Tuesday, 26 July 2022

AM — The EGX is courting state institutional investors in a bid to revive trading volumes

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, wonderful people. It’s hump day, and your reward is a very busy morning on the news front, as our very stacked tl;dr above suggests. Let’s jump straight in:

WATCH THIS SPACE #1- Did Orascom Financial just agree to sell its stake in Beltone to our friends at Chimera? Local newspapers are reporting that Orascom Financial Holding (OFH) decided at a board meeting yesterday to sell its 56% stake in EGX-listed Beltone Financial to Chimera Investments. The report in Hapi Journal cites an unnamed source at OFH. The Abu Dhabi-based investment firm is bidding to acquire up to 90% of Beltone at EGP 1.485 per share, valuing the financial services firm at around EGP 690 mn. Chimera’s 10-day mandatory tender offer kicked off on Thursday and ends 3 August. We’ll have more for you on this in tomorrow’s EnterpriseAM.

Sound smart: Chimera is a unit of Abu Dhabi’s Royal Group. Led by CEO Seif Fikry, a veteran of regional capital markets, Chimera has in the past two years aggressively ramped up its investments in Egypt and beyond, including with a massive venture capital fund and other investments that span financial services to real estate. Parent company Royal Group has investments in some 60 entities with 20k employees spanning real estate to FMCG by way of healthcare and aviation.

WATCH THIS SPACE #2- Will the USD break the EGP 19.00 barrier today? The greenback continued its slow march toward EGP 19.00 yesterday, with 1 USD changing hands for EGP 18.97.

HAPPENING TODAY-

IT’S LOOKING UGLY OUT THERE- The IMF will release its updated World Economic Outlook this afternoon. 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.

We’ll have full coverage of the report in tomorrow’s EnterpriseAM, but if you really can’t wait you’ll be able to read the report and tune into the IMF presser at 3pm CLT here.

MEANWHILE- Pharma players get their say as the government’s public consultations on its state ownership policy continue today. Representatives from the country’s healthcare industry discussed the government’s privatization plans on Sunday. Every Sunday, Tuesday, and Thursday see workshops on how privatization plans will affect specific industries.

The Egyptian-Indian Business Council will hold its first meeting since 2016 in Cairo today to discuss bilateral investment, Al Borsa reports.

SETTING THE GLOBAL AGENDA- The US Federal Reserve starts its two-day policy meeting today. While the consensus is that the Fed will go ahead with a second consecutive 75-bps rate hike to tamp down on inflation, some investors are hopeful that this marks the peak of its tightening cycle 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 when it next meets to review rates on Thursday, 18 August.

US stocks whipsawed in trading yesterday ahead of the Fed meeting and a spate of tech earnings landing this week. The S&P 500 closed marginally in the green while the Nasdaq ended lower as investors prepare for bad news when Amazon, Google, Facebook and Microsoft release their 2Q earnings later this week.

Asian markets are largely up in early trading this morning and futures suggest stocks in Europe (with the exception of France), the US and Canada will face selling pressure at the opening bell today.l

HAPPENING TOMORROW-

Egypt will host the annual general meetings of the African Reinsurance Corporation (Africa Re) tomorrow, marking the first time the meetings will be held in person since the pandemic broke out in early 2020, the Finance Ministry said yesterday. The meetings will discuss Africa Re’s performance and the impact of the ongoing global economic crisis on the continent’s ins. and reinsurance industries.

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

SOMETHING WE MISSED- Zamalek were crowned Egypt Cup champions last week after beating rivals Al Ahly 2-1 in the final. This is the 28th time the White Knights have got their hands on the cup. The victory sees the team achieve the domestic double for the fourth time after winning this year’s Egyptian Premier League.

THE BIG STORY ABROAD-

Russia is turning the screw on energy-starved Europe: Gazprom will further cut gas flows through the Nord Stream 1 pipeline this week, piling pressure on Germany, which was already struggling to secure enough gas to last it through the winter. In a statement yesterday, the Russian gas giant said it would reduce flows to just 20% of capacity, blaming an issue with another turbine. Gazprom had already reduced shipments by 60% in June, which it also claimed was due to a turbine. European gas futures surged almost 12% on the news. (Reuters | Bloomberg | FT | NYT | WSJ)

Rationing now may be the only option, according to Bloomberg commodities columnist Javier Blas, who wrote that the country will not have enough gas for the winter unless “major demand reductions” are made.

Things were already looking dire: Fresh data (pdf) out yesterday showed German business confidence fell to a two-year low in June as surging energy prices and uncertainty over gas supplies put the country “on the cusp of a recession.”

Ukraine could resume wheat exports via the Black Sea as soon as this week following last week’s agreement with Russia to unlock mns of tons of grain stranded in the country’s ports, the Financial Times reports. This comes despite Russia’s missile strike on the port of Odesa hours after the agreement was signed, an attack which Ukraine said was in breach of the agreement. Russia has claimed it fired on a military target and thus was not in breach of the accord.

MORNING MUST READ-

Is it time for investors to return to emerging markets? The bulls say yes, but El Erian says investors should still be selective: Considering the current global headwinds and unstable environment still looming over emerging markets, investors need to be selective in their EM investments, market guru Mohamed El Erian writes in a column for the Financial Times. Although EM assets are currently very attractively priced, that metric alone is not enough, he says. “Investors need to take into account both the dispersion of returns within the asset class and economic and financial influences that are yet to play out fully, such as the surge in global inflation forcing major central banks to tighten policies aggressively into a rapidly slowing global economy,” El Erian writes.

WORTH KNOWING-

  • GAFI is looking to drum up interest from Indian investors in sectors including tech, engineering, textiles and green hydrogen / ammonia.
  • Kuwait has a new prime ministerAhmed Nawaf Al Sabah, the eldest son of the country’s emir. Al Sabah will now form a government and prepare for a fresh general election.
  • PSA– Nilepreneurs has launched four new incubator programs with focuses on segments including B2B software, design, engineering (with an emphasis on climate) and women-led startups. Applicants have until the end of August to submit.

enterprise

*** 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: Enterprise looks into Egypt’s updated Nationally Determined Contributions (NDC) (pdf), covering the period from 2015 until 2030. The report provides updated emissions targets for 2030, with a focus on the government’s climate action to lower emissions in heavily-polluted energy and transport sectors and others.

enterprise

A sizzling summer awaits you by the bay: 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 beachside 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.

INVESTMENT WATCH

One giant leap for regional integration…

Egypt, Jordan + UAE choose projects for joint industrial partnership: Egypt, Jordan, the UAE, and now Bahrain, have identified USD 3.4 bn-worth of joint investment projects in the first phase of a USD 10 bn industrial partnership signed in May, according to a joint statement (pdf) yesterday. Three days of talks in Cairo this week have seen officials from the four countries choose 12 projects in the food, agriculture, pharma and fertilizers sectors. The next stage of the partnership will focus on the metals, chemicals, plastics and textiles industries, the statement said.

The UAE is bankrolling the agreement: The Emirates confirmed it will contribute USD 10 bn to the initiative, which will be managed by Abu Dhabi sovereign wealth fund ADQ. UAE’s Industry and Advanced Technology Minister Sultan Al Jaber — who has long helped shepherd the UAE’s relationship with Egypt — said that the country is keen to invest in the sectors covered by the partnership.

Three’s a crowd, four’s a party: Bahrain has officially signed on to the regional agreement, according to the statement. “Bahrain joining will be a great boost to the partnership and push forward its agenda of achieving sustained regional growth,” Jordan’s Industry, Trade and Supply Minister Yousef Al Shamali said.

What are they looking for? Hedging against supply chain disruptions is key. All four member countries affirmed that the partnership is hoped to link supply chains and integrate industrial and logistics networks to minimize supply chain disruptions. But more than that:

  • Jordan wants to safeguard crucial supplies: Al Shamali stressed that the committee had focused on projects to secure steady supplies of food and meds.
  • Ditto Egypt: Trade Minister Nevine Gamea said the partnership is necessary to guard against the disruptions caused by the global economic crisis — and that it will spur sustainable growth and job creation.
  • Bahrain basically wants export markets: Bahrain wants to increase food and fertilizers, pharma, textiles, metals, and petrochemicals exports, Industry and Commerce Minister Zayed Al Zayani told Sky News Arabia yesterday.

We’re still waiting on a lot of details: It remains unclear which projects are in line for funding or how the money is being allocated. Al Shamali told CNBC Arabia yesterday (watch, runtime: 1:27) that Jordan will take part in 10 of the 12 projects, which will receive USD 3.2 bn in investment, though how Egypt, the UAE and Bahrain fit into the partnership is still to be announced.

A “matter of life or death”: Those were the words used by Prime Minister Moustafa Madbouly during a meeting with the officials yesterday. The PM used the occasion to call on all four countries to take the initiative seriously and deliver on the projects. He urged the group to set a timetable and pledged to cut any red tape slowing the process.

Private sector participation crucial: Al Jaber called on private sector companies to take part in the committee’s policy discussions so they can best benefit from the investments that are to come. The high committee will be holding meetings with companies interested in participating, the statement said.

The next steps: The committee has commissioned feasibility studies for the selected sectors, will then issue a detailed investor roadmap for the upcoming projects, according to the statement.

The news got plenty of coverage on the airwaves last night: El Hekaya (watch, runtime: 8:33) and Hadeeth El Kahera (watch, runtime:31:52) both had Trade Minister Nevine Gamea on to discuss the partnership, while Ala Mas’ouleety (watch, runtime: 8:08) dedicated some to time discussing what it means for Egypt.

CAPITAL MARKETS

The EGX wants to bring local institutional investors back into the market

The EGX wants state institutions to invest more in capital markets, with EGX officials having held recently a series of meetings with state-owned institutions in a bid to increase the amount of domestic institutional money in Egypt’s equity market and raise liquidity, a source with first-hand knowledge of the push told Enterprise.

Who’s involved: The EGX has in recent weeks been meeting with a number of government institutions, fund managers, and the Central Auditing Organization to discuss issues that are preventing them from investing in the market. Egypt Post, state-owned ins. companies including Misr Ins. Holding, the National Social Ins. Authority, and the General Authority for Health Ins., and the Egyptian Endowment Authority have all been involved, our source says.

What’s the driver? It’s all about liquidity. Trading volumes on the bourse have been anemic this year. Foreign institutions have pulled back from emerging markets in general (and Egypt, in particular) and state institutions have traditionally stayed away from equities (outside of units at major financial institutions such as Banque Misr and the National Bank of Egypt). That’s left retail investors fully in charge of the direction of the local market in 2022: Domestic institutions accounted for less than 4% of total trading volume in May, according to Enterprise calculations based on figures provided to us by the bourse. Local institutional appetite has picked up in recent weeks, but so far in July has still only made up 13% of trades. “It’s an ongoing process, and this is one of the most important issues we’ve been working on lately,” our source said of the talks. “The market currently needs an increase in liquidity, particularly institutional liquidity.”

2022 has been a bad year for the EGX: A general risk-off sentiment and the retreat of foreign institutional investors from emerging markets has driven the benchmark EGX 30 to lows not seen since November 2016. A litany of headwinds — including rampant global inflation, rising US interest rates and geopolitical worries thanks to Vladimir Putin’s invasion of Ukraine — have caused foreign money to exit the market, which is currently down nearly 23% year-to-date.

But the EGX is hoping a more flexible investing environment will draw local institutions back: The meetings kicked off after Prime Minister Moustafa Madbouly discussed the matter with EGX boss Mohamed Farid in April. By bringing all concerned parties to one table, the EGX wants to create more flexible investment frameworks that provide better returns to investors and enhance market liquidity. “We’re currently looking to raise the quality of the investment process more than we’re looking to raise the amount of investments,” an EGX official told us.

One problem: Ins. and pension funds don’t tend to get heavily involved in equities: Local ins. companies often focus their investments in debt (both sovereign and corporate). The social security and pensions law requires that public pension and social ins. funds invest no less than 75% of their capital in treasury bills and bonds, with the remainder divided among a range of asset classes. The state ins. fund for public-sector workers invested a mere 1% of its total funds in the EGX in 2019, according to the fund’s then-head Mohamed Seoudi.

The EGX thinks it has two potential solutions to the problem:

#1- Better asset managers: Following the series of meetings, state institutions identified the need to develop a criteria for selecting competent asset managers and make sure they’re qualified to make better investment decisions.

#2- Loosening the reins on asset managers: Current rules in place to limit losses and mitigate risk place strict limits on how managers of state assets can allocate capital. Participants in the meetings concluded that managers need to be given more flexibility when making investment decisions.

M&A WATCH

Allianz to hold 40% stake in JV with Sanlam

Allianz will hold a 40% stake in its new joint venture with South Africa’s Sanlam, an official at Allianz told Enterprise yesterday, confirming a report by Al Shorouk.

A blockbuster merger for the African ins. industry: The two companies agreed to merge their Africa operations in May, creating the largest pan-African non-banking financial services business on the continent. The JV will operate in 29 countries in Africa, and is expected to have an estimated value of ZAR 33 bn (c. USD 2.05 bn). South Africa is excluded from the agreement and Namibia will be included at a later date.

Allianz could up its stake: Allianz could later increase its share of the company to 49% and obtain management rights, the source told us yesterday, without disclosing further information.

The merger will see Sanlam enter Egypt for the first time. The South African insurer has been planning to enter the Egyptian market since 2019.

OTHER M&A NEWS-

Berlin-based corporate venture builder FoundersLane has launched operations in Egypt after its acquisition by Creative Dock, FoundersLane Egypt Managing Director Anas Rabah told Enterprise. The Czech firm bought FoundersLane earlier this month to create what the company said will be the largest independent corporate venture builder in the world. FoundersLane Egypt is part of its plans to expand in the MENA region.

SOUND SMART- Venture builders help build startups from scratch and position themselves as going beyond the provision of finance (an assertion, we note, that just about every venture capitalist will make). Their role usually lies in staffing a startup, testing its product, and preparing it before launching it into the market. Venture builders usually focus on a small handful of early-stage startups, rather than building large portfolios.

The firm is big on MENA: The acquisition has given Creative Dock a presence in several MENA countries including Saudi Arabia, the UAE and Kuwait, and it now plans to invest over EUR 100 mn in the region over the next five years. FoundersLane has MENA experience in financial services, healthcare, logistics, manufacturing and utilities, Rabah said.

The company is still studying the Egyptian market to sort out its focus and average ticket size will be, Rabah said. “The startup ecosystem is doing very well and is booming, but on the other hand, there’s a huge number of corporates and family businesses that operate very traditionally and do not have tech arms,” Rabah told us. “We want to enhance the business flow of these firms by building tech ventures and startups under their umbrella,” he explained.

STARTUP WATCH

Cartona raises USD 12 mn series A funding

Egyptian B2B e-commerce platform Cartona has raised USD 12 mn in a series A round led by VC firm Silicon Badia, the company said in a statement (pdf). KfW’s Sanad Fund, Arab Bank Accelerator and Sunny Side Ventures also participated in the round together with existing investors Global Ventures and Kepple Ventures, which invested in the company in its USD 4.5 mn pre-series A round last September.

How it works: Launched in August 2020, Cartona operates a digital marketplace allowing grocery retailers to purchase fast-moving consumer goods from sellers online while receiving real-time price comparisons and estimated delivery times. The platform currently works with 200 FMCG companies, including household names Henkel, Unilever, Bel and Mondelez, along with 1.5k distributors and wholesalers.

The platform has acquired over 60k users in 11 cities around Egypt and currently processes around 1 mn orders a year with a gross merchandise value of EGP 2.3 bn. It launched two years ago.

New locations, new verticals: “By the end of 2023 we hope to have a presence in each governorate, and we’re exploring the possibility of expanding our services to other verticals, for example pharma or electronics or light construction materials would suit the dynamics of our platform,” CEO Mahmoud Talaat told Enterprise.

MOVES

valU has Walid Hassouna’s full attention: Walid Hassouna is leaving his position as CEO of EFG Hermes’ Non-Bank Financial Institutions (NBFI) platform to dedicate himself full-time to his role as CEO of its buy-now-pay-later (BNPL) platform valU, according to a press release (pdf). “The decision to appoint Hassouna as CEO of valU follows the remarkable success the brand has achieved in a short span of five years, becoming one of the fastest growing BNPL players in MENA,” our friends at EFG Hermes said. The move “comes at a vital stage in the growth life cycle of valU where it will certainly benefit from increased independence in its pursuit of growing its footprint and capitalizing on the numerous opportunities in Egypt and beyond,” Group CEO Karim Awad said.

Hassouna’s shift to focus entirely on valU comes amid rising investor interest: Amazon purchased in May USD 10 mn worth of EFG Hermes’ London-listed global depositary receipts (GDRs) with an option to convert the investment into an equity stake in valU within five years. The Amazon transaction was followed in June by Saudi Arabia’s Alhokair family acquiring a 4.99% stake in the company through a USD 12.4 mn capital increase, valuing the company at USD 247.4 mn.

enterprise

LAST NIGHT’S TALK SHOWS

It was a business / econ-heavy evening on the airwaves last night as PM Madbouly’s economic adviser Gihan Saleh phoned in to Kelma Akhira to discuss the IMF negotiations, privatization and the Egyptian economy (watch, runtime: 4:23 | 4:48 | 5:22).

The latest on the IMF negotiations isn’t hugely encouraging: Asked by show host Lamees El Hadidi for an update on the negotiations with the IMF, Saleh said that technical talks are ongoing, but the two sides have different perspectives. She denied that there was any conflict in the talks when asked by El Hadidi. Egypt has been in negotiations with the Fund since March for fresh financing that will help it mitigate the pressures on its external position caused by surging food and energy costs, and rising interest rates.

Where do the state’s privatization plans currently stand? The government could “possibly” approve fresh sales on the EGX later this year, Saleh said. She blamed market conditions for the decision earlier this month to delay Banque du Caire’s IPO.

What does the Fed’s expected 75-bps rate hike mean for Egypt? The Madbouly government already expects the Fed to raise rates in response to inflation, Saleh said. An increase in US rates doesn't necessarily mean that Egypt will follow with an equivalent hike of its own, although a US rate hike would increase pressure on state finances and make it necessary to increase GDP and avoid a rise in the debt-to-GDP ratio.

El Sisi met his Somali counterpart and GERD was on the agenda: President Abdel Fattah El Sisi and Somali President Hassan Sheikh Mohamud met yesterday in Cairo and the two discussed bilateral relations and the issue of the Grand Ethiopian Renaissance Dam (GERD), Al Hayah Al Youm reported (watch, runtime: 8:36). Ala Mas’ouleety (watch, runtime: 2:03) also had the story.

EGYPT IN THE NEWS

Leading the conversation in the foreign press this morning: An Egypt court is calling for the House of Representatives to pass legislation that would allow the public broadcast of the execution of the man found guilty of murdering university student Naira Ashraf earlier this summer. The BBC and AFP have picked up on the story, which is getting wide coverage in the domestic press, from Al Masry Al Youm to Masrawy and El Watan.

Broadcasting the execution (or otherwise carrying it out as a public spectacle) would simply be barbarous. Agree or disagree with capital punishment — and we here at Enterprise simply hate it — the notion of broadcasting it is in every circumstance wrong.

Egypt and other MENA countries are suffering the most from the impact of climate change: The effects of climate change have hit the Middle East region hard over the past years, with the looming threat of water scarcity and drought growing bigger each day, the Associated Press writes. Egypt has seen precipitation fall 22% over the past 30 years, according to the World Bank, while rising soil salinity in its Nile Delta is destroying crucial farmland. Hopes are now that the COP27 summit — which we’ll host in Sharm this November — will see developed nations offer climate financing to developing countries to help them adapt to these changes.

Also making headlines:

  • Human rights lawyer Mohamed Ramadan has been released after four years in prison. Ramadan was arrested in 2018 after publicly showing his solidarity with the yellow vest protest movement occurring in France at the time. There’s still no word on whether Alaa Abdel Fattah is slated for pardon or release. (AFP)
  • The beach in North Sinai’s Sheikh Zuwayd is open to residents and vacationers again, eight years after terrorist attacks prompted authorities to close it on security fears. (Al Monitor)
  • A look inside the Alamein Art Festival: Chinese media is looking at the first edition of the festival, which features the works of seven recycling artists. (Xinhua | watch, runtime: 2:03)

ALSO ON OUR RADAR

CIB now has a mortgage finance + factoring arm: CIB has established Commercial International Finance after obtaining initial approval from the Central Bank of Egypt. The subsidiary is 99.8% owned by the bank and will reportedly provide mortgage finance and factoring services. (Earnings release, pdf | Al Borsa)

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

  • EGAS is joining forces with Norway-based Kanfer Shipping and Leth Suez Transit to establish a LNG bunkering service at the Suez Canal. (Statement)
  • Marcyrl Pharma plans to invest EGP 400 mn to expand its factories in Egypt over the coming two years as it launches a number of new products including syringes and eye drops. (Al Borsa)
  • The UN High Commissioner for Human Rights wants to strengthen its presence in Egypt and establish a technical team on the ground in Cairo. (Statement)
  • The Sovereign Fund of Egypt has tapped Colliers International to consult on the planned redevelopment of the Mogamma and the former National Democratic Party headquarters in downtown Cairo, Colliers’ country director for Egypt Karim Helal told Al Mal.

PLANET FINANCE

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EFG Hermes - https://efghermes.com/

Walmart is expecting terrible earnings ⁠— and that’s not great news for the US economy: The company’s share price fell as much as 10% in after-hours trading yesterday after it cut its profit outlook for the year due to the impact of surging food and energy costs on consumer demand. The retailer, which will publish its 2Q earnings in three weeks time, is now predicting earnings per share to fall 11-13% for the year, just two months after forecasting a 1% drop. (CNBC | FT | Reuters | Wall Street Journal)

A strong USD has been bad news for some American corporations: The surging greenback has been one of the culprits behind the slowdown in earnings at US multinationals in 2Q, the Financial Times writes. With the greenback at a 20-year high, American companies with large global operations are facing lower international revenues and slowing demand abroad, prompting many to lower their earnings forecasts for the rest of the year. “Even if the rise of the USD was to stop here, the strengthening we’ve seen over the past 12 months would be enough to prompt further downgrades to earnings estimates just because of the foreign exchange headwinds,” said an HSBC strategist.


The 60/40 portfolio split isn’t dead yet? A common portfolio strategy where investments are split 60% in stocks and 40% in bonds is losing its appeal amid market turmoil that has seen both stocks and bonds plunge amid rising interest rates and rampant inflation. But Morgan Stanley thinks it’s a matter of time before the split pays off once again: according to its chief cross-asset strategist, Michael Sheets, the approach could provide some of the highest long-term returns in the US and Europe seen in recent years, Bloomberg reports.

Down EGX30 9,238 -0.4% (YTD: -22.7%)
None USD (CBE) Buy 18.89 Sell 18.97
None USD at CIB Buy 18.91 Sell 18.97
None Interest rates CBE 11.25% deposit 12.25% lending
Down Tadawul 11,874 -0.8% (YTD: +5.3%)
Down ADX 9,589 -0.8% (YTD: +13.0%)
Down DFM 3,236 -0.7% (YTD: +1.3%)
Up S&P 500 3,967 +0.1% (YTD: -16.8%)
Up FTSE 100 7,306 +0.4% (YTD: -1.1%)
Up Euro Stoxx 50 3,604 +0.2% (YTD: -16.2%)
Up Brent crude USD 104.92 +1.7%
Up Natural gas (Nymex) USD 8.73 +5.2%
Down Gold USD 1,737.10 -0.5%
Down BTC USD 22,026 -3.3% (YTD: -52.2%)

THE CLOSING BELL-

The EGX30 fell 0.4% at yesterday’s close on turnover of EGP 842 mn (2% above the 90-day average). Foreign investors were net sellers. The index is down 22.7% YTD.

In the green: MM Group (+13.8%), Ibn Sina Pharma (+6.5%) and Abu Dhabi Islamic Bank Egypt (+2.9%).

In the red: CIRA (-3.9%), GB Auto (-3.3%) and Ezz Steel (-2.9%).

greenEconomy

We have the details of Egypt’s updated emissions targets for 2030: Earlier this month, Egypt submitted its updated nationally determined contributions (NDCs) committing to new emissions targets by 2030, President Abdel Fattah El Sisi said at a climate dialogue in Germany. The new NDCs — an update to our first-ever report, submitted back in 2015 — comes ahead of us hosting COP27 in Sharm El Sheikh in November, which Egypt hopes will lead to turning climate pledges into tangible measures and actions towards crucial climate financing for developing countries.

Energy, oil + gas, transport in focus: These targets include fresh commitments to reduce emissions in the energy and transport sectors — two of the most polluting industries in Egypt — and will also look to scale back emissions from transport, Environment Minister Yasmine Fouad said at a presser last week, according to a statement. We break down the new targets — and how we plan to reach these goals by 2030 — as outlined in the government’s updated NDC report (pdf).

More ambitious renewables goals to slash energy emissions: The government wants to slash emissions from the energy sector to 33% of the business as usual (BAU) scenario — i.e. what emissions would be without any mitigation plans — by 2030 by ramping up its renewable energy targets, the report shows. Officials had previously set an (already ambitious) goal of having renewables account for 20% of our power generation by 2022 and 42% by 2035, but Egypt is now looking to have renewable energy account for 40% of our energy mix by 2030 and will keep its 2035 target unchanged.

Let’s repeat that BAU bit for those of you at the back of the class: This isn’t about cutting current emissions by 33% — the target is to make emissions 33% of what they would be without mitigation.

How we plan to get there: The plan is to accelerate “the scale-up of on-grid renewable energy by reducing coal capacity in the generation mix,” including expanding residential renewables generation with more rooftop PV panels and encouraging the use of LED lighting. The government is also looking to expand regional interconnection projects and shift to a smart grid using new tech such as smart metering, the report says, without providing specific targets. A shift to smart grids “will contribute significantly to improve electricity efficiency, reduce carbon emissions, and reduce the investment required for infrastructure for electrical networks.” Outdated power plants will also be either taken offline or maintained and upgraded to improve their efficiency. Upping efficiency of the country’s transmission and distribution networks, including extra-high voltage substations and control centers, are also in the plan.

The oil and gas industry is also up for an efficiency overhaul: The updated NDCs target cutting emissions from the oil and gas industry to 65% of what it would be in the BAU scenario. The target is to reduce emissions from the oil and gas industry to 1,682 Gigagrams (Gg) of CO2 equivalent by the end of the decade by increasing gas recovery at oil fields and raising energy efficiency.

How we’re going to do it: Egypt primarily wants to focus on making use of the recovery of associated gases generated from crude oil fields, the report says, with the program including 17 implemented projects and 36 others planned until 2030. “Instead of flaring, the associated gases will instead be directed to gas processing facilities to produce liquified petroleum gas (LPG), natural gas, and condensates,” according to the report. The plans also include implementing “low-investment energy efficiency measures in petroleum companies” designed to cut 5% of the sector’s energy consumption. The report also says the government plans to conduct energy efficiency audits on a petrochemical plant and two upstream oil and gas facilities, without naming any of the three facilities.

We’re also doubling down on green fuels + waste-to-energy: Under the strategy, Egypt will extract 350k tons of algae oil annually for use in the production of biofuels and generate 100k tons of bioethanol annually, the report shows. The government also has a planned product to convert plastic waste to oil as an intermediary product to produce 30k tons of polyethylene.

Transport emissions are up for the biggest reduction relative to the BAU trajectory: The government’s plan will see Egypt’s transport sector emissions fall to 7% of what they would be in the BAU scenario by 2030. “Road transport is by far the largest [greenhouse gases] contributor in the transport sector in Egypt,” which means the strategy will focus on encouraging a “low carbon modal shift” towards mass transit options, the report notes.

How we’re going to get there: Changes to the transport sector’s emissions rely on three main prongs: Developing mass transit services, improving road infrastructure for better fuel efficiency, and bringing greener fuel to mass transport modes. The report takes note of mass transport development projects, including expanding the Cairo Metro network, the rehabilitation of the Alexandria Raml Tram, the USD 4.5 bn monorail lines, and the 103.3 km light rail train project. The government is also working to upgrade road infrastructure to “improve interconnections between cities and decrease commuting time and fuel consumption for road vehicles,” the report notes. Finally, the government is working to switch passenger buses to run on “cleaner fuels” and will introduce a 2% biofuel quota to airplanes’ energy consumption, the report says, without providing further details.

The manufacturing industry isn’t going unnoticed, either: A decarbonized industrial sector is also in the government’s plan, although the report does not include specific emissions reductions targets. The plan includes improving energy efficiency across all industries, with an eye to cut average thermal energy consumption in iron and steel, fertilizers, and ceramic tiles industries (which are energy-intensive) by 10%, the report says. Fertilizers, for example, will see a transition to low-carbon nitrogen fertilizer production by replacing feedstock with green hydrogen and green ammonia. The government has signed some USD 14 bn worth of preliminary agreements for green hydro and green ammonia projects over the past several months.

Cement is a major component of the decarbonized industry target, with the government looking to enforce a low carbon roadmap that will improve energy efficiency, introduce a partial shift to alternative fuels, and lowering clinker content in cement by as much as 80%. The main pollutant in cement is the production of clinker, which releases CO2. Construction material manufacturing — including cement, red brick, paint, and steel — are major contributors to pollution, as we’ve noted previously.

Also in the plan: The government’s strategy touches on adopting low carbon targets in other sectors, including:

  • Solid waste management: Improving waste collection efficiency to 95% from 55% currently by 2025 through attracting more investments in developing solid waste management infrastructure nationwide.
  • Urban planning: Promoting green buildings and developing 16.9k buildings under the scheme by 2030, as well as implementing energy efficiency codes for new buildings and the renovation of existing buildings.
  • Tourism: Encouraging the use of renewable energy sources, including rooftop PV panels; implementing energy-efficient HVAC systems and water pumping systems; and encouraging hotel guests to be more energy-conscious.
  • Irrigation: Raising the efficiency of current agricultural water use by 20% through using modern irrigation techniques and reducing leakages across 4 mn feddans.

How much is this all going to cost? The updated NDC could cost no less than USD 246 bn, according to the report. Mitigation will account for most of the spend at USD 196 bn, while adaptation will cost USD 50 bn. “The actual implementation of these mitigation and adaptation measures are conditional on the provision of adequate, appropriate international finance through highly concessional finance and grants as appropriate,” it said. Financing — particularly innovative financing tools, such as concessional lending — will be a core theme at COP27, International Cooperation Minister Rania Al Mashat has said.


Your top green economy stories for the week:

  • World Bank weighs in on Egypt’s Climate + Development Report: International Cooperation Minister Rania Al Mashat met with the World Bank’s operations manager in the Middle East and North Africa, Robert Bou Jaoude, to discuss Egypt’s preparations ahead of the submission of its Country Climate and Development Report.
  • 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.
  • Emaar Misr under fire for environmental damage: 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.

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.

26 July (Tuesday): The government hosts public consultations on its state ownership policy document with pharma players.

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

28 July (Thursday): The government hosts public consultations on its state ownership policy document with experts and think tanks.

29 July (Friday): Aleph Commodities shareholder meeting to vote on potential merger with Tenaz Energy Corp.

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): Conference of Egyptian entities abroad.

16 August (Tuesday): MNHD’s general assembly meeting to decide whether to allow SODIC to go ahead with due diligence on its takeover bid.

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

SEPTEMBER

September: Naval Power, Egypt’s first naval defense expo

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

September: Egyptian-German Joint Economic Committee.

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

September: Government to launch an international promotional campaign for Egyptian tourism.

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

7-9 September (Wednesday-Friday): African Finance Ministers to meet in Cairo to coordinate an African-led position during COP27.

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

11-13 September (Tuesday-Thursday): Environment and Development Forum (EDF), InterContinental City Stars, Cairo.

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.

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

1 October (Saturday): 2022- 2023 academic year begins for public universities.

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.

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): Autotech auto exhibition, 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.

DECEMBER

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

13-15 December (Tuesday-Thursday): US-Africa Leaders Summit.

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

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.

7 January (Saturday): Coptic Christmas.

25 January (Wednesday): 25 January revolution anniversary / Police Day.

26 January (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

FEBRUARY 2023

11 February (Saturday): Second semester of 2022-2023 academic year begins for public universities.

MARCH 2023

March: 4Q2022 earnings season.

APRIL 2023

17 April (Monday): Sham El Nessim.

22 April (Saturday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

27 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC).

Late April – 15 May: 1Q2023 earnings season.

MAY 2023

1 May (Monday): Labor Day.

4 May (Thursday) National holiday in observance of Labor Day (TBC).

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

JUNE 2023

28 June-2 July (Wednesday-Sunday): Eid El Adha (TBC).

30 June (Friday): June 30 Revolution Day.

JULY 2023

18 July (Tuesday): Islamic New Year.

20 July (Thursday): National holiday in observance of Islamic New Year (TBC).

23 July (Sunday): Revolution Day.

27 July (Thursday): National holiday in observance of Revolution Day.

Late July-14 August: 2Q2023 earnings season.

SEPTEMBER 2023

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

OCTOBER 2023

6 October (Friday): Armed Forces Day.

Late October-14 November: 3Q2023 earnings season.

EVENTS WITH NO SET DATE

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.

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