AM — SFE lining up stake sales worth USD 6 bn, with first names to be announced within four weeks

Happy hump day, wonderful people. We have a nice, brisk issue for you today packed with plenty of investment news.

THIS IS BIG- President Abdel Fattah El Sisi is traveling to Qatar today on an official visit, a government source confirmed to Enterprise following reports in local media (CNBC Arabia | Zawya). El Sisi will meet with Qatar’s emir, Sheikh Tamim bin Hamad Al Thani. Investment in Egypt is near the top of the agenda for the sit-down. The visit comes on the heels of Al Thani’s landmark visit to Cairo in June, his first since we normalized relations in early 2021. Qatar has since confirmed the visit (here and here).

We’ve been expecting Qatari inflows for some time: Reports have been circulating in local media for some time now suggesting Qatar’s sovereign fund could follow in the footsteps of the Saudi and Abu Dhabi wealth funds, which have snapped up shares in high-profile Egyptian companies. Qatari officials have discussed investing USD 2-3 bn in the local market in talks with the Madbouly government, Finance Minister Mohamed Maait said in the wake of the emir’s visit. Qatar pledged in March to invest USD 5 bn in Egypt, joining our Gulf neighbors to help shore up our finances fallout from Russia’s invasion of Ukraine.

EGP WATCH- The EGP once again slipped ever so slightly against the greenback yesterday, with 1 USD changing hands at EGP 19.41, compared to 19.39 a day earlier. The local currency has now fallen by over 22% against the USD since March’s devaluation. Gradualists will take the slow crawl as a sign that Central Bank Governor Hassan Abdalla is opting for a gradual float and not a 2016-style shock devaluation.

WATCH THIS- The US country music primetime soap opera with a “finance in Egypt” connection: Monarch, starring Oscar-winning actor Susan Sarandon, made its debut on Fox after the National Football League lineup on Sunday. The local connection? The show’s executive producer is none other than the wonderful Hend Baghdady (IMDb | biography), whose credits include the Netflix hit Tidying Up with Marie Kondo. Hend just happens to be the sister of our friend Karim Baghdady (LinkedIn), CEO of EFG Hermes USA. Among other shows, Hend is also working on the animated detective comedy series Grimsburg, starring none other than Mad Men’s Jon Hamm. You can check out the trailer for Monarch here (watch, runtime: 2:37).

ALSO IN HOLLYWOOD- HBO’s Succession (best drama) and Apple’s Ted Lasso (best comedy) cleaned up at the Emmys overnight. CNBC has coverage here, including rundowns on winners and nominees by category.

ALSO HAPPENING TODAY-

It’s inflation day in the US: Everyone’s eyes are on the US, where inflation data for August is due to be released. Analysts and economists polled by Reuters expect inflation to have slowed in August to 8.1% from 8.5%. The figure will be key for assessing how the Federal Reserve might act when it meets next week to discuss interest rates. Markets could start to price in a smaller 50-bps hike if we get a second successive month of declines. Anything less than that and a third straight 75 bps increase is looking likely.

A big day in the Musk-Twitter saga: Twitter shareholders are expected to approve today a USD 44 bn takeover bid that tech b’naire Elon Musk is trying to kill, the Wall Street Journal reported yesterday, citing people familiar with the matter. They said that early votes showed shareholders nodding the merger by a landslide, with an approval by investors leaving Twitter’s future in a Delaware judge’s court as the platform attempts to force the takeover through court.

The vote comes one day after shareholders in the social media platform rejected another attempt by Musk to nullify the deal, Bloomberg reported. Its lawyers described Musk’s latest attempt as “invalid and wrongful” and that Twitter didn’t breach any of its obligations.

THE BIG STORY ABROAD- The attention of the global press continues to be on east Ukraine, where Kyiv is continuing to retake territory and forcing Russian troops into retreat. (Reuters | AP | FT | NYT | Washington Post | WSJ)

Road to COP27: Climate finance for developing countries needs to be reexamined during the COP27 summit in November as rich nations fail to keep to their pledge to provide USD 100 bn in funding annually, Egypt’s climate czar Mahmoud Mohieldin told Reuters in an interview. “The finance architecture of climate is inefficient, insufficient and unfair,” he said, calling for a new paradigm consisting of increased finance from the private sector and DFIs, debt relief measures, and local carbon markets in Africa.

HAPPENING THIS WEEK-

Shareholders have until tomorrow to sell their shares to the consortium of investors led by Expedition Investments, which is bidding to take a 34% stake in the EGX-listed cheesemaker. Expedition sweetened the deal by upping its offer price by 10% last week.

Expedition has more than half of its targeted shares in Domty: Shareholders have reportedly agreed to sell almost 53 mn shares to the consortium, according to Al Borsa. This is roughly 55% of the 96.2 mn shares it is targeting.

B Investments is going to have to make up its mind over TotalEnergies Egypt by Thursday: The private equity player has the right to preempt a bid by Abu Dhabi energy giant Adnoc to acquire a 50% stake in the company, which expires on Thursday.

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: The year so far in Egyptian agriculture.

The Madbouly government will within four weeks announce the names of the state-owned companies it will offer to foreign sovereign funds in the first of a series of strategic stake sales that it expects will bring in as much as USD 6 bn, Planning Minister and Sovereign Fund of Egypt (SFE) head Hala El Said told Bloomberg Asharq (watch, runtime: 2:50) yesterday.

Up first: Look for the SFE’s newly-established pre-IPO fund to offer within a month shares worth USD 2.5-3 bn held by the National Investment Bank (NIB). The SFE will be marketing the transactions to “Arab, regional or international sovereign wealth funds,” El Said said. The minister did not give hints as to which companies might be on the list or what industries they may be in. A second phase could see stakes worth as much as USD 3 bn taken to market.

A hint at what could be up for grabs? NIB holds stakes in a large number of state-owned companies across sectors including banking, media, fertilizers, food and agriculture, building materials, real estate, and transport, according to its website. Two of the companies listed — Egyptian Media Production City and Mopco — have recently been reported in local media to be the target of Gulf wealth funds, though none of the parties involved have publicly confirmed this.

Could Banque du Caire and Misr Ins. be next? Kelma Akhira’s Lamees El Hadidi said last night that Banque du Caire could be on the sale list (watch, runtime: 2:13) in the fourth quarter. The bank is a perennial IPO prospect that has seen its financial and operational performance sharply turn around under Chairman and CEO Tarek Fayed. At least one Gulf-based lender has previously expressed serious interest in an outright acquisition. Lamees also said Misr Ins.could “maybe” be up for grabs in the fourth quarter, too.

Challenging market conditions have pushed the government to relaunch the program through the SFE’s pre-IPO fund, EGX board member Rania Yacoub told El Hadidi last night (watch, runtime: 11:06). “I believe this will be a good opportunity to take to market [government-held] stakes in state-owned companies, especially amid an interest by Arab sovereign wealth funds and investors,” she said. The fund will select strategic investors opting for stakes “carefully” to ensure they bring added value to the table, she said

Our GCC neighbors will likely be the biggest buyers: Gulf sovereign funds have been piling into Egypt after GCC countries pledged more than USD 22 bn in direct investment to help the country weather global economic headwinds. The Saudi and Abu Dhabi funds have supported the government’s pivot to strategic stake sales, snapping up holdings in EGX-listed, state-owned companies including Mopco, Abu Qir Fertilizers (which NIB reportedly made a complete exit from when it sold its stake to Abu Dhabi wealth fund ADQ), Alexandria Containers, and E-Finance.

Is Qatar next? There has recently been talk that the Qatar Investment Authority is poised to follow — and President Abdel Fattah El Sisi is in Qatar today to discuss investment (among other topics) in a landmark visit after we re-established diplomatic relations.

We knew this was coming: The SFE last week set up a pre-IPO fund to offer stakes in state-owned companies to “strategic investors and different sovereign wealth funds” ahead of listing them on the bourse. The government would then look to list the firms “when the market is ready,” El Said said at the time. The move aims to push forward the government’s privatization agenda even as unfavorable market conditions delay its IPO plans. The government was previously aiming for as many as 10 stake sales this year (including strategic sales of the kind El Said is talking about and secondary sales of more shares in already-listed companies).

Remember that USD 40 bn figure: This process is part of the Sisi administration’s strategy to raise USD 10 bn every year for the next four years by offering a range of assets to the private sector.

MIR is coming: The Central Bank of Egypt is working to link Russia’s MIR payments system with Egypt’s homegrown Meeza card network, House Budget and Planning Committee Chairman Fakhri El Fiqi told Ala Mas’ouleety (watch, runtime: 4:57) last night.

SOUND SMART- Uh, wasn’t Mir a space station? Yup. It was a Soviet-era installation run from 1986-2001. But we’re not talking about that Mir. This MIR is Russia’s answer to Mastercard and Visa. It’s a payments system that operates independently of the Western financial system, allowing countries to transact with Russian banks outside of Swift — and letting Russian citizens to make digital transactions. It’s an incomplete analogy, but think of it as Egypt’s 123 network on steroids.

Could Egypt and Russia drop the USD for bilateral trade? El Fiqi said Egypt could move to pay for Russian commodities such as wheat and cooking oil in RUB rather than USD once Egypt’s banking system is hooked up to MIR. This, he said, would be a “positive step” for the country and would alleviate some of the funding pressure currently weighing on Egypt by a scarcity of USD.

It’d be good for tourism: MIR has become essential for Russians traveling overseas since US payments companies severed ties with Russian banks following Moscow’s invasion of Ukraine. Before the war Russia was one of Egypt’s biggest tourism markets by volume, but the number of visitors have fallen with the onset of the war and sanctions on the Russian economy. Integrating MIR in Egypt would mean that Russians would be able to pay in RUB, use their cards, and access ATMs, making it easier for them to visit the country.

There were rumors of this before: Reports in Russian media earlier this year said that Egyptian authorities were working to allow businesses in destinations popular with Russian tourists to accept MIR. This was confirmed by the head of the Red Sea Chamber of Hotel Establishments, Alaa Akel, who told us some months back that they were awaiting instructions from the central bank.

Turkey and the UAE are already on board: Both countries have made moves to integrate MIR into their payments infrastructures. The system is beginning to be rolled out in the UAE while most hotels in Turkey now accept the cards.

Integrated Diagnostics Holding (IDH) saw its bottom line decline 62% y-o-y to EGP 125.6 mn in 2Q 2022 amid a drop in covid-related income as the pandemic recedes, according to its latest earnings release (pdf). The LSE- and EGX-listed consumer healthcare firm reported a 34% y-o-y decline in revenues to EGP 773.6 mn during the April-June quarter.

This was expected: Covid-related net sales fell 87% to EGP 75 mn during the quarter as infection rates continued to fall, governments ended mandatory testing regimes, and test prices declined.

Meanwhile: IDH’s conventional business is growing: The drop in covid testing was partially offset by growth in conventional sales, which rose 18% y-o-y to EGP 699 mn in the quarter. Conventional sales accounted for 90% of the company’s total net sales, up from 51% in the same period last year. Notably, conventional sales were up both year-on-year and quarter-on-quarter in 2Q despite the seasonal slowdown associated with Ramadan and the Eid holiday.

IDH remains optimistic despite economic challenges: The company, which operates in Egypt, Sudan, Nigeria and Jordan, has maintained its full-year guidance and is on track to increase revenues from conventional sales by 20% from 2021, despite supply chain snags and a high inflation environment, said IDH CEO Hend El Sherbini. “While we expect the current operational challenges to persist throughout the rest of 2022, I firmly believe that the robust mitigation measures we have put in place provide ample protection against possible future disruptions to the business.”

It was a mixed bag on the airwaves last night, with the potential revival of the government’s IPO program (more on that above), the ongoing crisis at Egyptian ports, and the rise in education financing in Egypt all getting a look in.

Businesses are losing “tens of mns of USD” a day due to the bottlenecks at Egyptian ports caused by import restrictions imposed by former central bank governor Tarek Amer, Federation of Egyptian Industries (FEI) head Mohamed El Sewedy told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 6:24), warning that many could shutter if the crisis continues. “Surely, some factories would be at risk of suspending operations. Not all factories can weather losses of a month or two,” he said, urging authorities to speed up the release of shipments stuck at ports. His statements come despite the government rolling out late last month a basket of measures to clear shipments that have been held up at customs.

Just like trying to score [redacted]: The head of the Dentists’ Syndicate, Ehab Heikal, described a shortage in local anesthetics as similar to “getting [illegal substances],” describing the growth of a black market which he blamed on a a shortage in local production, import restrictions, and corruption in distribution lines. [Editor’s note: We’re writing around words that would otherwise see our email sent to a bad folder from which it will not emerge.]

On the agenda of the government economic conference taking place toward the end of this month: Localizing industries and boosting exports, Prime Minister Moustafa Madbouly told FEI representatives in a meeting yesterday. Industry figures presented several proposals to the PM to support domestic industry, according to a cabinet statement which didn’t elaborate. Al Hayah Al Youm had coverage (watch, runtime: 2:06).

Madbouly + Abdalla meet again: The PM held another round of talks with the acting governor of the Central Bank of Egypt, Hassan Abdalla. On the agenda: monetary policy, talks with the IMF on an assistance package, and the economic conference, cabinet said, again without providing many details. Ala Masouleety had coverage (watch, runtime: 3:07).

Education financing is booming: El Hadidi talked to Ahmed Hashem, CCO at EFG Hermes’ valU (watch, runtime: 0:48), and Contact Financial Holding’s Tamer Samir (watch, runtime: 4:33) to discuss the growth of consumer finance providers in the education space.

Amendments to a law providing a framework to settle building code violations is set to be finalized by the Cabinet before the end of September, cabinet spokesman Nader Saad told Salet El Tahrir (watch, runtime: 6:35). When approved, the amendments would be referred to the House of Representatives when it returns from its summer recess.

The international press is once again honing in on human rights ahead of COP27: Imprisoned Egyptian-British activist Alaa Abdel Fattah has told his family he is scared he may die in prison as he continues his months-long hunger strike, according to the Guardian, which along with the Associated Press takes note of a new Human Rights Watch report on environmental activism ahead of COP27.

Entrepreneur Youssef Hanna and his biotech startup Khepra get feature-length ink in the Financial Times’ Masters in Management column. Khepra is exploring the use of insects in animal feed.

Also making headlines:

• The makeover of the Giza Pyramids plateau in a bid to lure tourists is getting attention. (The National)
• January 25 figure Wael Ghoneim has returned home from a decade of self-imposed exile for a family visit in what Emirati media claims is connected to the upcoming National Dialogue. (The National)
• Old money + older cheese: In separate digs, archaeologists have discovered several blocks of white cheese dating back 2.6k years in Giza's Saqqara necropolis and some 300 coins dating back to the Mamluk era. (The National | The National)
• Ahmed Bassam Zaki’s acquittal in a [redacted] assault cases is getting ink. Zaki is serving a seven-year sentence in a separate case. (The National)

Qalaa Holding subsidiary Taqa Arabia will explore ways to develop and operate gas transport services in Saudi Arabia after signing an MoU with the Natural Gas Distribution Company. The Saudi company said the agreement, signed on 6 September, is aimed at supporting its expansion plans and boosting profitability, in a disclosure to the Saudi stock exchange.

Medical training startup 5 Quarters has raised an undisclosed seed round from a Saudi angel investor, according to a press release picked up by Wamda. The company will use the funds to grow its footprint in Saudi Arabia and add new services to its platform, it said. The company, founded in 2016, offers online courses taught by certified professionals for doctors, dentists, pharmacists, and physiotherapists. It says it has c. 15k customers across Egypt, Saudi Arabia, Libya, Iraq, the UAE, Tunisia, and Jordan.

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

• The Financial Regulatory Authority has revoked the licenses of both Al Ahly Financial Investments Management and Al Nahda Holding for Financial Investments, without disclosing any further details. (EGX bulletin, pdf | pdf)
• The Grand Mufti approved the Giza criminal court’s decision to sentence to death Egyptian judge Ayman Haggag and his accomplice Hussein Al Gharabli for the murder of the Haggag’s wife, TV presenter Shaimaa Gamal. (Al Masry Al Youm)

Washington is set to expand restrictions next month on US semiconductor exports to China as it looks to slow the development of the country’s chip making industry, Reuters reported, citing people familiar with the matter. The Commerce Department will issue new regulations prohibiting some US companies from exporting chip-making equipment and will codify instructions handed to Nvidia and AMD last month banning them from selling AI semiconductors to Chinese firms, the people said.