AM — Up to 6 private companies in IPO talks with the EGX, says El Dokany

Good morning from Atlantis The Palm, our home for the week as we settle in for the first EFG Hermes One on One to take place in person since 2019 (Thank you, covid-19). We’re expecting some 205 corporates from 33 countries to show up over the course of the week for face-to-face meetings with 655 institutional investors from 270 different institutions — making the One on One the world’s premier frontier and emerging markets investor conference.

Corporates here cover every industry in F/EM you could imagine, including energy (huge, with COP27 slated for Sharm El Sheikh later this fall and COP28 next year in the UAE), consumer-driven sectors, banking, finance, healthcare, industrials, tech, telecommunications, utilities, real estate and more.

“We’re excited to finally bring back the physical iteration of the One-on-One for the first time since the onset of covid-19 under the patronage of H.H. Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum,” our friend Karim Awad says this morning in a statement (pdf). Karim, group CEO of EFG Hermes Holding, says that the firm’s role in serving as a conduit for investment is more important than ever as businesses and investors grapple with the aftermath of covid, ongoing supply chain snarls, and sharp inflationary pressure.

WHAT YOU CAN EXPECT TODAY- Tons of one-on-one meetings as well as group sit-downs with in-demand companies.

On the stage this morning: Helal Saeed Almarri, who wears many hats in Dubai including that of director general of the Department of Economy and Tourism. Almarri is also a member of the Executive Council of Dubai and chairman of the Dubai Financial Market, among other posts he holds. He’ll be interviewed on stage at 11:50am Dubai time by our friend Simon Kitchen, head of strategy at EFG Hermes Research.

ALSO THIS MORNING- Attendees will be asked to vote in the Consensus for 2023, the largest (and only live) F/EM research poll. We’ll have the results for you in tomorrow morning’s EnterpriseAM.

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WATCH THIS SPACE- Is a Capiter bailout in the cards? US-based Quona Capital wants to acquire 70-80% of crisis-stricken B2B e-commerce startup Capiter in efforts to reform and restructure the company, Al Mal reported yesterday, citing informed sources. Quona is a key investor in Capiter, having co-led its USD 33 mn series A round with MSA Capital last year. Representatives of Capiter did not respond to requests for comment when we reached out yesterday.

Capiter was the talk of the town this past week after social media exploded with allegations of financial impropriety (including embezzlement) at the company after the board fired the company’s co-founders. Internal and external investigations are ongoing, while the news has sparked a wider conversation on what lies in store for the local startup scene as VC funding dries up on the back of rising borrowing costs and fears of a global slowdown.

PSA- Your commute around New Cairo may take a little longer for a few months: Authorities have shut several roads in New Cairo for two months due to the construction of the monorail, according to state news agency MENA. Baqi Zaki tunnel on southern Road 90, the Al Mushir ramp on Road 90 heading towards Maadi, and the entrance to the southern Road 90 coming from Maadi via the Ring Road are all affected.

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HAPPENING TODAY-

Prime Minister Moustafa Madbouly is in the UK to attend the funeral of Queen Elizabeth II on behalf of President Abdel Fattah El Sisi. The prime minister attended a reception hosted by King Charles III and Queen Consort Camilla for world leaders at Buckingham Palace on the eve of the funeral yesterday.

The funeral is one of the big stories in the foreign press this morning: Reuters | AP | Washington Post | FT | BBC | The Guardian.

Shoukry in New York for UN General Assembly session: Foreign Minister Sameh Shoukry is in New York to participate in the high-level meetings ahead of the UN General Assembly session. The general debate for the 2022 session will take place from Tuesday, 20 September to Monday, 26 September.

Indian Defense Minister Rajnath Singh is in Cairo for a three-day visit focused on bolstering defense ties.

HAPPENING THIS WEEK-

The Central Bank of Egypt will meet to discuss interest rates on Thursday, and the signs are pointing towards a third hike of 2022. Six of seven analysts and economists surveyed in our regular poll expect the Monetary Policy Committee to raise rates as inflation rises and the EGP continues to weaken.

Make that seven of eight: HC Securities sees the central bank raising rates by 100 bps on Thursday and another 100 bps in the November meeting due to Egypt’s deteriorating external position and expectations for inflation to accelerate in the coming months.

Intellectual property strategy coming this week: Egypt will launch its intellectual property strategy on Wednesday. World Intellectual Property Organization (WIPO) Director-General Daren Tang will make an appearance at a ceremony being put on to launch the program.

FURTHER AFIELD-

HSBC is hosting an energy transition webinar series next Tuesday-Thursday, 27-29 September. The series will look at the “latest climate analysis in relation to the global energy market and transition to net zero” in six different sessions covering energy security, what is required to ensure the success of COP27, financing and investment needs for the energy transition, and the scaling up of renewables in the region, among other topics. You can register for the series here.

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

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FACT CHECK- Al Baraka Bank denies plans to take over First Investment Development Company: The bank said reports that we picked up from local media yesterday of plans to acquire 100% of the company were “completely untrue” in a statement (pdf) sent to the bourse. First Investment Development Company also refuted the news in a separate statement (pdf), saying it is not in any official talks over a sale.

DATA POINT- The Suez Canal Authority (SCA) expects an additional USD 700 mn in annual revenues thanks to the 15% hike in transit fees for most vessels crossing the canal starting January 2023, SCA Chairman Osama Rabie told CNBC Arabia.

People will be able to pay government dues of EGP 4k and above at some 4k post office branches and 38 banks, after the cabinet reduced the existing EGP 10k minimum, according to a statement.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Corporates and organizations providing scholarships to Egyptian students pursuing undergraduate and graduate degrees locally or abroad typically require students to work here in Egypt for at least two years after graduation. We look at how these organizations implement the requirement, and whether students actually abide by this stipulation.

The EGX is in “serious talks” with five or six private sector companies to list on the bourse, new EGX boss Ramy El Dokany told Bloomberg Asharq. He said the negotiations are at an “advanced stage” and came on the back of the bourse’s moves to simplify listing procedures.

REMEMBER- Companies now have longer to meet the EGX’s listing requirements and are able to temporarily list shares before getting approval from the Financial Regulatory Authority under changes introduced last week to boost liquidity on the bourse.

What kind of companies can we expect? El Dokany said that petrochemical, energy, fuel, and fertilizer companies are best suited to IPO amid the current turmoil in the global economy.

Liquidity is key for foreign money: “To be able to attract foreign investments, we have to first bolster the confidence of the local investor and raise liquidity in the market … this will increase listing and IPOs in the bourse,” he said.

But so is a stable global economic environment: Trading volumes have been anemic for most of this year after foreign investors pulled back from Egypt and other emerging markets on the back of the war in Ukraine. The benchmark EGX30 index has fallen more than 18% this year, leading to the postponement of at least two IPOs and forcing the government to rethink its privatization plans, which at the beginning of the year envisaged as many as 10 state-owned companies selling shares on the bourse.

The bourse is turning to state-owned institutions: The EGX has held talks with a number of state-owned institutions about increasing their investments in listed-companies. Egypt Post, Misr Ins. Holding and other ins. companies have all been involved in meetings, which come as the bourse tries to find ways of boosting trading volumes.

The government is now trying to reboot its privatization program with the listing changes and a new pre-IPO fund set up by the Sovereign Fund of Egypt (SFE) earlier this month. The fund will offer stakes in state-owned companies to strategic investors and sovereign funds ahead of listing them on the bourse, and is expected to announce the first batch of companies within the next month.

SUEZ IPO COMING END OF 2022?

The Suez Canal Authority (SCA) will IPO the Canal Mooring & Lights Company on the EGX at the end of 2022, SCA Chairman Osama Rabie told CNBC Arabia yesterday. The authority plans to offer 10-15% of the company to investors, he said, without providing further details. Rabie said in August that the authority was planning to list three of its companies on the bourse before the end of the year.

EGX WATCH: Egyptian shares suffered their biggest single-day loss since early July yesterday amid growing investor concerns about global growth. The benchmark index fell 3.1% during trading yesterday to reach its lowest level in seven weeks, leaving it down more than 18% year-to-date. The broader EGX70 index was harder hit, losing 6.8%.

Leading the declines: The sell-off was broad-based, with only five of the 30 companies in the EGX30 finishing in the green. Fawry shares were hardest hit, ending the day 9.1% in the red and leaving them down more than 48% since the start of the year. GB Auto (-8.7%) and Heliopolis Housing (-8.4%) also suffered heavy losses.

Reversing the rally: The EGX30 has now fallen 6.4% across a four-day losing streak, paring much of the gains seen in recent weeks. The index has staged a modest recovery over the past 2.5 months after hitting its lowest level since November 2016 in early July.

It wasn’t just us: Gulf stocks also fell yesterday as investors priced in the impact of a global recession on oil prices, which earlier this month dropped to the lowest levels since the start of the war in Ukraine. Saudi Arabia’s benchmark index fell 2.2% and shares in Qatar ended the day down 1.2%.

Putting the climate crisis into perspective: As we near COP27 in November — seven years after the Paris Climate Agreement was signed — many of the fundamental issues are yet to be ironed out. The dust has yet to settle on everything from who bears responsibility, to who foots the bill for financing, to the debate about adaptation vs mitigation.

Perhaps there is no one better to help us get a sense of all of this than Egypt’s UN high-level climate champion, Mahmoud Mohieldin, whose work on these issues predates the Paris agreement, and will continue to drive the agenda for global climate action in the coming years. Prior to his selection as Egypt’s climate czar, Mohieldin — who is also a special envoy for the UN secretary-general and an executive director at the IMF — had been the World Bank’s senior vice president for the 2030 Development Agenda, where he helped shape the 17 sustainable development goals — the global metric for development.

In Part 1 of our two-part interview, Mohieldin explains the fundamental challenges when it comes to the climate crisis, and provides a sobering reality check on just how far off the mark we are.

KEY TAKEAWAYS-

• Emerging economies bear no real responsibility for climate change, but are the most impacted by it;
• Developed economies are falling far short of the USD 100 bn per year they’ve collectively pledged to help developing nations mitigate and adapt. The real gap, he says is in the USD tns, not USD bns;
• Reducing the climate change debate to “mitigation” suits the interests of developed economies;
• Mohieldin took the job as UN high-level climate champion because it meshes two of his passions: Crisis management and sustainable development.

ENTERPRISE: Let’s go back to the beginning. How did you wind up in this role?

MAHMOUD MOHIELDIN: This goes back to a process that started in Marrakesh a year after the Paris Agreement. Marrakesh is where the international community really recognized the importance of non-state actors — any entity or agency that is not part of the formal negotiation track. That includes the business community, civil society organizations, academic institutions, local and regional governing bodies, et cetera. So it’s a very broad tent of participants.

Within that, my focus is very much on the implementation side, on turning into reality everything the state actors agree on. I’m the seventh to hold this post, and there are two champions at a time. So I’m doing this work with the champion from COP26, Mr. Nigel Topping, and next year I should be doing this job with the climate champion selected by the UAE.

ENTERPRISE: Why was it the right challenge for you? Why was it appealing to you personally?

MM: Because it’s about a crisis and about development. It’s as simple as that.

I’ve been tackling crises and challenges throughout my professional life. Some of an economic nature, with challenges of development — challenges that were financial, economic and social — and now, climate.

And climate is the ultimate crisis. We do come across occasional short-term or midterm-crises — a financial crisis, a debt crisis, or even a pandemic — but the climate crisis is long-term. It is very deeply rooted in history, going back to the Industrial Revolution. And the stakes are so very high.

It also relates to my years at the World Bank, where I worked on the 17 sustainable development goals (SDGs). My focus has always been on implementation, on finance, on monitoring data systems and helping the work at the country level and globally. When I was offered the chance to do this work, I said, “This is a great chance to get into this area that had its own dynamics, but was very much integrated in the sustainable development framework that I had been working on.”

And it has many links with other problems. So while climate change is causing more poverty, more vulnerability, loss of economic potential, and negatively impacting social development … the solutions to the climate agenda are about investment, which I have been doing and implementing for many years.

Solutions to climate challenges are not just about massive investment in mitigation, in renewable energy, in tackling the impact of the crisis through adaptation. It requires more investment in human capital and resilience at large. Others take a much more narrow or “reductionist” approach to climate challenges.

ENTERPRISE: What do you mean by reductionist?

MM: Sustainability means handling different aspects of economic and social problems, including the political economy dynamics. This is the beauty of the structure of SDGs. You need to end poverty and you need to improve equity or equality in society. That will only happen through investment in health, education, infrastructure, digital infrastructure and resilience (including climate and biodiversity). If you take it this way, it’s about an inclusive and balanced approach to the challenges facing people and our planet.

A reductionist approach is telling you something completely different. It comes from a group of countries that have already benefited from their social and economic development. They have higher education levels, they have satisfactory health services, their economic progress and development brought them high living standards. These countries have hit the critical minimum of economic, social and human development. So, what’s left for them but the climate crisis?

That reductionist approach, reduces the whole discussion about sustainability to mean decarbonization and emissions and taking as well measures like carbon pricing as a guiding star for their activities. This fits nicely with their own priorities for economic development going forward.

ENTERPRISE: Who are these countries?

MM: Let’s just say the very advanced members of the OECD — the club of rich countries.

ENTERPRISE: So what’s a holistic approach, then?MM: Let’s start with Africa, Latin America or parts of East Asia. They haven’t really contributed to the mess we’re in, but they’re most exposed to the shocks. All of Africa is responsible for maybe 3-4% of global emissions, but water management systems are being compromised. Climate change has a severe impact on coastal areas. They’re exposed to severe weather. So when we talk about climate in developing economies, we need to do it in a comprehensive program. It needs to address a ‘typical’ African country that may suffer more from poverty, inequality, from the quality of education, and from inadequate health services and infrastructure.

Tap or click here to catch the rest of the interview in this morning’s Enterprise Climate here.

Nclude hits USD 105 mn second close: Local and international investors have committed around USD 20 mn to Global Ventures’ Nclude’s second funding round, bringing the fintech-focused VC fund’s total capital to some USD 105 mn, a source close to the matter told Enterprise. The source declined to name the contributing investors at this time.

About Nclude: Dubai-based Global Ventures partnered with state-owned banks and firms to reach a first close of USD 85 mn on the Nclude fund in March. Banque Misr is acting as an anchor investor, while NBE and Banque du Caire are on board as strategic investors, and e-Finance’s parent company e-Finance Investment Group also paid in to the initial raise. Nclude targets early- and growth-stage fintech startups based in Egypt, as well as regional firms looking to expand here. It has already invested in local startups including Khazna, Paymob, Lucky, and Mozare3.

By Zoe Knight

The arrival of COP27 and COP28 to the Middle East makes our region the focus of international efforts to implement energy transition as part of the shift to a net zero carbon global economy.

The example the Middle East sets will be a guiding light for others, because if the world’s most important region for traditional energy production can get the transition right, it means everyone can.

Access to capital on a global scale is critical, both to fund emerging green energy solutions, and to ensure that existing energy and industrial giants have the support needed to transition their own businesses to net zero.

Saudi Arabia plans to scale up the share of gas and renewables in its energy mix to 50% each by 2030. The UAE has pledged to improve energy efficiency by 40%, reduce emissions from the energy sector by 70%, and increase the share of renewables in the energy mix to 44%. And Egypt aims to make 42% of the country’s energy mix renewable by 2035 while cutting energy subsidies.

The good news is that investment in renewables across the region is gathering pace. The Benban solar power plant in Egypt — the largest in Africa and fourth-largest in the world — is an example of how we’ve supported a client, FAS Renewable Energy, in their commitment to support Egypt’s transition to a greener economy.

In addition, funding to decarbonize existing technology and industry, develop green hydrogen and its derivatives has enormous potential for the Middle East. Projects are already under way in Oman, UAE, and Egypt in the Suez Canal Economic Zone (SCZone).

Delivering a net-zero outcome is going to require significant progress and acceleration of carbon removal technologies, such as carbon capture, utilization and storage (CCUS). The UAE’s ADNOC has pioneered CCUS in the Middle East at its Al Reyadah plant in Abu Dhabi, the first in the world to capture carbon from the iron and steel industry. We hope more such facilities will follow across the region.

HSBC Egypt recently signed an agreement with other energy transition leaders to decarbonize existing oil and gas downstream facilities, with the ambition to provide execution, technology, and financing expertise to support the decarbonization of select downstream facilities across the country, aligning plans with Egypt’s leadership of COP27.

Designing and creating energy and industrial systems that offer both climate security and energy efficiency is complex, requiring intense collaboration. I believe that HSBC, with our global scale and the nature of our business — providing finance to enable economic and social development around the world — can deliver this convening power.

The hard truth about transition is that huge access to capital is required. The Energy Transitions Commission (ETC) estimates around USD 4 tn per annum average capital investment is needed in energy, built environment, and harder-to-abate sectors such as shipping, steel, and cement, to achieve net zero by 2050.

That capital must come from a variety of sources. So must the ideas for making transition real. HSBC’s net zero strategy is centered around supporting clients to make the transition, and I believe we can make the strongest impact by helping develop tailored solutions for reducing emissions, taking into account the unique needs of industries, businesses and geographies.

I invite you to join the conversation on what is needed to make this happen by registering for our Energy Transition Webinar series, which starts next week. Join us as we discuss the latest climate analysis, the global energy market and progress on transition to net zero. Hear from policymakers, industry experts, businesses and climate tech players, helping to facilitate the transition of the energy system and wider climate goals on the route to COP27 and beyond.

Zoe Knight (LinkedIn) is HSBC’s Group Head, Centre of Sustainable Finance and Head of Climate Change Middle East, North Africa and Turkey

Egypt wants to generate USD 8.5-10 bn in natural gas revenues in FY 2022-2023, up from USD 6.5 bn last year, Oil Minister Tarek El Molla told Al Arabiya (watch, runtime: 2:02).

El Molla cited the government’s electricity rationing strategy as being a key driver for the higher expected revenues, telling the broadcaster that Egypt was able to make additional shipments in August due to lower domestic consumption. “Temperatures dropping in September and October would raise our electricity rationing capabilities, and therefore [allow] for more gas to be sent to liquefaction plants [for exports],” he said. Egypt has made two additional gas shipments since the decision to ration electricity consumption came into force last month, Prime Minister Moustafa Madbouly said last week.

Higher spot prices are helping too: Bloomberg forecasts Egypt to export 8.2 mn tons of LNG this year due to higher spot prices in Europe. Gas prices in Europe have surged on the back of the war in Ukraine, which has seen Russia cut gas flows in response to financial and energy sanctions imposed by the EU and US.

Introducing the new and improved PPP Act: Prime Minister Moustafa Madbouly yesterday signed off on amendments to the executive regulations of the PPP Act aimed at making it easier for private sector firms to partner with the government on key projects. The regulations were published in the Official Gazette yesterday, after the cabinet greenlit them earlier this month.

Among the important changes:

• Going solo: Companies are no longer required to be part of a consortium to bid for projects and can bid individually;
• The right to appeal: Companies who have their pre-approvals rejected can now appeal the decision;
• Taking initiative: Companies can now propose new projects provided they handle the feasibility studies and the financing.

REMEMBER- The government’s plans to reduce state involvement in the economy are expected to see it sell down assets to private sector firms via PPPs. Industries including electric and gas utilities, pharma, and education have been pushing for more involvement through a more efficient and flexible PPP framework. Mobilizing private sector investment in state-funded mega-projects is also on the IMF’s wishlist amid ongoing talks with the government on an assistance loan.

Qatar, Transport Ministry to conduct feasibility studies for Egypt port investment: Maha Capital, the investment arm of Qatar Investment Authority (QIA), has signed an MoU with the Transport Ministry to explore investment in Egypt’s container terminals, the ministry said in a statement yesterday. Under the agreement, the two sides will conduct feasibility studies for “joint projects in ports” such as the West Port Said container terminal, the statement said, without disclosing further information.

This is the second agreement of its kind in less than a week: The Sovereign Fund Egypt and QIA last week signed an agreement on ports during President Abdel Fattah El Sisi’s visit to Doha. Neither the Egyptian or Qatari governments have disclosed the details of the agreement. Qatar has pledged to invest USD 5 bn here to help shield us from the fallout from the war in Ukraine.

Islam Mohamed Abdel Fattah has been appointed chairman of Alexandria Container and Cargo Handling (ACCH), according to an EGX disclosure (pdf).

ACCH is now majority-owned by Gulf sovereign funds: The EGX-listed firm recently saw a change in shareholders after the Saudi and Abu Dhabi sovereign funds acquired minority stakes as part of a USD multi-bn buying spree on the EGX. The Saudi Public Investment Fund (PIF) purchased a 20% stake in Alex Containers for EGP 3 bn, while Abu Dhabi fund ADQ snapped up a 32% stake for USD 186.1 mn. The Holding Company for Maritime and Land Transport was the reported seller to the PIF, while Alexandria Port Authority reportedly sold the stake to ADQ.

Two of the big themes of 2022 — climate and the economy — featured on the airwaves last night following the deadline of the Smart Green Governorates initiative and ahead of the Central Bank of Egypt’s policy meeting later this week.

BUT FIRST- We’ll soon know which companies will be redeveloping the NDP HQ: The Sovereign Wealth Fund of Egypt (SFE) will announce the winner of the contract to redevelop the former National Democratic Party headquarters “in the coming weeks,” SFE head Ayman Soliman told Kelma Akhira’s Lamees El Hadidi last night (watch, runtime: 10:50). It remains unknown which companies are vying for the project, though Soliman said in December that five consortiums were interested in submitting bids. Bidding for the tender closed at the end of June.

More macro + policy analysis: Economist Medhat Nafea made his second appearance on the airwaves in two days, joining Ala Mas’ouleety to discuss central bank independence and the upcoming economic conference (watch, runtime: 3:06 | 3:30). The Central Bank of Egypt’s monetary policy “hasn’t been successful” in recent years due to “conflicting” decisions, Nafea said, stressing the importance of maintaining central bank independence. Meanwhile, former prime minister Hazem El Beblawy was back to warn about Egypt’s rising debt levels and called on policymakers to control it (watch, runtime: 7:16).

The expiration of yesterday’s deadline for the Planning Ministry’s Smart Green Governorates initiative got coverage from Kelma Akhira (watch, runtime: 1:39). The initiative, which will map green projects nationwide, gives prospective green projects a platform to raise investments at COP27 in November. The 5.4k submitted bids will be whittled down to 18, which will be presented at the summit in November, El Hadidi said. Emad El Din Adly, the head of the Egyptian Sustainable Development Forum (ESDF) and a member of the jury for the initiative, phoned in to the show to discuss the process (watch, runtime: 6:29).

It’s a mixed bag in the foreign press this morning, with no one story dominating the conversation. Here are some of the stories being picked up internationally:

• Our import woes are making headlines: Egypt and Tunisia are having a hard time filling the shelves as the FX shortage impacts the availability of certain foods and consumer goods. (The Economist)
• Controversy over rumored Egypt-KSA-Greece World Cup bid: Rumors that Egypt, Saudi Arabia and Greece will launch a bid to host the 2030 World Cup are already generating controversy, with Football Supporters Europe and Human Rights Watch criticizing the idea on human rights and logistics grounds. (Politico)
• Farmers embrace agtech: Government initiatives to boost food security and local startups like Mozare3 are introducing local farmers to new industry tech. (Quartz Africa)

The European Investment Bank (EIB) could lend EUR 100 mn to the Environmental Affairs Agency for on-lending to public and private industrial companies to green their manufacturing processes, according to the bank’s website.

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

• Egyptian Company for Pipes and Cement Products (Siegwart) is set to open an EUR 8 mn railway sleepers factory this October, with an annual production capacity of 500k high-speed railway sleepers. (Statement).
• The new Egyptian-British mint in the Suez Canal Economic Zone will cost EGP 2 bn to set up. The facility will produce 500 mn coins annually, with 50% directed for export. (Cabinet statement)
• Chinese chemical firm Tianyi Chemical will build a bromine plant in the Suez Canal Economic Zone that is set to eventually produce 30k tons of bromine a day. (Statement)
• Amazon Egypt head Omar Elsahy met with the head of the General Authority for Investment and Freezones to discuss increasing investment. (Statement)
• Forty-six pre-trial detainees were released over the weekend, including human rights lawyer Haitham Mohamadein. (Youm7 | AP)