy, and re-export gas from the Eastern Mediterranean,
  • New Capital, stage 2: The state-owned developer of the new administrative capital is preparing to launch the second stage of the megaproject.

CALENDAR

OUR CALENDAR APPEARS in two sections:

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

JUNE

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

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

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

25-27 June (Saturday-Monday): Big 5 Construct, Egypt International Exhibition Center.

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 (Monday): AmCham annual general meeting, St. Regis Cairo Hotel.

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: Eastern Company meets to decide on prices of its tobacco products amid rising production costs and scarcity of raw materials.

JULY

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

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

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

First week of July: The national dialogue called for by President Abdel Fattah El Sisi kicks off.

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

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

8 July (Friday): Arafat Day.

9-13 July (Saturday-Wednesday): Eid Al Adha, national holiday.

21 July (Thursday): European Central Bank monetary policy meeting.

26-27 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

30 July (Saturday): Islamic New Year.

Late July-14 August: 2Q2022 earnings season.

AUGUST

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

August: Sharm El Sheikh will host the African Sumo Championship.

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

SEPTEMBER

September: Egypt will display its first naval exhibition, Naval Power.

September: Estate Waves Egypt real estate exhibition through metaverse technology.

September: Central Bank of Egypt’s Innovation and Financial Technology Center to launch incubator for 25 fintech startups.

6-9 September (Tuesday-Friday): Gate Travel Expo 2022, El Kobba Palace, Cairo.

8 September (Thursday): European Central Bank monetary policy meeting.

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

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

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

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

OCTOBER

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

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

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

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

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

18-20 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

27 October (Thursday): European Central Bank monetary policy meeting.

Late October-14 November: 3Q2022 earnings season.

NOVEMBER

November: Cairo Water Week 2022.

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

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

4-6 November (Friday-Sunday): The Autotech auto exhibition kicks off at the Cairo International Exhibition and Convention Center.

6-18 November (Sunday-Friday): Egypt will host COP27 in Sharm El Sheikh.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15 December (Thursday): European Central Bank monetary policy meeting.

DECEMBER

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

JANUARY 2023

January EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

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

MAY 2023

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

EVENTS WITH NO SET DATE

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

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

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

1H2022: Target date for IDH to close its acquisition of 50% of Islamabad Diagnostic Center.

1H2022: 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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