AM — Three GCC sovereign wealth funds have their eye on TE’s stake in Vodafone Egypt

Good morning, everyone, and happy hump day.

THE BIG STORY here at home this morning is that not one, but three, GCC sovereign wealth funds are eyeing TE’s stake in Vodafone Egypt. We also think you should read today’s Going Green feature, which looks at how climate change is impacting small dairy farmers — the people who account for the majority of the milk our nation produces.

^^ We have both stories and plenty more below.

Welcome back, US and Canadian readers. We hope you enjoyed your Labor Day holiday — and that you’re now settling comfortably into the fall grind. It really is the best season of the year for you folks (all the more so if you live at a latitude that allows you to enjoy fall foliage).

*** You have just three days to tell us how you’re feeling about your business and the wider economy. We’ll have the results for mid-month — just in time to give you a sense of what everyone else is thinking heading into budget season. Make your voice heard in our Fall Reader Survey. It won’t take more than a few minutes to complete.

HAPPENING TODAY-

Palestinian President Mahmoud Abbas is in Cairo for an Egyptian-Palestinian summit. The two sides will discuss the situation in Palestine and the possibility of releasing Palestinian prisoners in Israeli custody. Egypt played a key role in brokering last month’s ceasefire following clashes between Israel and Gaza militants.

HAPPENING THIS WEEK-

We’re expecting some sort of announcement from the government on how it plans to proceed with its privatization program, according to comments given to the media by Finance Minister Mohamed Maait last week. This came on the same day as the Prime Minister Moustafa Madbouy met with the heads of the EGX and the Financial Regulatory Authority to discuss plans to sell stakes in state-owned enterprises on the bourse.

US climate envoy John Kerry will be in town tomorrow for the Egypt-International Cooperation Forum (Egypt-ICF), which runs 7-9 September at Almasa Convention Center in the new administrative capital. The three-day event will bring together global policymakers, ministers, development partners and other participants ahead of COP27 to discuss climate action and green transition, food security, and others with a focus on Africa. Check the full agenda here (pdf).

Tourism expo starts tomorrow: The four-day Gate Travel Expo 2022 starts tomorrow at El Qubba Palace.

Support measures coming for local commercial ships? Transport Minister Kamel El Wazir will hold a meeting this week with the maritime transport sector and private shipping companies to discuss ways to boost the commercial fleet, Al Mal reports, citing an unnamed source.

THE BIG STORY ABROAD-

Chaos has returned to the European energy markets on the first trading day since Gazprom said it would be indefinitely shuttering the vital Nord Stream gas pipeline. Gas and power prices soared, equities tumbled, and the EUR hit a fresh 20-year low against the greenback as markets freaked out about the escalating energy crisis and its implication for eurozone economies. The move — the latest round in a tit-for-tat energy war with Russia that came shortly after the G7 agreed to cap Russian oil prices — has forced Brussels into considering unprecedented measures to curb the crisis, including emergency caps on wholesale prices and hundred-bn EUR bailout packages to prevent utilities companies and household finances from collapsing. (Reuters | FT | Bloomberg | Politico | WSJ)

And in its most escalatory move yet: Moscow slapped sanctions on Zoolander. Ben Stiller and Sean Penn have been permanently banned from entering Russia for showing support for Kyiv’s war effort. The White House is yet to comment on how it might respond to the latest escalation.

CIRCLE YOUR CALENDAR-

The German-Arab Chamber of Industry and Commerce will commemorate 70 years of German-Egyptian business and economic ties with a gala celebration on 15 September.

Our monthly list of data points to keep your eye on over the next few days and weeks:

• Foreign reserves figures for August should be out during the first week of the month.
• Inflation figures: Inflation data for August from Capmas will land on Saturday, 10 September. Expect the Central Bank of Egypt to follow up on Sunday, 11 September with its inflation report.
• Interest rates: The Central Bank of Egypt’s Monetary Policy Committee meets on Thursday, 22 September to review interest rates.

The National Dialogue’s board of trustees will hold its next meeting on Saturday to name 30 rapporteurs and assistant rapporteurs for the dialogue’s 15 political, social and economic subcommittees.

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: How the changing climate is threatening the future of Egypt’s dairy farms.

Could Telecom Egypt’s stake in Vodafone Egypt be in play? The Qatar Investment Authority (QIA), Saudi Arabia’s Public Investment Fund, and Abu Dhabi’s ADQ are all eyeing part of state-owned landline monopoly Telecom Egypt’s stake in Vodafone Egypt, a source with first-hand knowledge of the matter confirmed to Enterprise. Bloomberg Asharq reported earlier yesterday that QIA is looking to acquire as much as 25% of the company, citing three anonymous sources.

TE is open to selling up to a 20% stake in Vodafone Egypt “at the right price that would bring maximum returns to shareholders,” our source tells us. The EGX-listed telecoms giant holds a 45% stake in the company.

Nothing official yet: Talks are ongoing with the government — which owns 80% of EGX-listed TE — on the potential stake sale, the source said. TE has yet to receive an official bid from QIA or other sovereign funds, the company said in an EGX disclosure (pdf) yesterday.

TE shares rose 15.8% to EGP 17.70 in trading yesterday following its disclosure. The EGX suspended intraday trading TE shares for ten minutes before publishing the disclosure, it said in a bulletin (pdf).

QIA has reportedly been eyeing several Egyptian companies: The fund is rumored to be planning looking at the EGX as an entry point to deploy capital as part of moves by our neighbors in the region to help shore up our economy with an influx of FDI. Local media outlets have reported that the Qatari fund is interested in purchasing stakes in Alexandria Containers and Eastern Company, though a source at Eastern’s majority shareholder, Chemical Industries Holding (CIHC), denied knowledge of the talks when we reached out recently.

Other Arab sovereign funds have been buying big: The Saudi Public Investment Fund (PIF) and ADQ have invested bns of USD in a number of EGX-listed companies this year, with PIF reportedly still eyeing stakes in at least three high profile Egyptian companies. Gulf state neighbors have pledged more than USD 22 bn in total to support the economy amid the fallout from the crisis in Ukraine.

Activity in Egypt’s non-oil private sector contracted at a slower pace in August on a relative easing of inflationary pressures, according to S&P Global’s latest purchasing managers’ index (pdf). Output and new orders inched higher for the second consecutive month from June's lows as clients’ spending constraints began to relax. The index rose to 47.6 last month, up from 46.4 in July — its highest reading since February, though still well below the 50.0 threshold that separates growth from contraction. This is the 21st consecutive month that the gauge suggests activity in Egypt’s private sector has declined.

The outlook remains uncertain: August's PMI shows a “move in the right direction with the headline index up for the second month running,” said S&P Global economist David Owen. “Monetary policy uncertainty, a weakening exchange rate, and the continued war in Ukraine mean there are still high levels of risk for the economy over the rest of 2022,” he said.

Input cost pressures eased: Input costs rose at a slower pace in August, although raw material supplies continue to be impacted by pressure on the EGP and import restrictions aimed at keeping foreign currency in the country. Input purchase levels dropped for the eighth successive month as companies curb their spending due to weak sales.

New orders continued to decline, but at a slower pace: Businesses continued to see a drop in client demand, though new orders decreased at the softest rate since April, leading to a slower fall in output. End prices for products and services continued to record “solid” rises in August, though also at a much slower rate.

What do you mean “easing inflationary pressures,” S&P? Inflation in the wider economy reached a three-year high of 13.6% y-o-y in July — largely on the back of higher food and fuel prices. That said, global commodities markets have on the whole been cooling as the immediate impacts of war in Ukraine subside, which could explain the relative easing of cost increases in the private sector in August compared with July, economist Mona Bedeir tells Enterprise. Most analysts are expecting the reprieve to be short-lived, predicting inflation to continue rising through the rest of the year as underlying pressures remain high.

Some good news on hiring: Hiring picked up at its fastest rate since October 2019, as firms brought on staff to make up for job cuts earlier in the year. Meanwhile, wage costs decreased for the first time in five months despite record-high inflation.

Businesses are still wary: Confidence fell to their lowest level on record barring last March, with only 9% of companies forecast output growth over the coming year. Weak market conditions, high inflation and supply issues dampened expectations on the business outlook.

In the foreign press: Reuters is stressing the doom and gloom in its report on this month’s PMI, while Bloomberg is more optimistic, emphasizing strong readings out of the Gulf and the softening contraction here.

FROM THE REGION –

UAE output at 3+ year high: Private sector activity in the UAE continued to grow in August as output rose at the fastest rate since June 2019. The PMI (pdf) rose to 56.7 from 55.4 in July in response to an increase in demand and new orders on the back of lower fuel prices and slowing inflation.

BUT- Confidence fell to its lowest level in 17 months due to fears of an oncoming global recession.

Saudi private sector growth hits 10-month high: Growth in the Saudi private sector picked up pace in August, with the PMI (pdf) rising to 57.7 from 56.3 in July — its highest since October last year. Purchasing saw its sharpest uptick in seven years, backed by high demand and strengthened business activity, providing further evidence of the resilience of the Saudi economy amid global growth fears.

EGX-listed private sector giant CIB is planning a multi-bn EGP capital increase that would raise its capital by around a third. The bank submitted documents to the EGX yesterday and the bourse is studying the proposal, it said, according to an EGX bulletin yesterday.

The plan: CIB would issue EGP 10 bn in new shares to shareholders, raising its capital to EGP 29.82 bn from EGP 19.85 bn currently. The bank would issue 1 bn shares at EGP 10 apiece to be covered by the general reserves for the period ended 31 December 2021.

Market reax: Traders didn’t get a chance to respond to the news yesterday because the EGX published the bulletin after the closing bell.

Earnings: CIB’s net income rose 9% y-o-y to EGP 3.5 bn in 2Q 2022 as demand for short-term credit picked up, according to the bank’s latest earnings release (pdf). The bank recorded revenues of EGP 6.9 bn, up 8% from the same period last year. On a 1H 2022 basis, the bank reported net income of EGP 7.8 bn (+28% y-o-y) on revenues of EGP 14.7 bn (+16% y-o-y).

Americana Egypt to expand food production: F&B conglomerate Americana is planning to invest USD 26 mn in new food production lines in Egypt, Vice Chairman Ihab Hajjaj said during a sit-down with General Authority for Investment and Freezones (GAFI) CEO Mohamed Abdel Wahab, cabinet said yesterday. The increased capacity would be directed to the local market and to target new markets for export, especially Gulf countries.

SOUND SMART- Parent company Americana Group, which runs the KFC and Pizza Hut franchises across MENA, earlier this summer tapped several big-name banks to work on its planned IPO, which could take the form of a dual listing in Riyadh and Abu Dhabi and raise as much as USD 1 bn.

Raya Holding subsidiary Aman Microfinance is negotiating an EGP 1 bn credit facility with four banks, Raya IR head Ahmed Nour Eldin told Enterprise, confirming a story first reported by Amwal Alghad. Aman is in talks with Credit Agricole, United Bank, Abu Dhabi Islamic Bank and Al Ahli Bank of Kuwait for the facility, which will fund working capital, Nour Eldin said.

Negotiations shouldn’t take long: “It normally takes us only 2-3 months to negotiate credit facilities and receive approvals from banks since they are particularly supportive when it comes to providing credit facilities for microfinancing,” Nour Eldin said.

Two local startups get a first foot on the funding ladder: E-commerce software provider El Dokan raised USD 550k in a seed round, while online used car marketplace Carzami bagged pre-seed funding, but declined to say how much it had raised.

FIRST UP- Cairo-based e-commerce platform El Dokan has raised USD 550k in its first funding round, led by EFG EV, Flat6Labs, 500 Global and Hala Ventures, the company said in a statement (pdf) yesterday.

About El Dokan: Founded in late 2020 by Ahmed Maher (LinkedIn), Mohammed Yousry (LinkedIn) and Sherif Alaa (LinkedIn), the company offers large retailers software to develop their own e-commerce platforms. El Dokan has more than 50 clients on its roster, including P&G, Misr Pharmacies, and startups such as Appetito. “We focus on medium and large enterprises because their operations are more complex,” Maher, who serves as the company’s CEO, told us. “Small businesses can go to any retailer to launch their e-commerce operations.” Earlier this year, the firm was among two startups chosen to work with P&G Egypt through its MEA Innovation Challenge.

The company has its eye on GCC expansion: The seed funding will go towards growing the company’s operations across the region by expanding its sales and marketing team, Maher told us. El Dokan is already registered in Saudi Arabia in preparation for launch, he said, adding that it is also planning expansion into other GCC and African countries. “We’ve been working on building our tech and working with local enterprises but our main goal is to scale our tech across the Middle East and Africa,” he said.

More funding to come: The startup is hoping to raise a USD 5 mn round by the end of next year, the CEO said.

AND- Carzami closes first funding round: Egyptian used car trading platform Carzami has raised pre-seed funding round led by Contact Financial Holding, along with an inventory financing facility, the startup said in a statement. Representatives from Contact and Carzami weren’t available for comment when we reached out yesterday.

Foreign Minister Sameh Shoukry has appointed Ahmed Abu Zeid to return as spokesperson for the Foreign Ministry and director of the public diplomacy department, marking the second time he has held the position, according to a Foreign Ministry statement. Abu Zeid is switching roles with Ahmed Hafez, who replaces Abu Zeid as ambassador to Canada after serving as spokesman for four years.

Classifieds platform 4Sale has appointed Nabil Mohamed (LinkedIn) as its chief product officer, according to a press release (pdf). Mohamed most recently served as vice president of product at Instabug, a global computer software company. Prior to that he was senior product manager in Amazon’s Prime video and recommerce divisions. Founded by local entrepreneur Tarek Sakr (LinkedIn), 4Sale’s online marketplace caters to the Kuwaiti market but operates out of Egypt.

Amr Ahmed Lotfy Shehata Morsi is the new head of Alexandria Mineral Oils Company (AMOC) while Sayed Al Rawi Mahmoud Abdullah will lead refiner Midor in a shuffle of leadership at a number of ministry-controlled stories.

The Sisi administration’s national dialogue dominated the conversation on the airwaves last night after the board of trustees yesterday appointed several rapporteurs for the process (more on this in this morning’s Also on our Radar, below). Nothing particularly interesting was said, but if you’ve run out of things to kill time: Al Hayah Al Youm (watch, runtime: 19:16), Kelma Akhira (watch, runtime: 3:45), and Al Hayah Al Youm (watch, runtime: 4:21).

The economic crisis and the future of the EGP got a selective mention: Hazem El Beblawy rang the alarm bells about Egypt’s increasing indebtedness in an interview with Al Hadath Al Youm. The former PM called on the government to take action to prevent a debt crisis — but didn’t provide much in the way of a solution himself (watch, runtime: 6:42).

Meanwhile, Wael Ziada, executive chairman of Zilla Capital, speculated that the IMF isn’t likely to force the government into a sudden currency devaluation but could give it space for a gradual decline (watch, runtime: 6:24).

The gradual vs. sudden debate is key right now: Hassan Abdalla’s appointment to head the central bank has brought with it a strong consensus that the government is preparing to let the currency fall against the greenback. The main debate is whether it will do so at a slow pace or opt for a sudden devaluation as happened in March.

While the rest of the country has to rationalize consumption to boost foreign currency, New Alamein can use all the power it wants. Why? To attract tourists to the area, Housing Minister Assem Al Gazzar told Kelma Akhira’s Lamis El Hadidi (watch, runtime: 3:25).

It’s a quiet morning in the international press: Haaretz is the latest foreign outlet to examine the likelihood of Egypt defaulting on its debt while Bloomberg is drawing attention to the government’s pivot towards local treasury bill issuances this year. Meanwhile, AFP reports on the eviction of Warraq islanders whose houses are being destroyed so the government can redevelop the island.

National dialogue rapporteurs appointed: The 19-member board of trustees overseeing the Sisi administration’s national dialogue named six rapporteurs and assistant rapporteurs for the process’ main political, social and economic committees. Board members appointed:

• Our friend Alieldean Helal, professor of political science at Cairo University and former sports minister, as the political rapporteur;
• Ex-finance minister Ahmed Galal as the economic rapporteur;
• and former youth and sports minister Khaled Abdel Aziz as the social rapporteur.

It also selected rapporteurs to each of the three political subcommittees.

Up next: The board will hold its next meeting on Saturday to name rapporteurs and assistant rapporteurs for the social and economic subcommittees.

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

• ADIB gets the all-clear for capital increase: Abu Dhabi Islamic Bank Egypt (ADIB) will move forward with an EGP 1 bn capital increase, after the Financial Regulatory Authority greenlit the move. ADIB will offer an additional 100 mn shares at EGP 10 per share to existing investors. (Disclosure, pdf)
• Scotland’s Queen Margaret University could be interested in opening a branch in the new capital. (Statement)

UN appoints new envoy to Libya amid rising tensions: UN Secretary-General Antonio Guterres has appointed a new envoy to Libya amid an uptick in clashes that threaten to unwind months of negotiations to end the country’s years-long civil war. The UN Security council has finally agreed to appoint Senegalese diplomat Abdoulaye Bathily to the job following a nine-month search that has seen several candidates rejected by council members, Libya or other countries in the region. Bathily replaces Jan Kubis who resigned last year in the lead up to ill-fated national elections. Egypt’s Foreign Ministry welcomed Bathily’s appointment in a statement yesterday.

Israel admits “high possibility” its soldiers killed Shireen Abu Akleh: The Israeli military has conceded for the first time that there is a “high possibility” one of its soldiers killed veteran Al Jazeera correspondent Shireen Abu Akleh in May, CNN reported, citing a statement by the military. The IDF said any attack on the journalist by soldiers would have been accidental and will not launch a criminal investigation into the killing.

Also worth knowing this morning:

• Bomb blast at Russian embassy kills six in Kabul: At least two Russian embassy staffers and four Afghan citizens were killed and another 10 people injured in a suicide bomb attack near the embassy’s entrance yesterday. Islamic State claimed responsibility for the attack. (Reuters)