AM — Gov’t is working to get car imports flowing again -PM Madbouly

Two more work days to the long weekend, ladies and gentlemen. And so far, the news has been very positive this week, particularly on the FDI front, and now for the auto sector.

THE BIG STORY here at home is a possible chink of light at the end of the tunnel for the local automotive industry, after Prime Minister Moustafa Madbouly directed his ministers, the central bank, and the banking sector to coordinate on setting up “a mechanism for the orderly release of car shipments” from ports. Local car dealers have faced challenges in recent months getting vehicles imported to the country, after a change in rules that required importers to get letters of credit (L/Cs) in order to purchase non-essential goods.

We also have more potential investments from our neighbors, with Finance Minister Mohamed Maait revealing that some USD 2-3 bn in potential FDI could be coming in from Qatar. Maait made a speech during the Amcham annual meetings, where he said that attracting local and foreign investors is a “presidential priority,” according to a statement by the Finance Ministry. More on that in today’s Investment Watch.

We’re getting Kudos for our GCC push: Gulf investments coming into the country will act as “stabilizers for the EGP” in the medium term, giving the currency upside potential towards the end of the year, Standard Chartered MENA economist Carla Slim told Bloomberg TV (watch, runtime: 5:25). We’ve received some USD 7 bn of the more than USD 22 bn pledged by our Gulf neighbors to support our economy, with the remainder expected to come through in coming months, Slim noted. The EGP is now trading at EGP 18.79 to the USD.

This is particularly important as it has not been a great month for the EGX: After a slight reprieve that saw the benchmark index rise less than 0.1% at Sunday’s close, the EGX30 fell by 2.0% yesterday with a turnover of EGP 828 mn (0.1% above the 90-day average). By our count, the index has now lost around 10% of its value in less than three weeks.

As long as demand remains weak, we won’t likely be seeing sales of stakes in state-owned companies on the bourse. Delays to public offerings in the state privatization program are down to weakness in demand on the EGX as well as global headwinds triggered by conflict in Ukraine, Public Enterprise Minister Hisham Tawfik suggested to Ahram Online in an interview. “The EGX is currently not at its best,” Tawfik said, adding that the offering of Eastern Company in 2019, and of state-owned fintech firm e-finance last year, had thrown up “some structural issues in the local demand that need to be considered before resuming the program.”

Pay attention, advisors: It is “the job of investment banks that set the stake that will be offered for the private sector and the shares that will be offered” to tackle those issues, he added.

Egypt had hoped to sell shares in as many as 10 state-owned companies on the EGX in 2022, before Russia’s invasion of Ukraine upended the global economy. It’s hoped that stake sales will resume in September, Tawfik said back in May.

THE BIG STORY ABROAD this morning continues to be shifting geopolitical tectonics in Europe, as the G7 summit continues against the backdrop of the Russian war on Ukraine and discussions to bring new members into the Nato security alliance to combat fears of aggression from Moscow. Here are the headlines leading the conversation:

• Russian missiles struck a crowded shopping mall in central Ukraine. Ukrainian officials say at least 16 people were killed and 59 wounded. (Reuters)
• G7 leaders condemned the “abominable” attack as a war crime. (Bloomberg).
• Ukraine’s Volodymyr Zelensky called on G7 nations to back his country’s military against Russia in a video address to the summit. (Associated Press).
• The G7 continued discussions of a potential price cap on Russian oil, pushing Brent crude up 1.7% above USD 115 per barrel. (Reuters)

AND ON NATO-

• The leaders of Sweden and Finland are set to meet with Turkish President Recep Tayyip Erdogan in Madrid today to discuss his objections to their NATO membership. Erdogan effectively blocked their bid to join the alliance earlier this month. (Twitter | Reuters)

MEANWHILE- Russia has defaulted on its foreign debt for the first time in over a century, after months of attempts to maneuver around Western sanctions. The country missed a Sunday deadline to meet a 30-day grace period on interest payments of USD 100 mn on two Eurobonds, Bloomberg reports. Taiwanese holders of Russian Eurobonds also claim they have not received interest payments due from Russia, two sources told Reuters.

Sweeping sanctions from the West have effectively cut off the Kremlin from the global financial system by freezing its FX reserves abroad. Moscow says the default is “artificial” because it has the means to make the payments, but is blocked from doing so. The Guardian, CNBC and the Wall Street Journal also had the story.

WHAT’S HAPPENING TODAY-

President Abdel Fattah El Sisi is in Bahrain today for talks with Bahraini King Hamad bin Isa Al Khalifa, according to a State Information Service (SIS) statement. The visit comes on the heels of El Sisi’s trip to Oman yesterday, where he discussed increasing Omani investment to Egypt with Sultan Haitham bin Tareq. The trip topped coverage on the airwaves last night, the details of which you can find in Last Night’s Talk Shows.

Public consultations on the state’s privatization plans continue. Today it’s the turn of the ICT sector, including telecoms. The government will today hold the latest in its series of public consultations over its state ownership policy document laying out privatization plans. Every Sunday and Tuesday sees workshops on how privatization plans will affect specific industries. The government has already heard from the electronics, food, and agriculture industries and today the ICT sector gets its say. Look for detailed coverage on the talks in EnterpriseAM or across our various industry features. You can find more details on the schedule of the meetings here.

SMART POLICY- The Madbouly cabinet’s new ministerial committee for competitive neutrality held its first meeting yesterday, according to a cabinet statement. The committee will work alongside the Egyptian Competition Authority (ECA) to set policies that allow a level playing field between private and state-owned companies.

Speaking of competition, will we get some news on amendments to the Competition Act today? The House Economic Affairs Committee had been expected yesterday to wrap its discussions on the contentious amendments to the Competition Act, which give greater powers to the ECA to regulate M&As — but we haven’t heard any updates yet.

A week of competition controversy: This week has been one of discussions between officials from the central bank, the Financial Regulatory Authority (FRA), the EGX, and the Egyptian Competition Authority (ECA) to iron out differences of opinion on the proposed amendments, including on (but not limited to) the fees the ECA would collect for looking into proposed M&A transactions.

What’s next? Once the committee’s done with discussions, it is expected to prepare its report on the amendments and debates, before sending them to be discussed in a House-wide plenary session.

AND TOMORROW- State grain buyer GASC launches a fresh wheat tender. The General Authority for Supply Commodities (GASC) is seeking an unspecified amount of wheat on a free-on-board (FOB) basis in an international tender, the state-run MENA agency reported, citing a statement from the authority. The deadline for offers is tomorrow, with the grain set to be shipped between August and October. If successful, this will be only GASC’s third purchase since war broke out in Ukraine, sending international wheat prices sky-high.

MARKET WATCH-

Another blow to global oil supply? OPEC member Libya may suspend oil exports from its key export terminals in the Gulf of Sirte for three days due to ongoing political turmoil, Libya’s state oil company National Oil Corp.(NOC) said yesterday. The country’s crude production has almost halved since mid-April to 600k barrels a day, Bloomberg estimates — piling pressure on a market already struggling to contain price hikes on the back of Russia’s war on Ukraine and an already tight supply chain.

Better news out of Libya’s oil sector: Egypt’s Petrojet will make a comeback to the country after a 11-year hiatus, NOC announced in a statement on Facebook. Petroject representatives were briefed on how NOC envisages the company helping to up production capacity by renovating dilapidated infrastructure and reopening closed fields.

CIRCLE YOUR CALENDAR-

The deadline for companies to submit bids for the redevelopment of the National Democratic Party headquarters is this Thursday, 30 June.

The government’s fuel pricing committee will likely meet to review fuel prices as part of its quarterly review sometime next week.

The national dialogue to set Egypt’s political and economic roadmap will also kick off next week. President Abdel Fattah El Sisi had called for the dialogue in April. Check out our explainer on the dialogue, its agenda, participants, and targeted outcomes here.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: As Egypt jumps on the growing global interest in green hydrogen facilities as a clean energy source, New York-headquartered energy firm H2-Industries recently signed an MoU to set up Egypt’s first waste-to-hydrogen facility in East Port Said. We sat down with H2-Industries’ founder and CEO Michael Stusch for details on the planned facilities and his views on how Egypt can best capitalize on the push towards green hydrogen.

PM Madbouly seeks to reassure automotive players on stymied car imports: Prime Minister Moustafa Madbouly has directed his ministers, the central bank, and the banking sector to coordinate on setting up “a mechanism for the orderly release of car shipments” from ports, according to a cabinet statement. Madbouly’s directive came during a meeting with automotive industry reps, cabinet ministers, and banking officials meant to address supply constraints in the industry, after new import rules created challenges for local car dealers to get shipments through ports.

Measures have been taken to accelerate the release of imported vehicles, Trade and Industry Minister Nevine Gamea said, without providing any details. Industry reps, meanwhile, expressed their thanks to the government, the central bank, and the banking sector for efforts to facilitate imports, adding that they understand “the exceptional circumstances the world is going through, and that this situation is temporary and imposed by the unprecedented current events.”

Finding a balance: The state is keen to find a balance between meeting import needs for basic commodities like food and oil, and “maintaining market movement” for local car companies and dealerships “despite the difficult and unfavorable global economic conditions,” Madbouly said.

Background: Several foreign car manufacturers have suspended sales to Egypt after a change to how imports are paid for left local dealers incapable of purchasing vehicles, industry sources told Enterprise last month, with one estimating that some 29k vehicles are stranded at ports. This followed new rules handed down by the Central Bank of Egypt (CBE) in March requiring importers to use letters of credit (L/Cs) to purchase non-essential goods, instead of documentary collection.

Dire straits: Car sales collapsed almost 20% y-o-y in April for the second consecutive month, as the automotive sector is being buffeted by a multitude of headwinds, including a lack of financing for imports, rising inflation, component shortages and the EGP devaluation in March.

Qatari officials have discussed investing USD 2-3 bn in the local market in talks with the Madbouly government, Finance Minister Mohamed Maait told reporters on the sidelines of Amcham’s annual general meeting yesterday, according to Al Mal. The inflows would come in the form of purchases in “company stakes and the real estate sector,” Maait said, without providing further details.

That’s only around half of the total investments pledged by Doha, which in March said it would invest USD 5 bn in Egypt to help shore up our finances amid the crisis in Ukraine — part of more than USD 22 bn of support pledged by Gulf neighbors, led by the KSA and the UAE.

There’s been plenty of promising signs that Qatari inflows are on the way – but no concrete agreements yet. A landmark visit over the weekend by Qatari Emir Sheikh Tamim bin Hamad Al Thani to Cairo saw him discuss “maximizing Qatari investments in Egypt.” Trade Minister Nevine Gamea and other officials have been in Doha to drum up investment in the past few weeks, where big Qatari names including Ezdan Holding and Qatari Diar expressed their interest. That said, we’re still waiting for Doha firms to sign on the dotted line.

The gov’t still wants to slash dependency on hot money, with Finance Minister Mohamed Maait echoing during the Amcham gathering earlier statements on the necessity of boosting foreign direct investments, Reuters reported him as saying.

MNT-Halan’s microfinance subsidiary Tasaheel has closed a USD 150 mn (c.EGP 2.8 bn) securitized bond issuance as part of a wider USD 600 mn securitization program with CIB, backed by Tasaheel’s loan book, according to a press release (pdf). MNT-Halan did not disclose the total value of Tasaheel’s loan book when asked by Enterprise.

The details: The issuance was 2x oversubscribed, and is being billed as the largest securitization in Egypt’s microfinance sector to date. Proceeds from the bonds will be used to finance “the company’s accelerated growth across multiple lending business lines and MNT-Halan’s expansion into new verticals,” the press release said.

MNT-Halan will issue the rest of the program through Tasaheel and its consumer finance arm over the next three years, Andre Valavanis, vice president of investments and corporate strategy, told Enterprise.

Who bought in? Abu Dhabi Commercial Bank, Al Ahli Bank of Kuwait, Al Baraka Bank, Agricultural Bank of Egypt and the Housing and Development Bank.

What they said: “This transaction marks our first securitization and ensures our continued growth as we expect our loan book to exceed USD 2 bn over the next couple of years,” MNT-Halan CEO Mounir Nakhla said.

By our count, MNT-Halan’s offering takes the total value of securitized bonds sold this year to almost EGP 14.3 bn. That’s just north of 90% of the total value of EGP 15.8 bn taken to market last year.

Advisors: CIB acted as financial advisor and general arranger of the transaction, while the National Bank of Egypt acted as co-financial advisor and underwriter. Arab African International Bank and NI Capital served as underwriters, and Matouk Bassiouny & Hennawy served as counsel.

IFC partners with local healthcare player EHCS on medical complex: The International Finance Corporation (IFC) will advise private healthcare developer Egyptians for Health Care Services (EHCS) on its CapitalMed integrated healthcare park in Badr City, a joint press release (pdf) read. The IFC is set to advise on “designing, structuring, budgeting, and managing the project while identifying strategic investors,” according to the statement.

Construction has already begun on the first phase of the project, which should open its doors next year and is set to cost EGP 5.5 bn split between equity and debt, EHCS Chairman and Managing Director Hassan El Kalla told Enterprise. The IFC will manage the equity side of the financing, he said.

Further down the line: The private medical complex is set to include a general hospital and 19 specialist centers, and hopes to serve some 20 mn people. El Kalla described the project — which local media has previously reported to be worth EGP 18 bn overall —- as “the largest ever development for healthcare in Egypt,” adding that its four phases will take 10-12 years to complete. Huawei is reportedly responsible for the park’s smart infrastructure.

What they said: “Given the challenges facing the public healthcare system, increasing the role of private providers will be essential if Egypt wants to meet its ambitious goal of pedobearpics.com within the next eight years,” said Cheick-Oumar Sylla, IFC regional director for North Africa.

WORTH NOTING- The IFC last year launched a three-year advisory program that aims to help at least 100 local private-sector healthcare providers improve patient care

Leading the airwaves yesterday: A two-day visit by President Abdel Fattah El Sisi to Oman led the conversation among the talking heads yesterday. El Sisi will land in Bahrain today, Ittihadiya Spokesperson Bassam Rady told Ala Mas’ouleety (watch, runtime: 4:25).

Investment from Muscat? Oman's Sultan Haitham bin Tariq told President Abdel Fattah El Sisi that he wants to increase the country’s investments in Egypt during their meeting in Muscat yesterday, according to an Ittihadiya readout.

Yesterday’s meeting was the first between the duo since bin Tareq assumed power in 2020, Rady said, describing the meetings between the two leaders as “productive.” Al Hayah Al Youm also covered the story (watch, runtime: 1:13).

Kelma Akhira’s Lamis El Hadidi highlighted the USD 586.2 mn worth of trade between Egypt and Oman last year, up 7.2% y-o-y, according to figures from statistics agency Capmas (watch, runtime: 1:50).

It’s a quiet Tuesday for mentions of Egypt in the international press. Making headlines:

• The impact of the global wheat crunch on our bread subsidy program continues to make international headlines. (Wall Street Journal)
• Egyptians raised EGP 40 mn through social media to give a life-saving injection of the world’s most expensive prescription drug to an Egyptian toddler with spinal muscular atrophy. (The National)
• University student Naira Ashraf’s murder at the hands of a male classmate is garnering more international attention. (CBS News)

The government has formed a committee to reconsider some of the penalties it imposed this harvest season on wheat farmers who fail to sell the required grain quotas to the state, Al Borsa reports, citing comments by Supply Minister Ali El Moselhy on the sidelines of his big presser on wheat earlier this week. The state is reportedly finding it hard to impose some of the penalties — including money fines and withholding fertilizer subsidies for next year’s crop from those who don’t provide the required amount of wheat — due to confusion over whether landowners or their tenant farmers should be penalized, and land changing ownership, unnamed sources told Al Borsa.

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

• Honeywell will use its tech to automate systems at the Anchor Benitoite petrochemicals complex in the Suez Canal Economic Zone, under an MoU it signed with Anchorage Investments. (Press release, pdf)
• EFG Hermes’ buy-now-pay-later platform valU has partnered with real estate developer Arab Developers Holding to provide residents with home improvement and maintenance finance. (Statement, pdf)
• The National Bank of Egypt is opening its first branch in Juba, South Sudan today. (Statement)

Second Negev meeting sees US, Israel, Arab allies form working groups on key issues: Officials from Bahrain, Egypt, Israel, Morocco, the UAE and the US agreed to form working groups for closer ties on clean energy, education, food and water security, health, regional security, and tourism at a steering meeting of the recently formed Negev forum in Manama yesterday, a joint statement released by the State Department read. The statement made no mention of the Iranian nuclear threat, which Israeli officials had suggested ahead of the meeting would be on the table.

Sudan is submitting a formal complaint to the UN Security Council against Ethiopia for allegedly kidnapping and killing seven Sudanese soldiers and a civilian last week, according to SUNA. Sudan has also summoned Ethiopia’s ambassador in Khartoum over the incident, for which President Abdel Fattah El Sisi extended his condolences to Sudan’s military leader General Abdel Fattah Al Burhan over the incident, according to an Ittihadiya statement, while Ethiopia’s foreign ministry denied the accusation, Reuters reports.

Warming Israel-KSA ties through easier Hajj access? Israel and Saudi Arabia are reportedly negotiating a potential agreement that would see Riyadh allow Palestinians with Israeli citizenship to board flights from Israel to conduct Hajj and Umrah, the Financial Times reports, citing people with knowledge of the matter. The negotiations are backed by the US and come ahead of US President Joe Biden’s trip to the two countries next month.