AM — IMF talks in “final stages,” says Madbouly

Happy hump day, wonderful people.

WATCH THIS SPACE- The search process for a new head of the EGX has been remarkably quiet. Vice-chairman Ahmed El Sheikh has been running the show since President Abdel Fattah El Sisi tapped longtime chairman Mohamed Farid to run the Financial Regulatory Authority earlier this month. There has been no meaningful chatter in the domestic press about who might take over and multiple sources we reached out to had no information or declined to comment. The chairman of the EGX is appointed by the prime minister.

FROM THE DEPT. OF GOOD NEWS- Global golf is coming to Egypt this fall: The Asian Tour has expanded its international series, adding stops in Egypt and Morocco in what is the tour’s first entry to North Africa, a statement by organizers read. Each event will have a generous purse of USD 1.5 mn on offer.

The first “International Series Egypt,” as it will be known, runs 10-13 November at Madinaty Golf Club, the statement said, describing the event as one that is “set to be the largest golf event ever staged in the country.” The golf nerds here among us are delighted — and even those of us with little interest in swatting a tiny white spheroid with a weighted stick think it is exactly the type of boost our tourism industry needs.

MORNING RECOMMENDATION- Westworld, season four. Season one was phenomenal. Two was very good. Three was … serviceable, at best? The fourth installment sees all major characters back as the show returns to form and lives up to season one’s promise. Catch the trailer here. You can stream all eight episodes on OSN+ or go check out iTunes if you need something to sink your teeth into in between episodes of House of Dragons.

MORNING KUDOS #1- Kashat celebrates a milestone: Our friends at Kashat, the region’s first nano-financial services provider, gave out loan #100k on Thursday, taking the company into six figures two years after its launch, the company said on its LinkedIn page.

MORNING KUDOS #2- Zamalek were named Egyptian Premier League champions for the second year running last night after second-placed Pyramids suffered a 1-0 defeat against Future. The White Knights take the title with three games to spare and marks their 14th league victory — a milestone they’ll likely celebrate on the field tonight when they face Ittihad at 8pm.

Zamalek are heading to Doha next month: The victory in the league means the team will have the honor of inaugurating Qatar’s Lusail stadium ahead of the World Cup in November in a game against Saudi league champions Al Hilal on 9 September.

WHAT’S HAPPENING TODAY-

Leaders of Egypt, the UAE, Jordan, Bahrain and Iraq will meet today in New Alamein for a second and final day. Organizers released few details following an initial meeting of the leaders from the five countries yesterday, with Ittihadiya saying only that they discussed bilateral relations and cooperation.

Policymakers are positioning the gathering as a regional love-fest in stark contrast to the disarray in global politics, playing up cooperation on everything from the economy to defense and development. We have more on the tone in Last Night’s Talk Shows, below.

Remember: Four of the five countries involved are spearheading a new regional industrial partnership. Egypt, the UAE, Jordan and Bahrain are collaborating on a new regional industrial strategy that will see the four countries embark on joint industrial projects in strategic sectors to strengthen supply chains and increase production. It is unclear whether Iraq could be announced as the fifth member of the partnership during the summit, but keep your eyes peeled for updates later today or tomorrow morning.

ALSO IN FOREIGN AFFAIRS- A delegation of Turkish businessmen and manufacturers is due in town today to talk investment and cooperation, Al Mal reports. The delegation includes investors in sectors including agricultural equipment, automotive components, textiles and garments, food and beverage, consumer goods, and building materials.

AND- The Madbouly government will hold consultations with construction players on its privatization strategy today. The government is holding workshops and consultations with stakeholders from different industries every Sunday, Tuesday, and Thursday on its privatization plans. You can find more details on the schedule of the meetings here.

HAPPENING TOMORROW-

CBE Governor Hassan Abdalla will reportedly meet with senior bankers, his first such meeting since being appointed last week. Abdalla tapped to run the bank last Thursday after Tarek Amer stepped down unexpectedly the day before.

THIS WEEK AND THE NEXT-

B Investments has just under a week to respond to Adnoc’s bid for TotalEnergies Egypt: Private equity outfit B Investments has until next Monday, 29 August, to decide whether or not it wants to preempt Adnoc Distribution’s bid to acquire 50% of TotalEnergies Egypt. Adnoc agreed last month to buy the stake in a USD 203 mn transaction, which would see it acquire the entirety of B Investments’ c.15.4% stake in the fuel distributor and a 34.6% stake from Total Energies Marketing Afrique.

WATCH THIS SPACE- The SCZone will sign yet more MoUs on green fuel with international partners “within days,” a statement by the zone read. The SCZone has so far signed nine MoUs with international companies under efforts to turn the zone into a hub for green energy, the statement said, as part of a huge push ahead of COP27 in November. By our count, major global companies have signed some USD 18 bn worth of preliminary agreements for green ammonia and hydrogen projects in Ain Sokhna this year, as authorities look to capture growing global interest in the so-called transition fuels ahead of the summit.

Egypt warns nationals in Ukraine to take cover this week: The Egyptian embassy in Kyiv told Egyptians in Ukraine to exercise caution over the next week and take shelter if sirens are heard, it said in a statement yesterday. The warning comes after Ukrainian President Volodymyr Zelensky warned that Russia could “do something particularly cruel” as Ukraine celebrates its independence on Tuesday.

PSA– Your deadline to catch a 65% break off late payment fines for your taxes is coming up on 31 August. The waiver applies to late payment fees for customs tariffs, income, real estate, and sales taxes, VAT, and stamp duties among others. The remaining 35% of your due payments will need to be paid before next March.

THE BIG STORY ABROAD-

The global financial press is freaking out about global markets after Wall Street suffered its biggest single-day loss since mid-June yesterday. The benchmark S&P 500 index fell 2.1% and the tech-heavy Nasdaq tumbled 2.5%, spelling the end of an impressive recent rally that has lifted stocks out of bear market territory.

Fear of Jackson Hole is driving the sell-off: Investors are anticipating Federal Reserve Chairman Jerome Powell to talk tough on inflation and double-down on aggressive interest rate hikes when he speaks at the annual gathering of central bankers at Jackson Hole later this week. (Bloomberg | FT | WSJ | CNBC)

It’s a sea of red in Asia this morning as the selloff carries over into Tuesday. Stock futures currently have Wall Street opening marginally in the green later today while European shares will fall at the opening bell.

Also getting significant coverage: Ford became the latest company to announce mass lay-offs yesterday. The auto giant will cut 3k jobs this week in a major restructure as it looks to finance its bn-USD plan to transition to electric vehicles and compete with Tesla. (Wall Street Journal | Bloomberg | Reuters | TechCrunch)

HEADING INTO COP27…

Got a green project? A new government initiative could help it secure investor funding at COP27. The Planning Ministry yesterday launched its “smart green projects” initiative, which will map green projects nationwide, giving them a platform to raise investments at the November climate summit, according to a ministry statement. Eligible projects must use technological solutions to address environmental issues and will be chosen based on their feasibility, scalability and impact, with a separate category for projects that are women-led or promote women’s participation in the green economy, according to the initiative criteria.

An executive committee that includes Egypt climate czar Mahmoud Mohieldin will whittle the applicants down to a final list of 18 projects to be presented for funding at COP27. You can apply to make the cut here.

CIRCLE YOUR CALENDAR-

Next week’s National Dialogue board meeting has been postponed to the first week of September after several members fell ill, Cairo24 reports. Board member Negad El Borai confirmed the postponement on social media, but did not say what triggered it. Cairo24’s source claims the meeting could now be held on 3 September. The meeting was set to see the board’s members choose the rapporteurs for all of the committees and subcommittees of the social, political and economic tracks, and prepare the agenda and topics of discussion for the dialogue.

The Union of Arab Banks is organizing a forum on money laundering and terrorism financing in Sharm El Sheikh from 1-3 September. Participating institutions include the Central Bank of Egypt and the Federation of Egyptian Banks, among others.

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

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

In today’s issue: With COP27 around the corner, Egypt is working with the UN to drum up investor interest in climate projects for developing nations — including for projects here at home. We take a look at the projects highlighted for climate finance so far as part of the pre-COP roadshow meant to attract funding where it's needed most.

Egypt and the IMF are in the “final stages” of talks for a fresh facility to help shore up the economy, Prime Minister Moustafa Madbouly said in a cabinet statement yesterday. The statement didn’t provide any details about the talks.

Madbouly’s statement comes amid growing pressure on the EGP and less than a week after the resignation of Central Bank of Egypt Governor Tarek Amer, a move that some in the capital city think will pave the way to a fresh devaluation of the EGP. Allowing a flexible exchange rate policy is likely to be one of the IMF’s key conditions for agreeing to a new loan, which is increasingly important to policymakers who are managing external funding pressures prompted largely (but not entirely) by fallout from Russia’s war in Ukraine.

Five months and counting: Egypt entered talks with the IMF in March as part of a bid to lock in financial support following the economic shocks caused by Russia’s war in Ukraine, rising interest rates, and the global-risk off in financial markets. Neither side has publicly spoken about any details of the talks or how much money Egypt is negotiating for. Goldman Sachs estimated that we could need as much as USD 15 bn to fund our debt repayments and current account deficit over the next few years, a figure that Finance Minister Mohamed Maait subsequently said is too high and “totally inaccurate.”

Strings attached: In an indicator of the conditions it wants to attach to the program, the IMF has called on Egypt to take “decisive” steps on fiscal and structural reforms. President Abdel Fattah El Sisi has publicly appealed to the Fund to allow Egypt some breathing room until the crisis abates. In addition to further currency devaluation, the central bank’s subsidized loan programs may be on the chopping block while bread subsidy reform may or may not still be up for negotiation, according to reports yesterday.

All subsidized loan programs need to go: The IMF wants the Central Bank of Egypt to “unify interest rates” and end its aggressive program of subsidized, low-interest loans for key sectors of the economy, Bloomberg Asharq reported yesterday, citing three government sources. The CBE has launched programs in recent years that allow commercial banks to provide low-cost finance to tourism operators, SMEs, housing, and most recently agriculture. The loans are funded by the central bank, distributed via state-owned banks, and guaranteed by the Finance Ministry.

The government is pushing back on scrapping subsidized loans: The Madbouly government has taken off the table the IMF’s proposal to halt the loans, a government source told Enterprise yesterday. The source defended the policy, saying the programs are designed to boost economic growth and will not impact the nation’s budget deficit.

Is the IMF easing off demands to reform bread subsidies? The IMF understands that “now is not the time to tamper with bread subsidies,” Supply Minister Ali El Moselhy told Al Arabiya yesterday, saying that the fund is aware of the need to make sure “instability does not occur due to certain measures.” Plans to overhaul the longstanding bread subsidy system — which offers loaves at lower prices to more than 60 mn people — have been put on hold amid soaring food prices. The government will spend EGP 55 bn on bread subsidies this fiscal year, El Moselhy said previously.

IN OTHER ECONOMY NEWS-

Egypt GDP to grow 6.2% this year -AMF: The Egyptian economy will grow at a 6.2% clip in FY 2022-2023, up from 5.5% last year, according to the Arab Monetary Fund’s latest outlook (pdf). The figure is slightly higher than the 5.9% growth penciled in for Egypt this fiscal year in the IMF’s most recent forecast. The Arab fund expects growth to moderate to 5.5% in FY 2023-2024.

EFG Hermes’ consumer finance arm valU has acquired 100% of digital HR and payroll platform Paynas, valU said in a statement (pdf) yesterday, without disclosing the value of the transaction. The acquisition will see valU tap into Paynas's roster of micro and small-business clients, while Paynas will add valU’s buy-now-pay-later (BNPL) products to its offering, the statement read.

About Paynas: The fintech outfit’s cloud-based platform offers MSMEs employee management and payroll services including the Visa Paynas card and salary advances, as well as tools to monitor time management and attendance. The startup, which counts mass transit app Swvl and state-owned mobile and digital advertising firm E3lany among its clients, was a member of the inaugural 2019 class of EFG-EV Fintech, the accelerator run between EFG Hermes and the International Cooperation Ministry’s venture capital arm, Egypt Ventures.

This is valU’s second investment this year: The company entered the Saudi market earlier this year when it acquired a 35% stake in Fas Finance in June. Fas Finance is the consumer finance arm of Fas Labs, a joint venture owned by the Alhokair family which acquired a 4.99% stake in valU in the same month.

We’re adding 500k tons to our silo capacity: The Supply Ministry is building wheat silos in Toshka with the capacity to hold 500k tons of grain, Supply Minister Ali El Moselhy told reporters yesterday, according to Al Borsa.

The first phase of the project will add 300k tons of capacity at a cost of almost USD 83 mn, according to the minister. The government will stump up EGP 860 mn (around USD 44.9 mn), while the World Bank will kick in finance worth USD 38 mn. The remainder will come in a second phase, the minister said, without specifying a timeline for the project’s implementation. The ministry chosen a contractor to build the facility, El Moselhy said, but didn’t name names.

The funding is likely part of the larger USD 500 mn financing package that the World Bank agreed earlier this year to boost Egypt’s food security. More than a fifth of the funding — USD 117.5 mn — has been allocated to raise silo capacity.

Raising storage capacity has been a key priority for the government as it tries to bulk up its reserves of food staples in response to the war in Ukraine which sent shockwaves through global food supply chains. Egypt currently has capacity to store 3.4 mn tons of grain and the Supply Ministry wants to up this by another 50% to 5 mn tons by the middle of the decade. In recent weeks, Denmark’s Cimbria has said it will build a complex in Port Said capable of storing 100k tons of wheat while Italy will work on six silos capable of storing a combined 30k tons.

SPEAKING OF WHEAT-

We’ve received 63k tons of Romanian wheat, the Red Sea Ports Authority said yesterday. Romania has been a major wheat supplier to Egypt this year. Egypt has been forced to diversify its wheat suppliers after Russia’s invasion of Ukraine disrupted exports from the two countries, which accounted for about 80% of our wheat supplies.

IN OTHER LOGISTICS NEWS-

The Supply Ministry has inked contracts with private sector players to build three new commercial trading and logistics centers worth EGP 2.4 bn — one each in Dakahlia, Suez and Kafr El Sheikh governorates, according to a statement. The ministry signed agreements with Sherif Younes’ US-based Vernbro Global Investment, local pharma wholesaler United Company of Pharmacists, and real estate developer Marakez. The new zones will create some 15k direct and indirect jobs, the ministry said.

Ahmed Zaki Abdeen will step down as chairman of the Administrative Capital for Urban Development (ACUD) at the beginning of September due to health reasons, he told Bloomberg Asharq. The board will appoint Deputy Housing Minister Khaled Abbas as his replacement, he said. The military-owned company is the owner and developer of the new capital. Abbas will take the helm at the company as it prepares to list its subsidiaries on the EGX, and potentially follow through with a blockbuster IPO.

President Abdel Fattah El Sisi has appointed Sherif Sedky (bio) to head the Egyptian Space Agency for one year effective 19 August, according to a presidential decree published in the Official Gazette. Sedky was formerly the executive president of Zewail City and has served as provost at AUC and University of Science and Technology.

The five-country regional summit taking place in New Alamein continued to take priority on the airwaves last night, with Ala Mas’ouleety (watch, runtime: 6:54) and Al Hayah Al Youm (watch, runtime: 2:01) both giving the event some airtime.

What the talking heads really wanted you to know: The coverage was full of talk of “unity,” “partnership” and “coordination” between the participating countries, a notable contrast in discourse from what’s going on in the global political order, which is facing its most serious schism since the Cold War as tensions between the US, Russia and China mount. Leading the charge into relentless optimism was deputy foreign minister Mohamed Hegazy, who described the summit as a “beacon of hope” for future Arab relations on Ala Mas’ouleety (watch, runtime: 3:32). “I expect that ‘togetherness’ could be the headline [for Arab relations] for the foreseeable future, investing together, building together, celebrating together, and working on projects together,” he said.

The summit could deliver more investment from regional allies: “The two-day summit will advance Arab partnerships in the face of challenging global conditions,” former foreign minister Mohamed Orabi told Masaa DMC (watch, runtime: 5:07). The location of the summit — New Alamein — also allows regional leaders to see firsthand the types of development taking place in Egypt, which can in itself help attract investments and economic cooperation, he said.

Egypt hasn’t given up getting the Security Council onto its side on GERD: “Egypt is working to involve the international community in the Grand Ethiopian Renaissance Dam (GERD) dispute through its appeal to the UN Security Council,” Hegazy told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 5:14). The country recently protested Ethiopia’s third filling of the dam in an appeal to the council, though various countries — including the UAE and the US — have been calling on Egypt, Sudan and Ethiopia to continue with the African Union-led negotiations.

It’s a slow morning in the pages of the international press: All of the attention is on the latest on the IMF talks (See: Bloomberg | Reuters) and the regional summit underway at New Alamein (Associated Press). More on both of these, above.

Another big East Med gas find: Eni and TotalEnergies have made a “significant” gas discovery in a shared exploration block off the coast of Cyprus which the companies estimate to contain at least 2.5 tn cubic feet of gas, Eni said in a statement yesterday. “Preliminary estimates indicate about 2.5 tn cf of gas in place, with significant additional upside that will be investigated by a further exploration well in the area,” the Italian energy company said.

Some of that gas could one day be brought to Egypt for re-export to Europe: Egypt and Cyprus are planning to lay a pipeline connecting the Aphrodite field to Egypt’s LNG facilities where gas can be liquified and exported to Europe. Egypt is the only country with LNG facilities in the Eastern Mediterranean, making it a key partner for Europe which is trying to rapidly transition away from Russian fossil fuels. The EU signed an agreement with Egypt and Israel earlier this year laying the foundations for Israeli gas to be exported across the Mediterranean via Egypt.

MEANWHILE- Transport Vehicles Distribution (TVD) —a joint venture between GB Auto and El Ghalban Auto —will start assembling Chinese JMC trucks early next year at GB’s plants, GB Auto IR Manager Marina Kamal told Enterprise.

AND- Qalaa Holdings has denied reports that it sold a stake in its subsidiary Taqa Arabia, saying that a 14% rise in its EGX-listed shares over the past week was not driven by any “material events.” (Disclosure, pdf)

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

• Real estate developer MNHD posted a record EGP 1.5 bn in sales in July, driven by the launch of two new phases of its Elect development at Taj City, it said in a statement (pdf) yesterday. More than half the units across both phases have now been sold. The statement comes after the company said in its 2Q earnings it had booked record sales — and after its board rebuffed an acquisition bid from SODIC.
• Raya Customer Experience (Raya CX) signed a partnership agreement with Zain Saudi Arabia to provide customer services for the telecoms operator in KSA. (Statement, pdf)
• Abu Dhabi Islamic Bank Egypt (ADIB) and Dubai-based payments firm SimpliFi will launch a card-as-a-service offering for companies in Egypt. (Statement, pdf)

Israeli defense minister acknowledges friction with Egypt, hopes it will “blow over”: “I definitely think there have been days of tensions” since the Egypt-brokered ceasefire in Gaza came into effect earlier this month, Haaretz quotes Israeli Defense Minister Benny Gantz as saying in a radio interview yesterday. “Relations between friends have ups and downs … without going into some specific incident or another, we will know how to stabilize the relations. We don’t need to take every crisis and turn it into the single most important thing. I hope it will blow over in the next few days.”

What’s the beef? Israeli media reported on Sunday that the head of Israeli intelligence agency Shin Bet had traveled to Egypt to defuse anger in Cairo over Israel’s killing of three Palestinians in Nablus. The incident came a few days after the ceasefire came into effect when President Abdel Fattah El Sisi reportedly asked Israeli PM Yair Lapid to rein in the military’s activities in the West Bank. Haaretz described Egypt’s reaction to the killings as “furious” and led to spymaster Abbas Kamel canceling a planned trip to Israel.

Iran accuses the US of stalling on nuclear pact as the West looks to meet this week to discuss it further: “The Americans are procrastinating” in indirect talks meant to revive the 2015 nuclear pact with Iran, an Iranian foreign ministry spokesperson told a news conference yesterday, Reuters reports. The US has snapped back that Iran has been stretching talks out, Bloomberg adds.

Kenya's opposition leader heads to Supreme Court to overturn election result: Defeated presidential candidate Raila Odinga is mounting a legal challenge against last week’s closely-fought election, which saw Deputy President William Ruto claim a narrow victory, Reuters reports.