AM — Russia, Ukraine reach landmark grain export agreement

Call us Mark Mobius Stans. We don’t care: In life, it is very rare to meet actual living legends that started a field you’re in. It is even rarer when that person actually remembers you. So you can pretty much imagine that it was birthday, Christmas, and New Years all rolled into one when we found an autographed copy of Manga Mark Mobius – An Illustrated Biography of the Father of Emerging Markets Funds waiting for us at the office.

For those who don’t know who he is, the title says it all. As the investment guru at the helm of Templeton Emerging Markets Group for over a quarter of a century, Mark Mobius effectively opened the eyes of the world’s largest financial institutions to emerging markets and almost single-handedly made it the asset class it is today. Many in our part of the world and beyond owe USD bns (and at this point USD tns) in investments and the development of our capital markets to him. His work continues as the founding partner of Mobius Capital Partners.

But don’t take it from us. Do yourself a favor and pick up a copy. Afterall, how many businessmen get manga biographies (well, Carlos Ghosn, but we won’t get into that).

WHAT’S HAPPENING TODAY-

Egypt, the UAE and Jordan are discussing their new industrial partnership in Cairo: Emirati and Jordanian officials are continuing high-level talks on the joint industrial partnership in Cairo today, the Trade Ministry said Thursday. The talks started yesterday and wrap tomorrow.

What industrial partnership? The three countries agreed in May to partner on a joint industrial strategy to support economic growth, increase industrial production, and strengthen regional supply chains. Abu Dhabi wealth fund ADQ has committed to investing USD 10 bn in industrial projects in the three countries.

On the agenda: The meetings will look into agreements on several projects in various sectors, including agriculture, food, fertilizers and pharma, according to the statement.

Russian Foreign Minister Sergey Lavrov will meet several Egyptian officials in Cairo later today, Bloomberg Asharq reports, citing sources in the know. Lavrov is also set to meet Arab League Secretary General Ahmed Aboul Gheit and several representatives of the league’s member states. The visit comes as part of the minister’s African tour that includes Ethiopia, Uganda and the Democratic Republic of the Congo.

The government’s public consultations on its state ownership policy continue today with healthcare players having their say. Pharma industry representatives are also up next this Tuesday. Every Sunday, Tuesday, and Thursday see workshops on how privatization plans will affect specific industries. You can find more details on the schedule of the meetings here.

THIS WEEK-

The IMF drops its updated World Economic Outlook on Tuesday — and don’t expect good news. The Fund has warned that it will “substantially” downgrade its 2022 global growth forecast as a litany of headwinds — from the war in Ukraine and soaring food and energy costs, to rising interest rates and a slowdown in China — bear down on the global economy.

It’s Fed week: Expect the Federal Reserve to go ahead with another 75-bps rate hike when it meets later this week. Policymakers meet to discuss interest rates on Tuesday and Wednesday and analysts are expecting the central bank to keep its foot down on the tightening cycle as it battles to get inflation under control. Inflation reached a fresh 40-year high in June, increasing pressure on the Fed to raise rates despite warnings that it could push the economy into recession.

Recession warnings are flashing red: Private sector activity in the US hit a 26-month low in June and contracted for the first time since June 2020, according to the flash PMI (pdf) out Thursday. Activity in the manufacturing and services sectors both contracted during the month, indicating a “worrying deterioration” in the economy amid surging inflation and weakening demand.

All eyes are on preliminary GDP figures out at the end of the week, which the Atlanta Fed is expecting to indicate that the US economy contracted for the second consecutive quarter in 2Q, putting it in a technical recession. In preparation for a disappointing figure, Biden administration officials are briefing that two quarters of negative growth doesn’t necessarily indicate a recession, and some economists are arguing that we shouldn’t be paying too much attention to the GDP figures. Should we treat the figures seriously? Axios and Reuters have more on the debate.

THE BIG STORY ABROAD-

Russia appears to have broken the wheat export pact with Ukraine just hours after signing it: Ukraine has accused Russia of firing missiles at the Ukrainian port city of Odesa, less than 24 hours after signing a landmark accord with Ukraine on Thursday that is hoped to pave the way for Ukraine to resume exporting grain from its Black Sea ports. Under the agreement, Russia committed not to attacking ports involved with grain exports. The airstrikes were described by Ukraine’s Foreign Ministry as a “spit in the face” to the UN and Turkey, which brokered the agreement. Turkey’s defense minister said yesterday that Moscow denied responsibility for the attack. We have more on the agreement in this morning’s news well, below. (Reuters | AP | FT | Bloomberg | WSJ | CNBC)

Is it officially time to worry about monkeypox? The WHO thinks so: The World Health Organization (WHO) has declared monkeypox a global health emergency and issued a number of recommendations aimed at stopping the spread of the virus, which has spread to 72 countries. The organization has so far recorded 14.5k monkeypox cases, five of which were fatal. The last time the group issued its highest alert was January 2020 at the beginning of the covid-19 outbreak. (AP | Reuters | Bloomberg | NYT | FT | WSJ | CNBC)

SIGNS OF THE TIMES-

#1- Global fintech funding is falling fast: Fintech funding fell by a third q-o-q and 46% y-o-y in 2Q 2022 to USD 20.4 bn, its lowest level since 4Q 2020, according to figures from CB Insights. Blockbuster funding rounds of more than USD 100 mn fell 45% q-o-q while M&As in the sector saw their largest quarterly drop in years.

#2- A common African digital currency? The Bank of Central African States is looking into launching a common digital currency to be used among its six member states: Cameroon, Gabon, Chad, the Republic of Congo, Equatorial Guinea and the Central African Republic, Bloomberg reports. This comes as several African nations — including Nigeria — adopt digital currencies, and shortly after the bank publicly voiced its disapproval of the Central African Republic adopting BTC as a legal tender.

CIRCLE YOUR CALENDAR-

Leaders from across Africa are scheduled to convene in Washington for the US-Africa Leaders Summit from 13-15 December. The summit will bring together leaders to discuss pressing matters including food security and climate change, according to a White House statement.

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

CORRECTION- We incorrectly stated in an article on Thursday that Averroes Ventures acquired local sportswear brand Magma. Mohamed El Sewedy, who was already a partner and investor at Magma, acquired the firm. We’ve since updated the story on our website.

*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: As global funding for startups dry up in the midst of global macro turbulence, VCs everywhere have been warning startups to be more prudent about their spending. Egypt’s VCs are no different. Today, we speak with insiders who give us their two cents on how startups at home should go about their belt-tightening.

Good news on the wheat front: Russia and Ukraine have signed a landmark agreement to resume grain exports through the Black Sea, in a move aimed at averting a global food crisis. Russian Defence Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov inked the agreement in Istanbul on Thursday following weeks of negotiations brokered by the UN and Turkey. The pact will unblock 20 mns tons of grain stranded at Ukrainian ports, a development that UN Secretary-General Antonio Guterres hailed as a “beacon of hope” that will alleviate the hunger of mns of people facing record food prices due to the war in Ukraine.

What’s what: Under the agreement, Russia has pledged not to attack cargo ships carrying wheat or Ukrainian ports involved in the shipping of grain, according to a document obtained by the Associated Press. In return, Ukraine will allow the ships to be inspected to assuage Moscow’s concerns that they’re being used to smuggle weapons and troops into the country. A UN-led joint coordination center will be set up in Istanbul, allowing Turkish, Ukrainian and Russian officials to monitor shipping in the Black Sea. The initiative runs for 120 days and will be extended automatically.

Normal service to resume soon: Guterres is expecting grain shipments to restart “within the next two weeks,” the newswire reported, citing statements from UN deputy spokesman Farhan Haq. The agreement sees shipments unlocked from Ukrainian ports of Odesa, Chornomorsk and Pivdennyi. Ukraine would be looking for some assurances about the safe corridors, needing around 10 days to prepare its ports, a senior UN official said. The goal would be to export 5 mn tons of wheat every month to help unload Ukraine’s silos in time for this year’s grain harvest.

Ukraine has a lot to sell: Ukraine has around USD 10 bn worth of grain to sell, Ukrainian President Volodymyr Zelensky said in an address Friday, according to Reuters. “Approximately 20 mn tons of last year’s grain harvest will be exported. There will also be a chance to sell this year’s harvest … at the moment we have about USD 10 bn worth of grains available,” he said.

Shoukry hails Russia-Ukraine wheat pact: Foreign Ministry Sameh Shoukry welcomed the agreement during a phone-in on Ala Mas’ouleety last night. “It is a positive step that will ease the pressure on many countries that depend on imports from Ukraine and Russia, led by Egypt,” he told show host Ahmed Moussa (watch, runtime: 2:31).

Why this is important for us: Egypt, the world’s largest wheat importer, is among the countries most affected by the grain shortage triggered by the conflict. Egypt purchased more than 20% of its wheat imports from Ukraine prior to the war, leaving it scrambling to find new suppliers after Russia blockaded the nation’s ports.

It has been costing us a lot: Surging wheat prices added an extra EGP 15 bn to Egypt’s import bill in the final four months of the previous fiscal year, and Finance Minister Mohamed Maait said in June that wheat imports will cost an additional USD 3 bn this year if prices remained at their current levels.

Thankfully, wheat prices have fallen far from recent highs: US wheat futures have plunged more than 40% since peaking in mid-May as supply shortages have eased. The benchmark futures in Chicago fell as much as 6.6% after the agreement was announced on Thursday.

MEANWHILE- State grains buyer GASC has reportedly purchased an additional 120k tonnes of Russian and French wheat on Thursday, Reuters reported, citing traders. The purchase came a day after it booked 640k tonnes of wheat a day earlier. It has canceled a wheat tender on Tuesday due to high prices.

REMEMBER- GASC can now book the wheat directly from commodity traders. The authority typically purchases wheat via international tenders but in May the cabinet gave the go-ahead for the authority to buy directly from suppliers.

The board of state-owned, EGX-listed paint maker Paint and Chemicals Industries (Pachin) has rejected Saybad Industrial Investment’s acquisition bid, saying in a filing to the bourse (pdf) on Thursday that it undervalues the company. Saybad earlier this month offered to pay EGP 16.00-16.50 per share to acquire up to 90% of the company, valuing it at EGP 384-396 mn, a price tag that Pachin said “does not reflect the true value of the company and its assets.”

It’s still a premium: Shares in Pachin were up nearly 2% to EGP 15.92 at the close of trading on Thursday.

It’s not over, folks: The company plans to hold talks with the Saybad to negotiate a price that’s more amenable, the statement reads. Pachin will decide on whether to proceed with due diligence on the transaction at the next general assembly meeting.

Refresher: Saybad Industrial Investment is an Egyptian outfit consisting of a group of local investors who are active in the paint industry here and across Asia, according to the EGX disclosure. Around 54% of Pachin is currently owned by state-owned companies and banks, making the sale a part of the state’s privatization plans, a source with first-hand knowledge of the transaction told Enterprise last week.

Even with the current climate, acquisition targets are feeling lowballed: This is the second rejection by a major listed M&A target in as many days, after Madinet Nasr Housing and Development’s (MNHD) board last week said SODIC’s bid was too low, and asked the company to substantially raise its offer.

Advisors: Catalyst Partners is acting as Pachin's financial advisor. Adsero–Raji Soliman & Associates is the firm’s legal advisor.

Engineering and contracting company FEMCO is looking at potentially IPOing on the EGX within the next two years, Al Mal cites Managing Director Ahmed Hassan as saying. The company would list 49% of its shares on the bourse to finance its expansion plans, which include a foray into real estate development by setting up a new company under FEMCO’s umbrella, according to Hassan. FEMCO is also looking to expand into education, sports, and hotels in a second phase of its expansion plans.

About FEMCO: FEMCO is an EPC contractor working in the oil and gas, petrochemicals, and power industries established in 2016.

FEMCO would need to grow its capital 50x to qualify for entry on the EGX: The company’s capital currently stands at EGP 10 mn and plans to kick off several rounds of capital increases as of the beginning of next year to bring that figure to EGP 500 mn to be able to list on the bourse, Hassan said.

The company might also look at bringing in a strategic investor as an alternative to IPOing, Hassan said. Opting for equity sales to strategic investors is also gaining steam in the state’s privatization plans. Public Enterprises Minister Hisham Tawfik had said earlier this year that the state plans to sell a 25-30% stake in EGX-listed EgyptAlum to a strategic investor, and also plans to offer a stake of up to 25% in the company it will create through a merger of seven or eight state-owned hotels.

CIRA reports growing revenue, lower bottomline in 3Q 2021-2022: EGX-listed education outfit CIRA reported EGP 149.5 mn in net income in 3Q 2021-2022, down 30% from the same period last year, according to an earnings release (pdf). Revenues during the March-May quarter rose slightly to EGP 520.1 mn, up from EGP 511.2 mn in 3Q 2020-2021. Profits fell 3% to EGP 448.3 mn during the first nine months of the year, while revenues increased 15% to EGP 1.46 bn on the back of higher enrollment rates across its K-12 and higher education segments. CIRA attributed the drop in net income to increased financing costs and debt incurred as a result of the group’s continued expansion plans, as well as a 31% y-o-y increase in operating costs such as rising salaries and wages.

Strong financial performance despite rising inflationary pressure + global turbulence: “We are without doubt going through a challenging period given recent market turbulence and uncertainty on both the global and local level. However, we believe that CIRA has the right fundamentals and risk controls in place to weather current economic challenges and deliver on its growth objectives, as we have done year over year, demonstrating the strong potential and conservative nature of CIRA’s business model,” said CEO Mohamed El Kalla.

Looking ahead: CIRA plans to kick off shortly its EGP 2 bn future flow securitization program to finance investments over the next three years, El Kalla noted. These expansions include adding two new nurseries to its portfolio, after launching KidzGround in Suez earlier this year. CIRA is also expecting to break ground on its Cairo Saxony University “by early September of this year with plans to launch the university’s first phase by September 2023.”

It was a diplomacy-heavy night on the airwaves last night, as the nation’s talking heads discussed the Russian foreign minister’s visit to Cairo, the latest on the GERD crisis, and El Sisi’s overseas visits last week.

On the agenda for Lavrov talks: Russian Foreign Minister Sergey Lavrov is in Cairo today for the first time since the war on Ukraine broke out for talks with Egyptian and Arab League officials. Arab League Assistant Secretary-General Hossam Zaki told Kelma Akhira’s Lamees El Hadidi that the situation with the Grand Ethiopian Renaissance Dam (GERD) and Syria will likely feature in the conversation (watch, runtime: 10:32).

El Sisi’s whereabouts over the past week got some coverage: President Abdel Fattah El Sisi’s travels over the past week — Saudi Arabia, Germany, Serbia and, most recently, France — reflect his interest to coordinate with Egypt’s many partners, Foreign Minister Sameh Shoukry said on Ala Mas’ouleety (watch, runtime: 8:07). Egypt has the capabilities to provide Europe with gas, electricity and renewable energy but in turn it’s calling for more direct European investments and employment opportunities, Shoukry said. Al Hayah Al Youm (watch, runtime:13:42) also covered the story.

Egypt is balancing its international relations in an increasingly polarized world: “We are maintaining our relations with various partners and will continue to manage these relations in a balanced manner,” Shoukry said. (watch, runtime: 2:31).

Ethiopia has started filling the GERD for the third year running: The country is currently halfway through the third filling which started 11 July, and and has so far stored around 2 bn cubic meters of water, Cairo University water resources professor Abbas Sharaki said on El Hekaya (watch, runtime: 5:10). Ethiopia is set to store an additional 3 bn cubic meters over the coming two weeks, he added.

Emaar Misr under fire: The Environment Ministry has ordered all dredging work happening near the north coast cities of Marassi and Stella to stop after a number of people took to social media to complain about environmental damage, El Hekaya reported (watch, runtime: 3:08). Social media users, including Hisham Ezz Alarab, have accused Emaar Misr’s Marassi Marina development of causing “catastrophic” damage to the shoreline, and called on the ministry to intervene.

President Abdel Fattah El Sisi’s visit to Paris for talks with Emmanuel Macron led coverage of Egypt in the foreign press over the weekend. We have more on the visit in this morning’s Diplomacy section, below. (AFP | Associated Press | Asharq Alawsat)

Also featuring heavily in the news: A radiographer scanned the head of an ancient Egyptian mummy — found in the UK in someone’s attic — to learn more about its origins. The head was found to have belonged to an adult female whose brain was removed, and is estimated to be around 2k years old. The story got coverage in the UK press: The Times | The Independent | Metro.

Also making headlines:

• Solid economic growth ahead: Egypt’s economy is forecast to grow at a 5.5% pace next year and steadily over the next three years, while inflation will average 10% this year and 10.4% in 2023-2024. (Reuters)
• The implications of rising fuel prices for Egypt’s poorest: Egypt’s recent fuel price hike has delivered a blow to the country’s most vulnerable people, with everyone from taxi drivers to regular grocery shoppers having to make changes to adapt. (AFP)
• Why is Egypt considering a BRICS bid? Egypt, Saudi Arabia and Turkey’s apparent interest in joining the BRICS — a group of major emerging economies including China, Russia, India, Brazil and South Africa — comes as Moscow and Beijing try to build support around the world amid escalating tensions with the US. (Arab News)
• Egypt eases its restrictions on street photography: The decision last week to allow amateur street photography without permits is getting attention in the UK. (The Guardian | Telegraph)
• The 23 July Revolution, 70 years on: On its 70th anniversary, Arab News talks to experts about the historical significance of the 23 July revolution. (Arab News)

This Nigerian startup is planning to launch EVs in Egypt: Metro Africa Xpress plans to debut its electric vehicles in eight countries in Africa by 2023, including Egypt, Cameroon and Uganda, CEO Adetayo Bamiduro told Bloomberg. The Nigerian startup, backed by private equity firm Lightrock, raised USD 31 mn last year, which will enable it to increase its vehicles to 100k by 2023 from 8k currently, and grow the percentage of EVs in its fleet to 20% from 4%.

Your Swvl ride is getting 5% more expensive: Swvl is raising its fares by 5% in response to the recent hike in petrol prices, CFO Youssef Salem reportedly told Al Shorouk. The mass transport company follows Uber, which last week raised prices in response to the higher fuel costs, and public transport, which hiked fares by 5-7%.

Qalaa Holdings’ shareholders voted to continue the company’s operations during an extraordinary general assembly on Wednesday, despite incurring losses of more than half of its shareholders’ equity, the company said in a disclosure (pdf) to the EGX. The devaluation of the EGP caused the company’s losses to widen to EGP 584.1 mn in 1Q2022, offsetting a surge in revenues.

The CBE wants exporters to use Buna: The Central Bank of Egypt (CBE) is calling on exporting companies to use the Arab Monetary Fund’s regional payment system Buna for cross-border bank transfers, Al Borsa reported. The platform was launched by the AMF in 2020 to increase the use of local currencies in settling payments. It offers instant transfers and charges fixed fees.

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

• The EU is providing Egypt with a EUR 117.9 mn grant for water and energy efficiency, the International Cooperation Ministry said. (Statement)
• The National Bank of Egypt is granting real estate developer Ardak an EGP 300 mn loan to restructure its debts. (Al Shorouk)

El Sisi meets Macron: President Abdel Fattah El Sisi met on Friday with French President Emmanuel Macron in a visit aimed at bolstering security and defense ties. The two heads of state discussed regional issues, the war in Ukraine, and COP27, according to an Ittihadiya statement, in what was their first one-on-one meeting since Macron’s re-election in April.

Human rights issues came up during the visit: The family of a 27-year-old French backpacker who went missing in Egypt last year used El Sisi’s visit to call for an investigation into his disappearance, the Associated Press reported. The family says their pleas to Egyptian police have been met with “silence or stonewalling” for months.

El Sisi also met with French Finance Minister Bruno Le Maire to discuss French investments in Egypt’s development projects, particularly in the renewable sector ahead of COP27, according to a separate Ittihadiya statement.

US peacekeepers in the Red Sea’s Tiran Strait will be replaced by remote-controlled cameras, which will now be responsible for ensuring uninhibited movement in and out of the Gulf of Aqaba, Reuters reports, citing unnamed officials. Securing the coastline used to be a job delegated to the Multinational Force and Observers (MFO) as a result of the 1979 US-brokered peace accord between Egypt and Israel.