AM — Abdalla lifts restrictions on cash deposits and will allow you to withdraw more cash in-branch

Good morning, friends, and welcome to a very busy Sunday. It’s largely good news to start the week, with lots of fresh investment in green energy, a new head of the EGX, and the easing of cash deposit and withdrawal restrictions at banks setting the tone.

There are also signs we have another busy news week ahead of us:

The Madbouly government will roll out new emergency social protection measures this Thursday, saying the move will not trigger the folks at the IMF. The expansion of the social safety net will see some 1 mn families join the Takaful and Karama social security programs as the state also raises ration card allowances and disburses emergency aid, Prime Minister Mousatafa Madbouly, told reporters over the weekend.

The increased social spending is fine by the IMF, the prime minister suggested, downplaying the idea that the Fund is imposing harsh fiscal and monetary conditions in exchange for a fresh loan. “The Fund does not force us to take any measures that could affect the Egyptian citizen. On the contrary, it welcomed the exceptional social protection package that we announced,” the statement said. This echoes comments made by Supply Minister Ali El Moselhy last week, who suggested that the Fund may have taken bread subsidy reform off the negotiating table.

Talks with the IMF are still ongoing and Egypt “hopes to reach an agreement as soon as possible,” Madbouly said. We entered negotiations this past 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. Madbouly said last week that the talks are in the “final stages.”

WATCH THIS SPACE- What’s on Hassan Abdalla’s mind? “I guess he [Abdalla] will go much faster in terms of currency adjustment. Not a sudden devaluation like Tarek did, [rather] a faster pace,” Reuters’ Patrick Werr quotes Hisham Ezz Al Arab as saying. The veteran banker and longtime CIB chef was speaking in his new capacity as a top advisor to the new central bank governor.

CLARIFICATION: Hisham Ezz Al Arab’s remarks regarding the expectation that CBE Governor Hassan Abdalla might “go faster” on allowing the EGP to float against the greenback were made hours prior to his being named advisor to the governor. Hisham was not speaking in his capacity as an advisor.

HAPPENING TODAY-

Prime Minister Mousafa Madbouly is in Tunis for the second day of Japan’s Africa investment conference. The first day of the Tokyo International Conference on African Development (TICAD) saw the PM hold talks with Japanese Prime Minister Fumio Kishida and meet with business leaders including Toyota Tsusho. In his address to the gathering, the PM called on African nations to work together to strengthen food supply chains and reiterated calls for debt relief countries on the continent.

The headline from Day 1: Japan pledged USD 30 bn in development aid for Africa during the conference, with smaller, undisclosed sums committed to food security in partnership with the African Development Bank, Reuters reported. Japanese PM Kishida also promised to work on securing grain shipments to Africa in an effort to plug the food crises that have erupted across the continent following Russia’s invasion of Ukraine.

It’s do or die for Ghazl El Mahalla’s micro-IPO: It’s deadline day for the retail component of the football club’s IPO, which has struggled to convince investors to subscribe. Ghazl El Mahalla has already extended the subscription period twice and as of the middle of August, had only received bids for 22% of the shares on offer.

The Madbouly government will hold consultations with representatives from the wood industry on its privatization strategy. 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.

WATCH THIS- COP27 will aim to attract concrete investments — and not just pledges — in fields including renewable energy, green hydrogen projects, agriculture, and food and water security, Egypt climate envoy Mahmoud Mohieldin said in an interview. (Masaa DMC | watch, runtime: 37:26)

Speaking of the road to COP27- “Global climate action remains insufficient,” EU says in draft negotiations mandate for COP27: The EU is planning to warn major economies that current climate change action is falling short, according to a draft of its mandate for this November’s COP27 summit seen by Reuters. The draft, which faces weeks of negotiations and amendments before approval in October, is pushing countries to set more ambitious pollution targets to stop global warming spiraling beyond 1.5°C.

THE BIG STORY ABROAD-

No story is dominating the global conversation this morning: The focus of the global financial press continues to be on Jackson Hole, where folks are trying to work out what Fed Chairman Jerome Powell’s speech (more on this in this morning’s Planet Finance section, below) means for the markets and the global economy. (See: Bloomberg | Reuters | CNBC). Meanwhile, the attention of the US press is turned to the upcoming midterm elections and fate of Donald Trump (See: AP | Washington Post | NYT | WSJ), while the Financial Times leads with the devastating effects of the energy crisis on UK households.

MEANWHILE- China announces debt relief measures for African countries: China plans to write-off 23 zero-interest loans to 17 African nations and will send USD 10 bn of its IMF reserves to help poor and middle-income countries on the continent, Foreign Minister Wang Yi said last week, according to Bloomberg. Wang did not disclose the value of the loans or specify which countries would have debts forgiven.

Beijing has signaled in recent months that it will put the brakes on the lending under Xi Jinping’s flagship Belt and Road Initiative as bns of USD of loans made across the developing world threaten to go bad. Chinese lenders had to renegotiate more than 6% of the USD 838 bn in BRI loans over the past two years as borrowers enter debt distress, but this year surging inflation worldwide, rising interest rates and a stronger greenback are heaping even more pressure on borrowers in developing economies.

THE HOMETOWN ANGLE- Egypt hasn’t turned to Chinese lenders in the same way other African countries have: Outside of the new capital business district and the light rail transit system, China has had little involvement financing infrastructure projects in Egypt, which has tended to rely far more heavily on western development finance institutions. A report (pdf) out last year estimated Egypt’s total sovereign and hidden debt to China to be in the region of USD 4.6 bn; small fry compared to Ethiopia (which owes USD 15.4 bn) or Africa’s most China-indebted country, Angola (with a USD 52.3 bn debt pile).

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

In today’s issue: Female technology (femtech) is being hailed as the next big thing for startups to capitalize on, with a growing appetite among consumers for the tech-enabled health platforms helping to reel in increased investor interest.

You can now deposit + withdraw more cash from your bank account: The Central Bank of Egypt (CBE) has raised the daily limit that individuals and businesses can withdraw in-branch from their bank accounts and scrapped limits on cash deposits at both bank branches and at ATMs, it said in a circular (pdf) Thursday.

REFRESHER- The temporary caps were introduced during the pandemic to encourage people to move away from cash and reduce footfall at banks. With the worst of the health crisis now behind us, the CBE’s move is meant to make life easier for individual and corporate clients alike, the central bank said.

Per the new rules:

• Individuals and companies can now withdraw up to EGP 150k daily at bank branches, up from a previous limit of EGP 50k.
• Withdrawals from ATMs for both individuals and companies are still capped at EGP 20k daily.
• Individuals and companies can now deposit whatever amount they wish, whether at bank branches or through ATMs. In-branch deposits had been limited to EGP 10k per day for individuals, while ATM deposits were capped at EGP 5k per day for individuals and companies alike.

There remains no ceiling on electronic transfers.

Thumbs up from the business community: The decision will help manufacturers access the liquidity they need to contract for raw materials and other goods, Mohamed El Sallab, deputy chair of the House Industry Committee, said in a statement (pdf).

The central bank last month also lifted its covid-era waiver on inter-bank ATM withdrawal fees. Fees on ATM withdrawals from a bank that is not your own are now capped at EGP 5, while the maximum amount that can be withdrawn in one go has been set at EGP 4k. Meanwhile, fee exemptions on inter-bank EGP transfers, e-payments, and new contactless cards and mobile wallets were extended until the end of the year.

The story got coverage from the foreign press: Reuters.

The EGX has a new boss: Rami El Dokany (LinkedIn) has been named head of the EGX for a one-year term by Prime Minister Mostafa Madbouly, according to a cabinet statement Thursday. El Dokany succeeds Mohamed Farid, who was appointed acting chairman of the Financial Regulatory Authority (FRA) earlier this month.

About El Dokany: El Dokany has nearly two decades in investment, corporate finance, and strategic planning. Since 2019 he has served as the secretary-general of the Arab Federation of Capital Markets (AFCM). His resume includes a seven-year stint at Al Ahly Capital Holding and service on boards including EGX-listed Alexandria Mineral Oils and Banque Misr’s leasing arm. He has worked as a part-time consultant to the World Bank for almost seven years and sat on the investment committee of the Social Fund for Development’s fund of funds VC program, in cooperation with the World Bank.

He was also an early player in our now-booming fintech sector: He was the co-founder and CEO VC firm Pride Capital, founded by Pharos and Kamelizer.

Madbouly also appointed Heba El Serafi (LinkedIn) as vice chairman of the EGX for the next year. El Serafi previously served as the bourse’s assistant chairman, where she led on disclosure and corporate governance.

El Dokany’s appointment met with optimism: El-Dokany will help “regain the trust of investors in the bourse,” Mubasher Capital Vice Chairman Ehab Rashad told Enterprise. He added that the EGX and the FRA will likely work “in harmony” due to “current good ties” between the bourse and the financial watchdog.

The job ahead: “We need to see smoother listing procedures, a reconsideration of price boundaries and the introduction of new products” like exchange-traded funds (ETFs) by the EGX, as well as encouragement of short-selling, Rashad said.

EGX-listed stocks are trading at a 50% discount to their recent five-year average, creating a good buy for investors, Hasnain Malik, head of equity research at Tellimer, tells Bloomberg (watch, runtime: 6:13). Undervalued EGX stocks represent a good “short-term trade” as the expected IMF loan, Gulf support, and a potential devaluation spur an economic recovery, Malik said.

Short term? Absent “root and branch” reform of how the Egyptian economy is structured, the country is unlikely to break the cycle of crisis and recovery, the prospect for which remains slim, according to Malik. “That’s why it’s a short-term thesis. It’s a trade around the stabilization of the macroeconomic indicators. It is not a root and branch reform.”

Another devaluation will be key for the return of portfolio investors, Malik said, joining calls on the CBE and its new governor to allow the EGP to depreciate further to help combat growing external imbalances. “Obviously as the IMF comes in, as Gulf funds come in, that will encourage portfolio investors to start reinvesting in Egypt, but not when there's a negative 2.5% real interest rate,” Malik said. “That's got to be fixed first.” Rising global interest rates as well as volatility in international financial markets have seen USD 20 bn in portfolio flows exit the country this year, putting pressure on the EGP, which has slipped almost 22% since March.

Double-digit deval? “I would expect a double-digit devaluation,” Malik said. “If you look at 12-month prices on the EGP you've got about a 15% further depreciation expected by the market.”

The Egyptian economy grew at a 6.6% clip in FY 2021-2022, up from 3.3% the previous year, according to initial figures announced by Planning Minister Hala El Said during a cabinet meeting on Thursday. The state’s fiscal year runs 1 July-30 June.

The economy grew faster last year than gov’t was expecting: El Said last month told CNBC Arabia that the Egyptian economy grew 6.2% in FY 2021-2022. The original forecast in the 2021-2022 budget had penciled in 5.4% growth for the fiscal year.

The hospitality sector roared back after covid: Hotels and restaurants registered growth of 45.5% y-o-y in FY 2021-2022 — the highest of any sector — as tourism rebounded from its pandemic lows. Growth was also driven by telecoms (+16.3%), Suez Canal revenues (+11.7%) and manufacturing (+9.9%). Construction, health, and education also registered clear growth, she said, without disclosing the figures.

Figures for the final quarter of 2021-2022 weren’t as rosy (no surprise there): Annual GDP growth came in at 3.2% in 4Q 2021-2022, down from 7.7% during the same period last year. The April-June period coincided with the fallout from Russia’s invasion of Ukraine, rising US interest rates, and imported inflation put pressure on the EGP and spurred further contraction in the private sector.

The government sees the economy growing 5.5% in FY 2022-2023, having recently trimmed its GDP forecast by 0.2 percentage points. The IMF thinks we’ll do a bit better, saying it sees us growing at a 5.9% clip in the same period and then 4.8% in 2023.

Taking note of the story: Reuters.

Lots more green energy investment: Seven international companies have signed early agreements to build facilities that will produce mns of tons of green fuel in the Ain Sokhna Industrial Zone, cabinet said in a statement on Thursday. The plants will have a combined annual capacity of around 5.5 mn tons, with the fuel will be exported abroad and sold to the shipping industry, the statement said.

Who’s in? The UK’s Globeleq, Saudi Arabia’s Al Fanar, Emirati firms Alcazar Energy and K&K, Mediterranean Energy Partners, Indian clean energy company ACME, and global private equity giant Actis all signed agreements.

In detail:

• Globeleq’s 10 mn sqm plant — the largest of the seven in terms of land size — is set to produce 2 mn tons of green hydrogen once fully operational, with 55k tons produced during the trial phase. The plant is set to come online in 2026.
• Actis expects to invest some USD 370 mn in its 200k-ton facility, which should become operational “within the coming year,” Actis partner and head of MENA Sherif El Kholy told Enterprise.
• Al Fanar said its facility will produce 500k tons of green ammonia and 100k tons of green hydrogen a year.
• ACME’s plant will have a maximum annual capacity of 2.2 mn tons.
• Alcazar and K&K have proposed to build smaller 230k-ton per-year facilities.
• Mediterranean Energy Partners has signed an agreement to construct a plant for producing green ammonia, which would output 120k tons a year.

What’s next: The companies will now begin conducting feasibility studies on the plants, the statement says.

What we don’t know: No details about the investment values of the facilities were disclosed. Aside from Globeleq, the statement does not include information about the expected timeline of completion for any of the plants.

What they said: Actis’ investment is “a continuation of our commitment to Egypt where we have a 20 year track-record of investing over USD 1 bn in some of the country’s most strategically important businesses and projects,” El Kholy said in a statement (pdf).

These agreements are the latest in a string of interest and investment in green hydrogen here in Egypt. International companies have signed USD 18 bn worth of preliminary agreements for green ammonia and hydrogen projects in Ain Sokhna this year. The push towards investing in green hydrogen comes as the government looks to capitalize on investment momentum in green energy in the lead-up to COP27 in Sharm El Sheikh this November.

NEED MORE BACKGROUND? We looked at what makes Egypt well-suited to grow a green hydrogen industry — and where the bottlenecks are in getting these projects off the ground in Going Green, our weekly look at the green economy in Egypt.

South Korea is getting in on Dabaa: South Korea’s state nuclear power company has signed a KRW 3 tn (USD 2.2 bn) contract with Rosatom to supply equipment and help build the 4.8 GW Dabaa nuclear plant, the companies said in separate statements (here and here) on Thursday.

In detail: Rosatom’s export arm Atomstroyexport has contracted Korea Hydro and Nuclear Power to supply equipment and materials for the turbines and build some 80 buildings, Rosatom said. The South Korean company was selected as the sole bidder for the contract after signing an early agreement at the beginning of 2022.

Construction began last month: The announcement comes nearly a month after Rosatom — which is handling construction and providing fuel for Dabaa — began construction at the USD 30 bn facility.

The Korean government consulted closely with the US on the agreement with Rosatom and confirmed that the transaction did not breach any sanctions against Moscow, Bloomberg reported South Korean Vice Trade Minister Park Il-joon as saying, citing statements picked up by the country’s news agency, Yonhap. Rosatom has so far not been subjected to Western sanctions that have restricted scores of Russian firms from doing international business. "We experienced many difficulties in the process of negotiating the contract due to unforeseen variables, such as Russia's war in Ukraine and sanctions against Russia," a Korean government official said at a presser on the contract, according to Yonhap.

REMEMBER- Construction is expected to take eight years, putting Rosatom on track to get the plant online by the beginning of the next decade. The plant had been set to become operational by 2028-29 but saw delays due to the pandemic.

The news got international ink: Bloomberg | Reuters | AP | CNBC | The Economic Times.

EGAS AND ENI ARE LINING UP A NEW GAS CONCESSION-

In other news from the energy sector: Cabinet gave initial approval to award state-owned EGAS and Italy’s Eni the rights to explore for gas in the Northeast Arish offshore concession, according to a cabinet statement. The companies will need final approval before they start drilling. The move comes as Eni works to ramp up gas imports from Egypt to Italy and the rest of Europe, as the EU scrambles to find alternatives to Russian fossil fuels ahead of a looming winter energy crisis.

Egypt’s commodities exchange (Egycomex) could go live before the end of the year, with trading of gold set to start as a first phase, Ibrahim Ashmawy, head of the Internal Trade Development Authority, told Bloomberg Asharq (watch, runtime: 15:25). Ashmawy told us back in 2020 that traders would be able to buy and sell wheat, oil, sugar, and rice when the exchange launches, and in a separate interview said that gold, steel and cotton would be added later.

Where things stand: “The electronic platform for the bourse is complete, and we have begun to create ID codes for some of the listed members,” Ashmawy said. The exchange began trading on a pilot basis last year.

WATCH THIS SPACE- Gov’t to buy local commodities via the exchange: The government will soon announce that most of its purchases of local, basic commodities will be made through Egycomex, Ashmawy said.

What about the law governing Egycomex? The law governing the forthcoming Egyptian commodities exchange — which has been in the works since February 2018 when it was made possible after amendments made to the Capital Markets Act — had been expected to be submitted to the House of Representatives last year after receiving cabinet approval in 2020, but we’ve heard nothing about it since.

Egyptian subscription management platform SubsBase has raised USD 2.4 mn in a seed round led by Global Ventures, according to a company press release (pdf). The round saw participation from HALA Ventures, P1 Ventures, Plus Venture Capital (+VC), Plug and Play, Ingressive Capital, Camel Ventures, and existing investors Falak Startups and Arzan Venture Capital.

Where the money’s going: The funding will go towards product innovation and development, recruiting talent and increasing the company’s regional presence.

About SubsBase: Founded in 2020 by Mohamed Farag and Sherif Aziz, SubsBase is subscription-based platform for managing corporate finances. The service allows businesses to record recurring revenues and provides analytics and billing tools to monitor collection. Interestingly, the company is targeting the NBFI and real estate industries to help them manage recurring payments.}

CI Capital reported EGP 1.61 bn in group revenues in 1H 2022, a 36% y-o-y increase (after normalizing for one-off adjustments), with net income after tax and minority interest almost doubling to EGP 341 mn compared to the same period last year, according to its earnings release (pdf). For 2Q 2022, CI Capital reported net income of EGP 187 mn (on par with the same quarter last year) on group revenues of EGP 848 mn.

Growth was driven by CI Capital’s non-bank financial services arm and the “resilient performance” of its investment bank, the firm said. CI Capital’s non-bank financial services (NBFS) platform accounted for 88% of the group’s bottom line in 1H 2022. The NBFS arm grew its on-balance-sheet financing to EGP 15.4 bn as of 30 June 2022, up 36% from the same date the year before. Net interest margin for the unit came in at 8.7%, a solid 111 bps expansion year-on-year. The company’s investment bank platform also saw “the successful execution of a number of high-profile IB advisory transactions, AUM growth, and garnered market share at the brokerage level” despite what it called “a challenging equity market backdrop.”

Commentary: The firm said its “resilient results were a function of the group’s scale, diversified business model, solid balance sheet, and sound liquidity position” and will continue to stand it in good stead amid current market conditions. Alongside its investment banking arm, CI Capital’s NBFS portfolio includes Corplease (leasing and its recently launched factoring unit), Reefy (microfinance) and greenfield mortgage arm CI Mortgage Finance. CI’s merchant banking function holds investments in education and healthcare.

First a new boss, now a new board for the FRA: The Financial Regulatory Authority (FRA) has appointed a new board for a four-year term under a decree issued by Prime Minister Moustafa Madbouly, according to a statement.

The board already has a new head: Former EGX boss Mohamed Farid was appointed as acting chairman of the FRA for one year earlier this month. He succeeds Mohamed Omran, who stepped down after five years at the helm of the regulator.

The FRA’s deputies are retaining their roles: Ahmed Abdel Rahman El Sheikh and Islam Azzam are staying in post as the FRA’s deputy chairmen.

Joining the board: One of the central bank’s two deputy governors will be selected by the new CBE Governor Hassan Abdalla to join the FRA’s board. Madbouly also appointed former planning minister Ashraf Al Arabi (bio), Rep. Marianne Azer (LinkedIn), former EGX boss Khaled Serry Seyam (bio), executive director of the National Training Academy of Egypt Rascha Ragheb (LinkedIn), and our good friend Tarek Mansour to sit on the board as economic, financial, and legal experts.

IN OTHER MOVES- Amr Ahmed Mostafa was appointed as non-executive chairman of the Holding Company for Maritime and Land Transport (HCMLT), Al Mal reported, citing a circular by Managing Director Abdelmotaleb Khedr.

A lot of economy + finance talk on the airwaves last night: The challenges facing newly-appointed Central Bank of Egypt (CBE) governor Hassan Abdalla are still getting a lot of attention from the talking heads. Former CBE governor Mahmoud Abou El Oyoun went on Ala Mas’ouleety (watch, runtime: 3:27 | 3:24 | 6:20 | 4:37) to off analysis of the current issues facing Abdalla and the government.

The gist of it: We’re in a crisis, and the CBE and government need to respond accordingly. This includes revisiting import restrictions that are currently stifling importers and businesses, postponing repayments for bank loans like during the covid-19 pandemic, and putting some public spending on the backburner, Abou El Oyoun said. The timing of implementing the rules requiring importers to use letters of credit (L/Cs) to purchase non-essential goods, instead of the previous system of documentary collection, at a time when the USD is gaining strength, was not ideal, he adds. “The new CBE governor now has a chance to calm the markets by exempting importers from having to issue L/Cs for urgent supplies like spare parts, raw materials, and car components,” he notes.

These measures would help stave off inflation — which, albeit harmful, is transitory, according to Abou El Oyoun — and relieve some of the pressure on people and the private sector, Abou El Oyoun said. It will also help reinstill business confidence, which has been on the decline over the past few months, he added. Helping the private sector by providing additional incentives like streamlining and accelerating operational license procedures will also help, he suggested.

Two other things were on the talking heads’ minds: coordination between the gov’t and the CBE + hope for some “positive measures” that could be coming our way. Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 7:39) for the second time suggested some “positive measures” from the CBE could be coming our way soon, while Banque Misr Chairman Mohamed El Etreby suggested the same in a phone-in with Salet El Tahrir (watch, runtime: 11:40) (though neither elaborated much on what they meant). Key cabinet members have already been holding meetings with Abdalla in recent days, stoking expectations among business leaders that they may be looking for ways to ease the import restrictions that have hobbled everyone from manufacturers to retailers.

Also on the airwaves last night:

• Prime Minister Moustafa Madbouly’s participation in the Tokyo International Conference on African Development (TICAD) in Tunisia yesterday also got some attention. (Sada El Balad: watch, runtime: 4:14 | DMC: watch, runtime: 5:42)
• The private sector — particularly microbusinesses and SMEs — needs new incentives from the government, Fakhry El Fiky, economist and head of the House Planning Committee, said. (Salat El Tahrir | watch, runtime: 5:26)

President Abdel Fattah El Sisi discussed the upcoming COP27 climate summit and bilateral relations in a phone call with British Prime Minister Boris Johnson, a statement by Ittihadiya read. A readout by the British PM’s office said Johnson and El Sisi also discussed “resolving the consular case of Alaa Abdel Fattah,” with Johnson expressing “his hope for swift and positive progress on the issue.” The case of the imprisoned Egyptian-British national, who has been on hunger strike since April, has drawn significant attention from the international press in recent months.