AM — Your Russian wheat shipments are safe, Lavrov tells Egypt

Good morning, wonderful people, and welcome to a reasonably quiet (but not dull) Monday morning. It feels a little bit like the summer news slowdown — a feature of both the Western and Egyptian news cycle — may be approaching as more and more people in the northern hemisphere head to the beach.

What news we have is meaty: Russia’s foreign minister was in town yesterday trying to reassure us on wheat supplies — and we have plenty of M&A, debt market, and infrastructure news. All of that (and more) below.

PSA #1- Metro and train fares are getting more expensive starting August, Transport Minister Kamel El Wazir told El Hekaya (watch, runtime: 4:45) last night. El Wazir said the ministry hasn’t decided how big the price hikes will be, but suggested that Metro fares will likely rise by EGP 1-2.

All means of public transport have gotten more expensive recently: Taxis, microbuses and buses across the country raised prices by 5-7% in response to the rising cost of fuel. Private companies including Uber and Swvl have followed suit.

PSA #2- Egypt has not yet recorded any cases of monkeypox amid a global outbreak that has spread to 72 countries, including Arab nations (among them the UAE), presidential health advisor Mohamed Awad Tageldin told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 3:55). The World Health Organization declared the outbreak a global health emergency over the weekend. Monkeypox is a rarely fatal, milder cousin of smallpox and is largely being transmitted as an STD.

THE BIG STORY ABROAD-

There’s no single story dominating the global front pages this morning: Reuters leads with the Russia-Ukraine grain agreement (more on this in this morning’s Diplomacy section, below) and the Financial Times has the latest on the race to become the UK’s next prime minister. A report in Axios, meanwhile, suggests that Agent Orange’s political clout is on the wane ahead of a potential 2024 run as the Murdoch empire turns against him — and as GOP rival Ron DeSantis gains in the polls.

FANCY SOMETHING A BIT MORE … SALACIOUS? Tesla and Space X boss Elon Musk and Google co-founder Sergey Brin are no longer besties after Elon allegedly slept with Brin’s wife, triggering a divorce, the Wall Street Journal reports. The front page story is getting plenty of pickup on social media.

WHAT’S HAPPENING TODAY-

OFH’s board will weigh in on Chimera’s bid to acquire Beltone: Orascom Financial Holding’s (OFH) board of directors will meet today to decide on Abu Dhabi investment firm Chimera Investments’ bid to acquire up to 90% of Beltone Financial, CEO Nils Bachtler previously confirmed to Enterprise. OFH is the majority shareholder in Beltone Financial. Our friends at Chimera Investments submitted a bid in June at EGP 1.485 per share, valuing the company at around EGP 690 mn. The Financial Regulatory Authority gave regulatory approval to Chimera’s offer last week.

US Special Envoy for the Horn of Africa Mike Hammer is talking GERD in Cairo today: Hammer will a diplomatic resolution to the long-running crisis over the Grand Ethiopian Renaissance Dam (GERD), according to a statement from the US embassy. This is Hammer’s first stop of a three-stop tour that will also take him to the UAE and Ethiopia. Egyptian experts have claimed in recent days that satellite images show that Addis Ababa has started the third round of filling the dam.

Hammer arrives in Cairo one day after Russian Foreign Minister Sergei Lavrov was in town to talk grain and, in the words of Deutsche Welle, “break Russia’s diplomatic isolation.” We have chapter and verse on the visit in this morning’s Diplomacy section, below.

Contracts for Dekheila Port dry bulk terminal will be signed today: The Alexandria Port Authority will sign today an agreement with a consortium of the Egyptian Group for Multipurpose Terminals, the Arab Group for Supply Chains, Gharably Integrated Engineering Company (GIECO) and Saudi conglomerate Ajlan & Bros for a dry bulk terminal at the Dekheila Port, according to the Transport Ministry.

HAPPENING TOMORROW-

The Federal Reserve starts its two-day policy meeting tomorrow, and the consensus is that policymakers will go ahead with a second-consecutive 75-bps rate hike as it battles to get inflation under control. US 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. The Fed meets after the European Central Bank raised rates last week for the first time in 11 years.

Watch this space: The Central Bank of Egypt’s Monetary Policy Committee will have plenty of time to digest whatever the Fed does next — the MPC next meets to review rates on Thursday, 18 August.

The IMF’s updated World Economic Outlook is out tomorrow: The Fund has warned that it will “substantially” downgrade its 2022 global growth forecast as the war in Ukraine, surging global inflation and rising interest rates weigh on the global economy.

MORNING MUST READ-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we looked at a step-by-step guide on how to open up a factory in Egypt, starting from land allocation and all the way through maintaining operating licenses.

CIRCLE YOUR CALENDAR-

Your next national holiday is not likely to be before October when we observe Armed Forces Day. The Madbouly cabinet announced yesterday that Saturday will be a national holiday in observance of Islamic New Year, meaning it is highly unlikely we’ll be downing tools for a weekday replacement day. 6 October will, in turn, be our last holiday until New Year’s Day 2023.

THIS IS WHAT THE FUTURE LOOKS LIKE: With holidays tied to the lunar calendar coming up 10 days earlier each year, we’re going to be frontloading our holiday schedule in the first half of the year for some time to come… It’ll be interesting to see how we all space out our vacation days in response.

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.

*** 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: When hiring fresh grads, Egypt’s private sector companies might look for a range of specific technical skills, but all want individuals with broadly similar work attitudes, we reported last week. So just how are Egypt’s fresh graduates being provided with the employment skills they need? Sources from law firms, startups, and companies in a range of industries tell us that while several Egyptian universities do a good job of preparing fresh grads to enter the workplace, many companies also need to take steps to fill in gaps themselves.

Shipments of Russian wheat are safe, Lavrov tells Egypt: Russian Foreign Minister Sergey Lavrov sought to ease Egyptian fears of a shortage of wheat and other grains during talks with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry in Cairo yesterday. The meeting comes amid concern that its agreement to resume Ukrainian wheat exports may collapse after a Russian missile strike on a key port. “We confirmed the commitment of Russian grain exporters to meet their commitments in full,” Lavrov said in a joint press conference with Shoukry following the talks (watch, runtime: 32:11).

The catch: It’s not just Russia’s wheat that we (and other nations) need.

Wheat pact under threat: The UN- and Turkey-brokered agreement to reopen Ukraine’s Black Sea ports and unlock mns of tons of stranded grain was thrown into uncertainty just hours after it was signed when Russian missiles struck targets at Odesa port, appearing to put it in breach of the pact under which Russia had pledged not to target Ukrainian ports involved in shipping grain. Ukrainian President Volodymyr Zelenskiy indicated yesterday that Kyiv will continue to prepare for the resumption of exports, but said the attack showed that Moscow cannot be trusted to keep to the agreement.

The prolonged wheat crisis is costing us: Egypt sourced around 80% of its wheat imports from Ukraine and Russia prior to the war, with more than 20% coming from Ukraine. Record wheat prices earlier this year added an additional EGP 15 bn to the country’s import bill in the final four months of the fiscal year that ended 30 June. Finance Minister Mohamed Maait said in June that wheat imports will cost an additional USD 3 bn this year if prices don’t come down.

Lavrov blames sanctions for food crisis: The Russian minister said “illegitimate” (read: Western) economic sanctions have been responsible for the shock to global food supply chains and called on Western nations to ease restrictions he claims make it difficult for Russia to export food and fertilizer. Ukraine and G7 nations say that Russia is responsible for the crisis due its blockade of Ukraine’s Black Sea ports. “We have a common understanding of the causes of the grain and food crises,” Lavrov said, adding that he agreed with El Sisi that the two countries will follow up on Russian exports.

Could Egypt play mediator? During talks with Lavrov, El Sisi reiterated his offer to help find a diplomatic solution to the crisis, according to Ittihadiya.

Lavrov’s visit is part of a wider tour around Africa with stops in Ethiopia, Uganda and the Democratic Republic of Congo as Moscow looks to firm up relations with our neck of the woods.

Also from the presser:

• Egypt could soon be a SCO member: A decision on whether to admit Egypt to the Shanghai Cooperation Organization (SCO) as a dialogue partner will likely be taken during the coming summit in September, Lavrov said.
• The next Russia-Africa summit will be held in mid-2023, the Russian FM noted.

Lavrov’s visit to Cairo is everywhere in the foreign press this morning. Global media outlets are remarking on the battle of narratives over who is responsible for causing the global food crisis — and the geopolitical significance of the trip as Moscow and the West vie for influence in developing countries around the world. Cue talk of Cold War II, et cetera, et cetera, ad nauseum. (AP | Reuters | AFP | NYT | FT | BBC | The Guardian | The Times | CNBC)

And it got all of the nation’s talking heads talking: Kelma Akhira (watch, runtime: 11:48), Al Hayah Al Youm (watch, runtime: 5:11), Ala Mas’ouleety (watch, runtime: 17:38), Masaa DMC (watch, runtime: 4:19) and Hadeeth El Kahera (watch, runtime: 4:53) all had coverage of the meetings last night. Amr Hamzawy, director of the Carnegie Middle East Program, told Hadeeth Al Kahera that the visit sends a message to US President Joe Biden after his meeting with a number of Arab leaders, including El Sisi, that Russia has strong strategic partnerships in the Arab world. Masaa DMC interviewed Egypt's former Ambassador to the Russia Nabil El Oraby.

IN OTHER DIPLO NEWS-

Egypt and Jordan have agreed to work on a joint food security plan the two sides hope to have crafted within a month, the Jordanian Trade Ministry said in a statement, without disclosing details. This came during a meeting between Jordanian Trade Minister Youssef Al Shamali and Supply Minister Ali El Moselhy in Amman yesterday. The two ministers also agreed to activate a memorandum of understanding signed in February that will establish joint logistics areas.

El Sisi + Macron follow up on France talks: President Abdel Fattah El Sisi called his French counterpart Emmanuel Macron last night to follow up on the talks held over the weekend in Paris, which focused on the war in Ukraine, regional issues, and COP27, Ittihadiya said in a statement.

The Suez Canal Container Terminal (SCCT) wants to invest USD 500 mn to expand the capacity of East Port Said port, company representatives confirmed to Enterprise. The company plans to build a 1k-meter container berth, which is expected to raise the port’s annual capacity by almost 40%. The news was initially reported by Al Mal.

The state of play: The company is in talks with the Suez Canal Economic Zone to finalize the details of the contract, including the final investment cost and financing. SCCT is majority-owned by Maersk subsidiary APM Terminals.

More berths = more containers: The new berth is expected to have an annual capacity of 2 mn TEU. This will significantly expand the port’s current capacity, which stands at 5.4 mn TEU a year. The port handled 3.8 mn TEUs in 2021, up 3% from 2020.

SOUND SMART- A TEU is a standard measurement in the shipping and terminal industry and is based on the dimensions of a common twenty-foot shipping container. The acronym stands for Twenty-foot Equivalent Unit. A double-length container, for example, would count as two TEUs.

About SCCT: SCCT operates the East Port Said port, located at the mouth of the Suez Canal on the Mediterranean. The company was set up in 2004 as a joint venture with APM Terminals as the majority shareholder. The Maersk subsidiary currently owns 55% of the company, with the balance held by shareholders including Hong Kong-based shipping line Cosco Pacific, the Suez Canal Authority, the National Bank of Egypt, and Egyptian private sector companies. The company invested more than USD 60 mn in 2020 to modernize its cranes, allowing two ultra-large container vessels to dock at the same time.

O West lands EGP 1.5 bn in funding from CIB: Orascom Development Egypt (ODE) subsidiary Orascom for Real Estate (ORE) has signed a EGP 1.5 bn facility agreement with CIB to partially finance and fast-track construction at its flagship O West project in west Cairo, according to a press release (pdf). The facility will help the developer accelerate delivery of phases at Whyte, Tulwa, Club Residences, Hillside, and the O-Business District, according to the release.

Accelerated construction = early deliveries: The facility will help O West begin delivering units in 1Q 2023 “ahead of our promise to customers,” said Orascom Development Group CFO Ashraf Nessim. The financing was executed independently from ODE, and will give O West an independent capital structure for the acceleration scheme.

O West net sales grew 73.6% to EGP 2.4 bn in the first half of the year, O West CEO Tarek Kamel said, according to a separate press release (pdf). The sales accounted for 51.4% of the company’s total sales for 1H 2022, he added.

Advisors: Our friends at EFG Hermes acted as sole financial advisor, lead manager and sole bookrunner for the transaction, which comes two years after EFG advised ODE on a USD 265 mn multi-currency term loan. MHR & Partners in association with White & Case were legal counsel to ORE.

Pioneers Properties for Urban Development has closed a EGP 425 mn securitized bond issuance, the second in a wider EGP 3 bn program, according to a press release (pdf) from its financial advisor, EFG Hermes. The four-tranche issuance is backed by a EGP 613.5 mn receivables portfolio, with the tranches rated AA+, AA, and A and by ratings agency MERIS.

Who bought in? Banque du Caire (BdC), the National Bank of Egypt (NBE) and CIB.

Pioneers has now completed a third of the program. The real estate developer completed the first EGP 627.5 mn issuance in December.

Advisors: EFG Hermes acted as the sole financial advisor, sole transaction manager and bookrunner, underwriter, and arranger on the issuance. NBE, BdC, and CIB acted as underwriters, with CIB also acting as the custodian bank. Baker McKenzie provided counsel, while KPMG was the auditor.

Structured finance has picked up in Egypt this year: The latest sale takes the total securitization volume this year to almost EGP 16.6 bn, exceeding the EGP 15.8 bn taken to market last year.

UP Pharma is still studying EIPICO’s takeover bid: Upper Egypt Pharma (UP Pharma) has not yet given Egyptian International Pharma Industries Company (EIPICO) the greenlight to conduct due diligence after it signaled intent to acquire 99.99% of the company’s shares in May, EIPICO said in an EGX disclosure (pdf). UP Pharma is still studying the offer, the disclosure said.

Refresher: EIPICO’s board had approved the start of procedures to potentially acquire a 99.9% stake in UP Pharma in late May. Both firms are owned by the Arab Company for Drug Industries and Medical Appliances (ACDIMA), and the transaction would see EIPICO snag ACDIMA’s stake in UP Pharma to bring it under its umbrella.

OTHER M&A NEWS- Obourland has not received any interest or formal acquisition offers from Emirati food and beverage firm Agthia Group, the company said in an EGX disclosure (pdf) yesterday. The denial followed reports in the local press that the ADQ-owned firm is interested in purchasing Obourland and plans to submit a non-binding offer as soon as it concludes its acquisition of Auf Group. Agthia also denied the news to Bloomberg Asharq.

CIB’s net income rose 9% y-o-y to EGP 3.5 bn in 2Q 2022 as demand for short-term credit picked up, according to the bank’s latest earnings release (pdf). The bank recorded revenues of EGP 6.9 bn, up 8% from the same period last year. CIB grew its local currency loan book by 20% during the first half of the year, fueling 16% growth in revenues and a 28% jump in net income which hit EGP 7.8 bn over the six-month period.

What they said: “CIB concluded the first half of 2022 with remarkable performance drawing on a resilient Egyptian economy that was able to control the inflationary pressures and pave the way for an encouraging local consumption and a recovery in investment, despite a much fluid global macroeconomic environment,” the bank said.

Russian Foreign Minister Sergey Lavrov’s visit to Cairo yesterday dominated the airwaves last night. We have the details in this morning’s Diplomacy, above.

What’s happening with North Coast beaches? The Environment Ministry has hired international specialists to assess whether alleged damage to some North Sea beaches is related to climate change or caused by dredging work for Emaar Misr’s Marassi Marina development, Fouad told Ala Mas’ouleety (watch, runtime: 7:59). The ministry ordered all dredging work near the north coast compounds of Marassi and Stella to stop after a number of people took to social media to complain about environmental damage they claim is being caused by the work. Al Hayah Al Youm (watch, runtime: 3:44), Hadeeth El Kahera (watch, runtime: 6:07) and Kelma Akhira (watch, runtime: 5:34) also had the story.

The road to COP27: The government is expecting up to 30k people to attend the COP27 summit in Sharm El Sheikh in November, Environment Minister Yasmine Fouad told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 3:31 | 8:35). Global climate goals have suffered a setback due to the war in Ukraine, which has triggered food and energy crises around the world and forced several countries to backtrack on their commitments to green energy, she said. Fouad also joined Ala Mas’ouleety (watch, runtime: 4:48) where she walked us through the government’s preparations to host the gathering.

Russian Foreign Minister Sergey Lavrov’s visit to Cairo yesterday is dominating the conversation on Egypt in the international press this morning. We have the full story in Diplomacy, above

The family of high-profile activist Alaa Abdel Fattah have accused UK Foreign Secretary Liz Truss of ignoring his case since launching her bid on 11 July to succeed Boris Johnson as Conservative party leader, according to the Guardian. The case of Alaa, now a UK national and on hunger strike since April, has drawn significant attention from the international press in recent months. A member of the presidential pardons commission suggested earlier this month that Alaa could be pardoned, though we haven’t heard anything on that since.

The plight of Egypt’s small farmers is getting attention: Despite growing nearly half of the country’s crops, Egypt’s small farms are struggling to make ends meet, often forced to sell their output at a loss because of their debt and difficulties with fragmented infrastructure, AFP reports.

FRA wants to see serious growth in the non-bank sector: The Financial Regulatory Authority (FRA) wants to see NBFS lending more than double to EGP 820 bn by 2026, up from EGP 370 bn last year, the regulator said in a statement yesterday. This comes as part of the FRA’s 2022-2026 strategy, which aims to more than double the EGX’s market cap to EGP 1.6 tn.

BAD NEWS FOR EXPORTERS? Exporting products to Jordan will get more complicated starting September: Jordan will impose pre-clearance fees for Egyptian imports and mandate the use of letters of credit (L/Cs) for financing trade with Egyptian companies, Al Borsa reported, citing a letter from the Jordanian government. The move is reportedly a response to Egypt’s new digital customs system, which charges exporters a fee to file documents on the Advanced Cargo Information (ACI) system. Jordan is a significant importer of Egyptian household goods, electronic appliances and machines, and also acts as a transit country for goods heading to Iraq, Sherif El Sayyad, head of the Export Council for Engineering Industries, told the newspaper. The council has called on the government to appeal to Amman and block the move.

FROM PLANET STARTUP- B2B logistics firm Khazenly is looking to expand to the Gulf and grow its footprint in Egypt, co-founders Mohamed Younes and Mohamed Montasser told Asharq Alawsat. The company is looking to enter Saudi Arabia and the UAE but has no timeframe for the move, they told the newspaper. This comes a few weeks after the startup closed a USD 2.5 mn seed round led by Arzan Venture Capital and Shorooq Partners.

Other things on our radar this morning:

• External debt rises significantly in 3Q: Egypt’s external debt jumped 17% y-o-y in 3Q FY2021-2022 to USD 157.8 bn, according to central bank figures. Long-term debt accounted for around 83% of the total figure.
• Saudi German Hospitals Group wants to make its hospitals in Egypt green: The Saudi German Hospital is working on applying new “green” measures to its newest hospital in Alexandria, as part of a wider strategy to establish an environmentally-friendly model for its facilities in Egypt, Regional Manager Mohamed Hablas told Enterprise, confirming a report from Al Mal.
• The government aims to roll out the universal health ins. system in Suez, Aswan and South Sinai before the end of the current fiscal year, after successfully trialing the program in Ismailia, Luxor and Port Said. (Statement)