Monday, 4 July 2022

AM — Expedition Investments submits bid for 34% stake in Domty

TL;DR

WHAT WE’RE TRACKING TODAY

We’re thankful for a relatively quiet Monday, ladies and gentlemen, that is being punctuated with interesting M&A news and other positive highlights coming out of the business community.

We want to give a special shout out to NBFS players, who seem to be picking up the slack left by banks when it comes to education financing. We have more on that in today’s Blackboard.

Eid, which is coming up next week. We’re still waiting for the usual official announcements on how many days to expect off for Eid Al Adha, which runs from this Saturday, 9 July to Wednesday, 13 July.

Speaking of national holidays, Happy 4 July, for those of you who like your fireworks, barbecues, and American independence. PS: Expect fewer fireworks at the celebrations in the US this year, thanks to a shortage of supplies and pyrotechnicians, the Wall Street Journal reports. US financial markets will remain closed today for the holiday.

THE BIG STORIES HERE AT HOME- Expedition Investments’ bid to take a chunk of Domty has taken a step forward, with the Financial Regulatory Authority announcing yesterday that it has received an official offer from the offshore company to acquire 34% of the EGX-listed cheesemaker. Meanwhile, the local office of Canada-based investment banking outfit Intercap Inc. is planning a new USD 30 mn fund that will invest primarily in Egyptian tech startups.

Transportation was also a big newsmaker yesterday, as President Abdel Fattah El Sisi inaugurated the first phase of the light rail transit system connecting Cairo, the New Administrative capital and 10th of Ramadan in a ceremony today at the Adly Mansour station. We have more on this in Last Night’s Talk Shows.

In attendance was European Investment Bank Vice President Gelsomina Vigliotti, who continues her four-day visit to Egypt today. In her first high-level visit since the covid-19 pandemic, Vigliotti is meeting with officials to discuss the bank’s support for Egypt’s energy and food security, as well as green projects ahead of the COP27 summit in November.

Could cement supply quotas stick around for another year? Over the past year, 23 local cement companies slashed production by more than 10%, in a bid to rescue the ailing sector from a supply glut. Now, these companies are lobbying for an extension of the cuts and seem likely to get it. In this week’s edition of Inside Industry — our weekly briefing on all things industrial in Egypt — we look at why local cement players are lobbying the government to extend the cuts, and ask how the quotas have impacted the industry in the past year.

WHAT’S HAPPENING TODAY-

House plenary sessions are expected to continue today and Tuesday as the current legislative cycle draws to a close. Speculation is growing among MPs that recess could begin later this week though there’s still a chance that our elected representatives will have to postpone their annual Sahel getaways until after Eid.

Still on the legislative agenda:

  • Competition Act: We’re still waiting on a breakthrough in negotiations over reforms to competition rules (more on this in the news well, below).
  • Consumer finance: Government-drafted amendments to the Consumer Finance Act will be debated tomorrow. Three articles could be added to the act to provide greater fraud protections to consumers, according to a note seen by Enterprise.
  • Tax disputes: The House will also discuss government-drafted amendments to tax dispute settlements tomorrow, part of efforts to improve the investor climate and boost tax revenues.

The Egypt Industries Expo continues today at the Egypt International Exhibition Center. The three-day event brings together leading industry players in various sectors to promote their products. The first day of the conference saw Public Enterprises Minister Hisham Tawfik announce the launch of the government’s new e-catalogue for Egyptian products, Gosoor, which goes live today.

Foreign Minister Sameh Shoukry is in London today for talks with British Foreign Secretary Liz Truss.

FOR TOMORROW-

Our national dialogue also kicks off this week, with Diaa Rashwan, the general coordinator of the dialogue, convening the first meeting of the 19-member board of trustees organizing the event tomorrow, according to the State Information Service. Board members include lawmakers, journalists, and political and economic experts. President El Sisi also signaled the beginning of the dialogue in a report picked up by Al Oula (watch, runtime: 2:18).

Need a refresher on the national dialogue? You can read our explainer here.


THE BIG STORY ABROAD- The global front pages are dominated by yesterday’s news that Russian forces have seized the last major town in Ukraine’s eastern Luhansk province, a significant military victory for Moscow indicating that the course of the war is shifting in its favor. (Bloomberg | FT | Reuters | AP | New York Times | Washington Post | WSJ)

MARKET WATCH-

Welcome to 2H 2022. It’s probably going to be even worse for the global markets. The first half of the year was pretty bad for global markets — and the worst for US equities in decades — but more losses are likely yet to come in the second half of 2022, both the Wall Street Journal and Bloomberg are predicting. The year so far was marred by soaring inflation, a historic bond sell-off, a fall in tech stocks, and the crypto winter. Now, as central banks continue to hike rates, recession has joined inflation as a major threat. “The next 10% will probably be down from here, not up,” one investor told Bloomberg, echoing a view held by most market watchers at the moment: We haven’t hit the bottom yet.

Could emerging markets benefit from a US recession? That’s the opinion of some analysts, including at JPMorgan and Deutsche Bank, Bloomberg reports. Cheap valuations, higher yields, faster growth and the revival of the Chinese economy could make a bull case for EM assets, they say, despite the sharp sell-offs in equities, bonds and currencies alike. “We may be close to peak pessimism,” said one currency analyst at Deutsche. “There are reasons to think emerging-market performance could hold up better than in past recessions, including very low foreign ownership of local assets, a relatively high starting point for interest rates and cheap valuations.”

Oil prices: Has demand destruction arrived? There are signs that demand for fuel could begin to fall as soaring oil and gas prices increase economic pressure on consumers, according to oil trading giant Vitol. “There’s very clear evidence of economic stress being caused by the high prices,” Mike Muller, the head of Asian markets at the firm, said during a Gulf Intelligence podcast (listen, runtime: 35:19). Fuel prices have surged to record highs in the US and other countries as reduced flows from Russia amid its war with Ukraine exacerbate supply issues caused by years of under-investment in refineries, Bloomberg writes. Soaring prices are starting to suppress demand for both oil and LNG, he said.

CIRCLE YOUR CALENDAR-

Speaking of which, our own fuel pricing committee could meet this week to review fuel prices for the third quarter sometime this week.

Other news triggers to keep an eye on this month:

  • PMI: Data measuring activity in Egypt’s non-oil private sector will drop on Wednesday, 6 July.
  • Foreign reserves: Foreign reserves figures will be out sometime this week.
  • Inflation: Inflation data for June will land on Sunday, 10 July.

Ghazl El Mahalla IPO: The deadline to subscribe to the retail portion of Ghazl El Mahalla’s IPO is 14 August.

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

enterprise

*** 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: Parents looking to put their children through private schooling at the K-12 stage continue to face higher costs, as rising inflation rates push schools to raise their tuition fees. But for the most part, the banking sector has not been an appealing avenue for tuition financing. Last week, we looked at how traditional education loans don’t see much demand from customers, with banks either pivoting to different products or tapping new pockets of potential clients. This week, we find out whether non-bank lenders could provide solutions.

enterprise

A sizzling summer awaits you by the bay as we’ve saved you the hassle of planning by bringing you a lineup of unmatched energy and fun packed vacation activities to last you all season long. It’s time to create magical memories with relaxed beach-side days and excitingly fresh nights. From pumping up the adrenaline with Footgolf and Go-Karting to turning up the music and heat at Sobar with Ladies’ nights, groovy beats and lots of dancing. From BBQ beach parties at S-cape to riding horses by the sea — there’s a little special something for everyone. We look forward to seeing you at the Bay.

M&A WATCH

Expedition Investments submits bid for 34% stake in Domty

Expedition Investments has submitted an official bid to acquire a 34% stake in cheesemaker Domty, the Financial Regulatory Authority (FRA) said in a disclosure to the EGX (pdf) yesterday. The consortium has offered to purchase up to 96.2 mn shares for EGP 5 a piece in a mandatory tender offer, the regulator said, giving the transaction a potential value of around EGP 481 mn.

The acquisition would give the consortium ownership of 90% of Domty’s shares, the FRA said. Domty’s founders, the Damati family, already control 56% of the EGX-listed company, and also own minority stakes in Expedition.

Who else is involved? Expedition is an offshore special purpose vehicle controlled by unknown investors in Egypt and the Gulf. The company is domiciled in Mauritius and counts veteran investment banker Mohamed El Akhdar as a board member. It was established on 21 March, according to the Mauritius company register.

What’s next? Expedition has completed its due diligence process on Domty and is currently awaiting the FRA’s approval to go ahead with the acquisition, sources told Al Borsa. The acquisition is expected to go ahead by the end of August, they said.

The market reaction: Domty’s shares rose 3.2% during trading yesterday, closing at EGP 4.8.

Advisors: Matouk Bassiouny & Hennawy is advising Expedition on the transaction.

IN OTHER M&A NEWS-

MNHD’s acquisition of Minka appears to be back — at a reduced price: The board of Madinet Nasr Housing and Development (MNHD) has given preliminary approval to acquire real estate company Minka Development and related special purpose vehicle EgyCan for Real Estate Development for up to EGP 200 mn, the company said in an EGX filing (pdf) yesterday. This is below the EGP 232 mn valuation produced by Baker Tilly Wahid Abdel Ghaffar & Co last year. MNHD will now have the firm produce an updated fair value study on the two companies, according to the filing.

Background: MNHD CEO Abdallah Sallam is the former managing director at Minka, and moved into his new role at MNHD at the same time as it announced the acquisition in October. Minka is owned by the Sallam family, who are set to use the proceeds from the sale of their company — plus an additional EGP 50 mn — to purchase a minimum 5% stake in MNHD, we were told last year, making them the third largest minority shareholder in the company. The family has already invested more than EGP 50 mn ahead of the acquisition, the company said yesterday.

STARTUP WATCH

Intercap Capital to set up a USD 30 mn VC fund

Investment banking firm Intercap Capital is working on setting up a USD 30 mn fund for investing in tech startups, Managing Director Rafik Dalala told Enterprise. The fund, which Intercap is naming T-Six, is aiming for a USD 10 mn first close at the beginning of 2023 and plans to acquire minority stakes in as many as 50 startups, he said.

Which startups is the fund targeting? The fund will invest between USD 500k and USD 1 mn in series A rounds held by startups in six sectors that fit into the “new wave of technology,” including AI, medtech, biotech, foodtech, and gaming and entertainment, Dalala said. The fund isn’t ruling out seed funding, but will be focusing mostly on businesses at the series A stage of funding which already have products in the market, he said.

The majority of the fund’s capital will be deployed in local startups, with some 20% earmarked for companies in Saudi Arabia, the UAE and Jordan. Intercap plans to stay on board for seven to eight years before it exits, Dalala said. The fund will deploy its capital over a period of three to five years, he added.

Where’s the money coming from? T-Six plans to hit up development finance institutions in the EU and Gulf, sovereign funds and regular LPs like ins. companies to participate in the fund, Dalala said.

Nilex listings could be T-Six’s exit of choice: Intercap plans to apply for a sponsor license to help startups list on the small-cap Nilex as one potential exit strategy, Dalala said. SMEs are currently required to contract with sponsors — financial advisors that assess the suitability of SMEs for listing on the exchange and assist qualifying firms in both going public and meeting their responsibilities after listing — before listing on the Nilex.

About Intercap: Intercap Capital is a local subsidiary of Intercap Inc, a Canada-based investment banking firm specializing in corporate finance, business valuation, accounting and taxation.

DEBT WATCH

FAB + Europe Arab Bank to contribute to Elsewedy’s USD 150 mn IFC loan

More details on the IFC’s USD 150 mn loan to Elsewedy Electric: First Abu Dhabi Bank and Europe Arab Bank are participating in the USD 150 mn loan from the International Finance Corporation (IFC) to Elsewedy Electric, the IFC said in a statement (pdf) last week. Elsewedy will mainly direct the funds towards acquiring solar projects as well as “capex maintenance” and improving its manufacturing facilities, as well as some refinancing of prior acquisitions, Elsewedy said in a fresh statement (pdf). The company will acquire renewable energy plants outside of Egypt using the loan, company VP and CFO Sherif Elzeiny told CNBC Arabia last week. Sharkawy and Sarhan acted as local counsel to the IFC, they said in an email.

MORE DEBT NEWS-

A banking consortium is considering a EGP 6 bn syndicated loan to Redcon Construction subsidiary ROCC, Chairman Tarek El Gamal confirmed to Enterprise, without disclosing the names of the banks involved. The loan would go towards financing the construction of the company’s Golden Gate project in New Cairo, the first phase of which will cost some EGP 12 bn. Al Shorouk reported last week that the National Bank of Egypt, Banque Misr, Banque du Caire and Arab African International Bank are among the banks considering contributing to the syndicated loan, citing unnamed sources.

The European Bank for Reconstruction and Development (EBRD) is granting Hassan Allam Holding a EGP 180 mn loan, in part to finance the company’s stake in an unnamed FMCG e-commerce and distribution platform, according to the lender’s website.

EARNINGS WATCH

Juhayna’s net income rose 16% y-o-y to EGP 142 mn in 1Q2022, according to the company’s unaudited consolidated results laid out in their earnings release (pdf). The company’s revenues rose 29% during the period to EGP 2.4 bn.

The breakdown: The company’s revenues were led by the dairy segment, which saw a 31% increase EGP 1.3 bn, followed by fermented products which recorded EGP 585 mn in revenues, up 28% from 1Q2021.

What they said: “Juhayna carried over the momentum from 2021 into the first quarter of

the new year to deliver strong top-line results, growing 29% yoy, mainly attributable to solid consumer recovery as consumers are back to their normal daily lives and normal spending habits,” CEO Niels Thomsen said.

Moving forward: “Going forward, we continue to focus on launching high-margin, premium quality, consumer-driven products while maintaining our controlled capital expenditure policy,” Thomsen said.

LEGISLATION WATCH

There’s still hope that changes to competition rules could pass the House this month

Talks over amendments to the Competition Act aren’t dead yet: The House Economic Affairs Committee continued to debate the contentious amendments to the Competition Act yesterday in hopes that an agreement could be found before MPs break for summer recess, committee head Ahmed Samir told reporters yesterday. "The committee is keen that the debate over the amendments is finished very soon in order for it to be discussed and voted on by the House before it adjourns for summer recess,” he said.

Serious disagreements remain over how much power to give to the ECA: Officials from the Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA) and the EGX have been unable to agree with the Egyptian Competition Authority (ECA) on key parts of the proposed changes, which would hand the authority greater powers to regulate mergers and acquisitions. There remain disagreements over how much time the ECA would have to assess M&As and the fees it would charge companies for investigations.

The current draft would allow the authority 30 days to investigate transactions, a period that EGX chief Mohamed Farid wants to cut in half to minimize the “negative impact.” Some MPs want to prevent the ECA from having a say over smaller M&As, arguing that the proposed EGP 900 mn threshold is too low and that the authority should only deliberate over larger transactions.

There may only be a few days left before parliament breaks for the summer: Some MPs expect the House to break for the summer recess as soon as Tuesday. Failing to reach an agreement during the current legislative session would mean that the amendments wouldn’t be discussed in the general assembly until our elected representatives return from the break in October.

Background: The amendments, which have been up in the air since last year, would give the ECA the power to approve or block mergers and acquisitions before they are concluded if the regulator feels the transaction would be anti-competitive. As it stands today, the ECA can only raise red flags, typically after a sale is concluded (though that hasn’t stopped the authority in recent years from making its position clear when it objects to certain acquisitions).

Want more on the proposed changes to competition rules? We have an explainer here.

ALSO FROM THE HOUSE-

One MP wants answers on British American Tobacco’s decision to exit Egypt: MP Mahmoud Essam has asked Prime Minister Moustafa Madbouly to explain whether British American Tobacco’s (BAT) decision to discontinue operations in Egypt is related to the new tobacco manufacturing license given to Philip Morris earlier this year. BAT said last week that it would be leaving Egypt after 22 years due to concerns about the market’s long-term commercial viability, and denied that the license factored into its decision. BAT was reportedly one of the companies to object to the tender last year, arguing that the conditions would establish a new monopoly over the manufacture of e-cigarettes and heated tobacco products.

enterprise

LAST NIGHT’S TALK SHOWS

A busy night on the local airwaves was dominated by the inauguration of the long-awaited light rail: President Abdel Fattah El Sisi yesterday inaugurated the Adly Mansour transit station and the first phase of the light rail transit system (LRT) that will eventually connect Cairo, the new administrative capital and Tenth of Ramadan City. The news was all over the airwaves, with coverage from El Hekaya (watch, runtime: 1:19), Kelma Akhira (watch, runtime: 00:59), Al Hayah Al Youm (watch, runtime: 5:29) and Masaa DMC, who had on engineering professor Hassan Mahdy (watch, runtime: 26:28).

Finance Minister Mohamed Maait was in the hot seat on El Hekaya last night to discuss the government’s response to the economic crisis caused by the war in Ukraine (watch, runtime: 33:04). The minister reiterated his recent comments that the government is working to decrease its reliance on destabilizing hot money flows in favor of more sustainable foreign direct investment, and talked about the debilitating effects the war is having on the public purse, highlighting the huge increases to the nation’s wheat and oil import bill caused by soaring commodity prices.

Despite this, the government is committed to continue cutting the budget deficit this fiscal year, he said, reviewing its recent track record of stabilizing public finances and reducing the debt-to-GDP ratio. Admitting that the current circumstances are imposing stresses across society, the minister sought to reassure the public that the government will continue to provide support and meet the needs of the country.

Transport Minister Kamel El Wazir addressed several recent criticisms during an appearance on Ala Mas’ouleety (watch, runtime: 15:17 | 5:06):

  • The North Coast road: The minister finally responded to criticisms of the newly-renovated North Coast road, telling viewers that they should wait until it’s finished before criticizing it. Since it opened, people have complained on social media that the road is dangerous, criticizing its design, a lack of signs and poor lighting.
  • Demolition of the Nile houseboats: El Wazir defended the decision to get rid of the Nile’s houseboats following backlash in parliament and among the public.

Also on the airwaves last night: Egypt has so far secured 43 medals in this year’s Mediterranean Games, the head of Egypt's delegation, Abdel Aziz Ghoneim, told Kelma Akhira (watch, runtime: 5:11).

EGYPT IN THE NEWS

A spate of shark attacks off the Red Sea coast are continuing to make headlines internationally this morning: A Romanian woman became the second person to die after being attacked by a shark in Sahl Hasheesh on Saturday. Her body was found 600 meters away from where a 68-year-old Austrian woman was fatally injured in a separate attack just hours earlier. Beaches in the area have been closed and the Environment Ministry is looking into the attacks. (Reuters | Sky News | Haaretz | The National | Telegraph | New York Post)

Also making headlines:

  • Gig workers in Egypt are among many hit by layoffs and surging oil prices around the world. (Thomson Reuters Foundation)
  • Two recent high-profile murders of women in Egypt and Jordan are sparking debate over women’s rights in the region. (DW)
  • New archaeological discoveries and museums are reviving Egyptomania. (Wall Street Journal)
  • Sudanese authorities have extradited 27 men to Egypt for alleged affiliations with the Muslim Brotherhood. (Al Monitor)
  • Human rights activist Karim Ennarah cannot join his British wife in the UK due to a travel ban. (Telegraph)
  • Environmental activists remain skeptical that Egypt will allow climate protests at COP27 after Foreign Minister Sameh Shoukry said that authorities will allow demonstrations in a facility near where the talks will be held. (The Guardian)

ALSO ON OUR RADAR

EFG Hermes’ subsidiary valU’s buy-now-pay-later installment plans are now available to customers of Amazon Egypt, according to a joint statement (pdf) out yesterday.

Amazon could soon be a valU shareholder: Amazon has the option of acquiring a 4.3% equity stake in valU after it invested USD 10 mn in EFG’s London-listed global depositary receipts in May. The e-commerce giant will be able to exercise its option to swap its GDRs for the equity stake if the Saudi Alhokair family acquires shares in valU. Under the terms of the agreement, Amazon can acquire the stake if a third-party investor invests in valU, or if valU is sold, IPOed, or otherwise listed.

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

  • Banque Misr and Turkish bank Ziraat Katilim will become the first international banks to operate in Somalia after the country’s central bank approved their bids to acquire banking licenses. (Statement, pdf)
  • The Suez Canal Authority has introduced lower transit fees for LNG and LPG carriers until the end of the year. (Al Mal)
  • Schneider Electric has signed an agreement with real estate developer Arab Developers Holding to collaborate on a number of local and international projects. (Statement, pdf)
  • Egypt’s Paysky has launched its Yalla card and super app in the UAE in partnership with Visa. (Zawya)
  • The Tourism Ministry launched a new promotional campaign to attract new Arab tourists to the country. (watch, runtime: 2:14)
  • Heliopolis Housing wants to hand 50% of work on its Heliopark project to subcontractors after developer Mountain View completes the master plan. (Al Shorouk)

PLANET FINANCE

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Dubai is emerging as a favorite spot for hedge funds, Bloomberg reports. A handful of well-known fund managers are either expanding operations in the emirate or decamping there entirely as Brexit takes the shine off London as a global financial hub, Hong Kong suffers under covid restrictions, and living costs soar globally. Dubai’s efforts to lure financiers come with sizable incentives, including low or no taxes and reduced fees.

“We are in a unique situation where the classic financial centers are disintegrating,” one London School of Economics professor tells the business newswire. “Living in Dubai — that’s now come down to personal preferences with low taxes, good infrastructure and low regulation.”

Is the Gulf IPO boom running out of steam? Saudi Arabia’s Al Othaim family has pulled its plans to IPO 30% of its malls business on the Saudi stock exchange, Bloomberg reports. The u-turn could indicate a slowdown in the red-hot Gulf IPO market, which had a record first half this year on the back of surging oil prices. Long insulated from the market volatility that has gripped other parts of the world this year, Gulf equities have fallen in recent weeks on fears of a global recession.

ALSO IN PLANET FINANCE-

  • Prominent crypto hedge fund Three Arrows Capital (3AC) has filed for US bankruptcy days after it was forced to liquidate in the British Virgin Islands. Last week the fund defaulted on a USD 670 mn loan from Voyager Digital. (Financial Times)
  • Swedish BNPL darling Klarna’s valuation has nosedived by over 85% from USD 46 bn last year as it looks to make a fresh USD 600 mn raise in tougher times for growth-oriented tech startups. (The Financial Times)
  • Turkey hiked its minimum wage by another 30% amid soaring inflation, on the heels of a 50% hike in December. Turkish inflation is set to hit 80% annually. (Bloomberg)

Down

EGX30

9,009

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Buy 18.78

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11.25% deposit

12.25% lending

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THE CLOSING BELL-

The EGX30 fell 2.4% at yesterday’s close on turnover of EGP 556.88 mn (32.7% below the 90-day average). Local investors were net buyers. The index is down 24.6% YTD.

In the green: Mopco (+2.1%), Rameda (+0.5%).

In the red: GB Auto (-7.1%), Credit Agricole Egypt (-7.1%) and Qalaa Holdings (-5.0%).

Asian markets are mixed on the opening trading session of the new quarter, with Chinese shares largely in the green and most other bourses in the region falling on recession fears. European shares are on course to see early gains when the markets open in a few hours. US stock futures slipped, signaling that equities will resume the downward trend when Wall Street reopens tomorrow after the July 4th holiday.

DIPLOMACY

Shoukry plays down speculation of “MENA Nato” military alliance: Foreign Minister Sameh Shoukry has ruled out the formation of a regional military alliance similar to Nato, saying that it is unlikely to happen in the immediate future during a press conference in Bahrain last week. Speaking following talks with Bahraini Foreign Minister Abdullatif Alzayani, Shoukry said that establishing a legally binding regional military alliance “would require consultation and is not being proposed at the moment,” Bahraini media reported.

An Arab Nato? Speculation has increased that a new regional military alliance against Iran is in the making ahead of US President Joe Biden’s visit to the region this month. The president will visit Saudi Arabia and Israel, and will meet with officials from across the region at the GCC+3 Summit. The Wall Street Journal reported recently that military officials from Israel and Arab nations met with US representatives in Sharm El Sheikh in March to discuss a coordinated security response to Iran’s growing power.

Speaking of Iran: The Islamic Republic apparently wants to improve its relations with Egypt. “We have not had direct talks with the Egyptian side. However, some efforts are underway to restore relations between Tehran and Cairo,” Foreign Minister Hossein Amir-Abdollahian was quoted as saying by Iranian media.

Austria backs our rights to the Nile water: “The flow of the Nile is not a concern of one country but rather all countries through which the river runs … the Nile River should not be controlled by one state,” Austrian Foreign Minister Alexander Schallenberg said during a press conference following talks with Shoury in Cairo yesterday, according to Ahram Online.

AROUND THE WORLD

Libya political negotiations remain deadlocked: Two days of UN-mediated talks between the country’s rival factions in Geneva failed to find an agreement on how to prepare for national elections, the Associated Press reports.

blackboard

How alternative lending solutions could address demand for tuition financing: Parents looking to put their children through private schooling at the K-12 stage continue to face higher costs, as rising inflation rates push schools to raise their tuition fees. But as we noted last week, for the most part, the banking sector has not been an appealing avenue for tuition financing. We looked at how traditional education loans — which typically carry higher interest rates, require more paperwork, and offer less flexibility than personal loans — don’t see much demand from customers, with banks either pivoting to different products or tapping new pockets of potential clients.

NBFS to the rescue? As the banking sector faces rising interest rates — after the Central Bank of Egypt hiked interest rates by 300 bps since March, bringing its deposit rate to 11.25% and the lending rate to 12.25% — non-banking financial services players are looking to plug the demand gap with alternative financing products. Some players are offering regular buy-now-pay-later services for tuition payments, while others provide facilitated loans. There are also some new tools potentially coming to the market soon, such as factoring for education.

The growth in their education financing portfolio is evidence that business is good.

Contact has earmarked EGP 2 bn for education financing in 2H 2022, Contact Financial Holding CEO Said Zater tells Enterprise. Meanwhile, education financing makes up around 3% of EFG Hermes’ buy-now-pay-later platform valU’s monthly bookings, which is around EGP 15-25 mn per month, CEO Walid Hassouna tells us.

And with rates like these, it’s hard not to see why parents would prefer them to bank loans: Contact Financial’s education financing options are offered at the company’s lowest interest rate — currently around 9%. valU’s education plans are offered around 50% of the company’s normal interest rates, Hassouna tells us. The plans can be repaid through 6-12 equal monthly installments with minimal documentation and instant approval, or they can secure facilitated funding to repay the loan over an extended period that can reach up to 60 months.

On the flipside: Alternatively, traditional bank loans for education are typically limited to a range of EGP 2k to 1.5 mn, with an average interest rate of around 18%.

So, how are NFBS players doing it? Direct agreements with schools to facilitate tuition payments: valU, for one, has tapped into the world of education financing through tuition facilitation programs. The platform has set up partnerships with education institutions across all levels (K-12, university, graduate schools, as well as post-grad certificates) to offer payment plans that are more affordable to parents, Hassouna tells Enterprise. valU has partnered with more than 65 schools across the country including El Gouna International School, Alexandria’s El Kawmeya Language school, GEMS Egypt schools, Metropolitan school, and many others across different expense levels. The platform also signed an agreement with the American University in Cairo to offer financing plans for undergraduate and graduate degree programs, with installments to be paid through payment gateway Paymob.

Beltone Financial’s consumer financing arm, BelCash, has also partnered with educational institutions to offer parents the chance to fully or partially finance their kids’ tuition fees. Last year, BelCash signed an agreement with EGX-listed education outfit CIRA to provide parents whose children attend any of CIRA’s schools with tuition fee loans with a 12-month repayment period. BelCash has also partnered with educational institutions such as El Alsson (pdf) and Kent College West Cairo (pdf) to offer the same arrangements.

Contact Financial’s consumer financing arm has its own tuition facilitation agreements with several education institutions, including schools and universities, Zater told Enterprise, without naming the institutions. Alternatively, parents can also sign direct agreements with Contact to receive financing for their kids’ school or university tuition fees, if the school or university is not already covered by Contact’s partnerships, he said. These direct agreements are usually repaid over 12 months.

And there could be yet more NBFS players and tools available to the market: EFG Hermes Corp-Solutions is currently applying for a consumer factoring license, with an eye to factor tuition fees, CEO Talal El Ayat tells Enterprise. The company would factor schools’ tuition fees as their receivables. Offering factoring as a relatively inexpensive financing option for schools would allow them to secure their tuition fee receivables up front, since schools typically collect 3-4 installments per year, El Ayat explains. (Want to brush up on your understanding of factoring? Check out our explainer here.)

Startups are also getting in on the action: Meanwhile, consumer finance startup Adva — which recently closed a USD six-figure seed round funded entirely by Sawari Ventures — has started offering BNPL financing for education. “We can provide a tailor-made product over a period of 12 months at any educational institution with 1% interest monthly and no hidden fees,” CEO Rania Gaafar told Enterprise, adding that demand for their education product is “witnessing an increase on a daily basis.”

Altogether, education financing appears to be an appealing space to capitalize on — mostly because education is low-risk. “Education financing is considered very low-risk,” Zater told Enterprise. “No parent will send their kids to school without paying their tuition fees.”


Your sole major education story for the week: The Higher Education Ministry is finalizing a study of nationwide land plots to be offered to the private sector for higher education projects. (Statement)

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.

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.

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.

14 August (Sunday): Retail component of Ghazl El Mahalla IPO ends.

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.

September: The sixth session of the Egyptian-German Joint Economic Committee.

September: A delegation from Germany’s Aldi will visit Egypt to look at potential investments.

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: Air Sphinx, EgyptAir’s low-cost subsidiary to commence operations.

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

October: The finals of the IEEE’s Arab IoT & AI Challenge will be held during GITEX Technology Week in Dubai next October, with participants from 11 Arab countries.

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.

7-13 November (Mon-Sun): The International University Sports Federation (FISU) World University Squash Championships, New Giza.

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.

December: The Sixth of October dry port will begin operations.

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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