AM — EFG Hermes’ outlook is “extremely bullish” — especially in the GCC.

Good morning, wonderful people, and hello from day two of the EFG Hermes One on One investor conference in Dubai. We try reasonably hard around here not to fall back on hyperbole, but: The excitement in the air is palpable. Investors and issuers are delighted by the fact that they’re finally speaking face-to-face after more than two years of suffering through Zoom / Teams / Google Meet / Webex / whatever.

Among the highlights yesterday: EFG’s live research poll, the only one we know of in frontier emerging markets. The poll capped an opening session that included an on-stage interview with DFM boss Helal Almarri and opening remarks from our friend Karim Awad, group CEO of EFG Hermes Holding. We have a rundown on the poll in this morning’s news well, below, and we’ll have more from the conference for you tomorrow.

WATCH THIS SPACE #1- Egypt-IMF talks will “be completed soon,” says senior IMF official. Loan talks between Egypt and the IMF are “in continuous progress,” according to Jihad Azour, IMF director for the Middle East and North Africa, who told Bloomberg Asharq that they will be completed “soon.” Azour did not indicate how much we will be borrowing, saying only that the amount will be set “when the negotiations are over.” Talks between the fund and Tunisia on a similar type of facility are also nearing an endgame, Azour said.

Six months and counting: Egypt has been in negotiations with the IMF since March in a bid to secure financial assistance following the economic shocks brought on by Russia’s war in Ukraine, rising interest rates in advanced economies, and a off in global-risk financial markets. Neither the IMF nor Madbouly government officials will say how much we’re looking for, though officials including Finance Minister Mohamed Maait have said the sum will be significantly lower than the USD 15 bn that some analysts have forecast.

With or without an IMF loan, EFG Hermes reckons Egypt has covered most of its funding needs for the next 18 months: Egypt should be able to cover most of its external financing needs for the next 18 months, EFG Hermes Head of Research Ahmed Shams El Din told Asharq from Dubai. Shams El Din said we should be able to bring in USD 15-20 bn through tourism receipts, foreign direct investment, and other sources of foreign currency, including the Suez Canal. Securing an IMF loan would be a “certificate of quality” for the economy, he added.

WATCH THIS SPACE #2- The US might have something to say about our plans to link with Mir: Egypt could risk running afoul of Washington’s sanctions regime on Moscow if it moves forward with plans to allow Russia’s Mir payment system to operate in the country. The US Treasury last week published guidance warning financial institutions against using the payment system and said that it could impose sanctions in response.

The message has already caused one overseas bank to rethink its plans: Turkey’s largest private bank, Isbank, has stopped processing payments through the system while it assesses the US’ warning, it told Bloomberg.

SOUND SMART- We’re not the only ones looking to link up with Mir. In addition to Turkey, the system is being tested in the UAE.

HAPPENING TODAY-

Live, from New York, it’s the UN General Assembly: Foreign Minister Sameh Shoukry is in the Big Apple for the UNGA. Shoukry started high-level talks in the US yesterday, speaking with officials including the foreign ministers of India, Cyprus and the Netherlands, and the US envoy to Yemen.

The general debate starts today and finishes next Monday: President Abdel Fattah El Sisi will deliver an address at the event. It’s not clear when, though: The full schedule is still TBA.

Transport Minister Kamel El Wazir is in Germany for talks with industry players and heads of German companies working on projects in Egypt. El Wazir toured Siemens’ plant in Krefeld, where trains for the high-speed railway project will start being manufactured in November, the ministry said in a statement.

The Federal Reserve kicks off its two-day policy meeting today amid rising economic uncertainty and market volatility surrounding the pace at which it’s raising interest rates. The central bank is widely expected to announce a third successive 75-bps hike when the meeting wraps tomorrow on the back of last week’s disappointing inflation data. An increase of this magnitude would take the Fed Funds Rate to its highest level since March 2008.

FOR TOMORROW-

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

LATER 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.

THE BIG STORY ABROAD-

Queen Elizabeth II’s funeral yesterday is dominating the headlines in the global press this morning: Reuters | AP | BBC | NYT | Washington Post | Bloomberg | FT.

MEANWHILE- Sri Lanka to face its creditors: Sri Lanka will present to its foreign creditors on Friday its plans for restructuring its debt and the objectives of the USD 2.9 bn bailout agreed with the IMF last month, Reuters reports. Sri Lanka defaulted in May on its debt for the first time in its history, plunging the country into a severe financial and economic crisis. The country owes more than USD 50 bn to external creditors.

CIRCLE YOUR CALENDAR-

Our friends at HSBC are 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.

WANT MORE on the region’s energy transition? Catch this op-ed in EnterpriseAM by HSBC’s Group Head, Center of Sustainable Finance and Head of Climate Change Middle East, North Africa and Turkey, Zoe Knight on to the capital that’s needed to help drive that shift.

A Spanish business delegation will be in town next Tuesday and Wednesday (27-28 September) for the Egypt-Spain Multilateral Partnership Forum, organized by the Spanish Institute for Export and Investment, according to a press release (pdf). The two-day conference will include seminars and panel discussions on trade and investment in transport, energy, and water with Egyptian ministers and representatives from government bodies, alongside officials from international financing institutions and Spanish Secretary of State for Trade Xiana Méndez Bértolo. The agenda for the conference is available here (pdf).

GITEX Global is being held at the Dubai International Convention and Exhibition Center from 10-14 October. The event, which is running under the theme “enter the next digital universe,” will bring together players in Big Tech to discuss AI, cybersecurity, blockchain, the metaverse, and more.

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: Private solar stations could cut down on electricity costs for homeowners and small businesses, but are upfront costs and a lack of space or permissions prohibiting them from making the switch?

EFG Hermes Group CEO Karim Awad welcomed more than 655 global investors as well as CEOs, C-suite execs and IR folks from more than 200 companies spanning from Nigeria to Vietnam and beyond, on the second day of the EFG Hermes One on One investor conference in Dubai. “Nothing beats the warmth of face-to-face human interaction,” Karim said. Everyone in the finance industry — issuer, investor and banker alike — has suffered through a lifetime’s worth of virtual meetings since covid-19 kicked off in March 2020.

Awad is “extremely bullish” on the countries in which EFG does business — and singled out the Gulf Cooperation Council countries. Business growth in the GCC is being driven not just by high oil prices, but by “strong and pragmatic leadership” that is diversifying economies and transforming stock exchanges with globally compelling transactions, he said.

EFG Hermes has changed massively since we all last gathered in Dubai in March 2019, Karim noted, pointing to the group’s acquisition of aiBANK in Egypt, valU growing to the point that it attracted investment from Amazon, and the investment bank’s involvement in IPOs including Dubai Electricity and Water Authority (DEWA), ADNOC Drilling, Borouge, Ali AlGhanim & Sons, and ACWA Power, among others.

KEY TAKEAWAYS from EFG Hermes Research’s “The Consensus 2023,” the only live research poll we know of in frontier emerging markets. Participants had 10 seconds to vote live on each of 10 questions. The results:

• 69% of respondents see the US Federal Reserve raising rates another 1.5 percentage points or more during the current cycle.
• 46% of respondents believe Brent crude will be at an average of about USD 80 / bbl in 2023 — and 41% see it averaging USD 100.

^^ Why this matters: Interest rates and oil are central themes for the region, EFG Hermes Research said in a note to clients yesterday after the poll.

• The markets likely to give the best return in 2023 (in USD terms): KSA (39%), followed by Egypt (21%) and the UAE (17%).
• Investors were evenly split on what asset class they’d choose to buy and hold for three years: 29% tap emerging markets equity ETFs, while the same number would hold an S&P 500 equity ETF. In third place: Gold, at 19%, with US 10-year bonds (13%) and a basket of cryptocurrencies (11%) bringing up the rear.
• The best performing US stock in 2023? That would be Amazon, which was tipped by 27% of respondents, narrowly edging out JP Morgan (24%), Tesla, Exxon, and Walmart.
• The biggest source of risk for your business over the next year: A dead heat between finding good people (23%) and rising interest rates (24%).

Tap or click here to see the full poll results (pdf)

ALSO YESTERDAY- DFM boss Helal Saeed Almarri did an on-stage interview with EFG Hermes Research Head of Strategy Simon Kitchen. Almarri wears many hats, including that of director general of Dubai’s Department of Economy and Tourism. He’s smart, well-spoken and absolutely worth hearing from on the importance to the private sector of clear, transparent and dependable regulatory frameworks, among other issues.

The One on One continues through Thursday. We’ll be bringing you daily coverage in EnterpriseAM.

The role of the private sector in tackling the climate crisis: On a global scale, the world has barely made a dent in the climate finance target of USD 100 bn — bearing in mind the true bill is actually in tns of USD — UN High-level Climate Champion for Egypt Mahmoud Mohieldin told us in the first part of our two-part interview. With so much still left to do, the big questions are: How can we tackle this daunting funding gap? And whose responsibility is it to fix: governments or the private sector?

In this second part of our talk, Mohieldin tackles the hard questions on climate finance: from the role of the private sector — and especially mid-sized business — vs the role of governments, to climate debt vs climate investment. He also gives us a sneak preview on what to expect during COP27.

MISSED PART 1 OF OUR TALK? You can read it here.

KEY TAKEAWAYS-

• The private sector is best-positioned to lead on “mitigation” (cutting our collective carbon footprint) while governments need to lead on “adaptation” (tackling the fallout, including the washing away of coastal areas and how to keep cities habitable);
• More debt is not the answer — developed economies need to invest in mitigation and adaptation in EM;
• COP27 is just the beginning — he will work through COP28 with whoever the UAE presidency appoints as its champion;
• Mohieldin provides a day-by-day overview of what you can expect if you’re attending COP for the first time.

ENTERPRISE: What’s the role of the private sector versus that of the state in plugging the financing gap?

MM: With the climate gaps being in the USD tns — not USD bns — the private sector isn’t the singular answer, but it has a big role.

The private sector more or less knows its way on how to engage in mitigation, decarbonization, solar projects like in Benban in Egypt or in Ouarzazate in Morocco. Private businesses are investing in wind farms, and in the case of Egypt, in green hydrogen and ammonia. Those are all private-public partnerships (PPPs). And I’m saying private first because the private sector brings the technology and the finance while the public sector provides land and the regulatory framework.

ENTERPRISE: Does the private sector have a role to play in adaptation?

MM: I think it’s struggling there. What are the commercial benefits? They’re not as clear in all aspects of the adaptation work. But if you look at the nexus of energy, water, food and agriculture, I think you can see room for the private sector to do nicely on adaptation.

ENTERPRISE: What about the state?

MM: Well, that’s the elephant in the room. Public finance in developing economies is responsible for a huge part of the climate action agenda, especially in adaptation, and also in mitigation, where we see all of this investment in solar, wind and green hydrogen. That’s either public or through PPPs.

I would say that mitigation needs really to be given more to the private sector to lead, domestic and foreign, under the regulatory framework of the public sector with some room for development finance institutions.

But adaptation is mainly the responsibility of state budgets. My argument here is that we need full alignment of the state budget with sustainability at a minimum. This then needs to progress to a shadow budget for sustainability or, on a great day, an SDG-sustainability budget that includes infrastructure, health, education, resilience, governance. Anybody who benefits from the state budget should be aligned with the SDG priorities for the current challenges and for the future.

ENTERPRISE: You spoke earlier about the need to do all of this without adding to debt…

MM: Absolutely. More than 60% of finance for climate action is coming from debt instruments. I’m concerned that just c. 12-13% of this debt-based finance is concessional. In a world that faces a variety of debt challenges, with rising cost of investment, with rising interest rates. We need debt-reduction mechanisms and the emphasis instead needs to be on investment.

Look, it’s not fair to ask countries that were not responsible for the deterioration of the climate to borrow commercially. I’ve been saying this for years, and the simple reality is that today countries of the developing world are one of three things: Those with a debt management problem; those with a debt management crisis; and those with a debt management catastrophe. The reality is that debt issues can be handled and there are technical and innovative solutions. What I’m saying is: Don’t add to the problem further.

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

Yas Holding relaunches its bid to acquire Alex Medical: The UAE’s Yas Holding (formerly known as Emirates Advanced Investments) appears to be reentering the bidding war for Alexandria Medical Services. The company has upped the per-share price of the offer it made for a majority stake in Alex Medical last year by some 10.5% to EGP 48.62 per share, the Financial Regulatory Authority (FRA) said in a statement (pdf) to the EGX yesterday. The offer values Alex Medical at some EGP 757 mn by our math — and comes in some 2% higher than the mandatory tender offer for Alex Medical currently in play from the Tawasol Holdings-LimeVest consortium.

REMEMBER- We’re expecting Alex Medical’s board to say what it thinks of another acquisition offer today. The Tawasol-LimeVest consortium is offering EGP 47.67 a share as it looks to purchase up to 74% of Alex Medical, relaunching its bid from last year at the same valuation, with an adjustment in the pre-share price to account for the capital increase the healthcare provider made in the interim. Tawasol already owns 26% of Alex Medical, meaning the acquisition could give the consortium 100% ownership. Alex Medical’s board has said it will share its view on the consortium’s offer today, after appointing Andersen as its financial advisor to study the bid. Alex Medical’s shareholders have until 27 September to weigh in.

Will Tawasol-LimeVest up its offer? The Tawasol-LimeVest consortium is still deciding how to respond to the amended offer from Yas, a source close to the transaction tells Enterprise. The Yas offer is pending healthcare-sector specific approvals and the greenlight from the FRA, according to the regulator’s statement.

Who’s selling? Abu Dhabi Commercial Bank (ADCB) wants to sell its 51.5% stake in the company that it acquired from NMC Healthcare’s disgraced founder, BR Shetty. Another 9.8% is owned by an individual shareholder.

Advisors: Al Ahly Pharos is reportedly Yas’ financial advisor on the transaction, according to sources quoted by Hapi Journal at the time the offer was launched. Prime Holding are the brokers on the Tawasol-Limevest offer and Zaki Hashem and Partners are acting the consortium’s legal advisors.

In context: Yas and the Tawasol-LimeVest consortium had both put in offers for Alex Medical in June last year, amid a bidding war for the healthcare provider that at its peak saw eight companies and consortiums signal their interest before it fizzled out without a sale.

Egypt and Danish shipping giant Maersk could cooperate on a USD 15 bn project to produce clean fuel for ships, Ittihadiya said yesterday following talks between President Abdel Fattah El Sisi and Maersk CEO Soren Skou. The statement said El Sisi directed the government to start working with the company to set up a national network to produce and distribute green energy and fuel for ships, providing no further details on how the two sides will cooperate. The project is set to create more than 100k jobs, according to the statement.

What they said: Egypt could be a main hub for supplying ships with green fuel in the region, Skou said, according to the statement by Ittihadiya.

REMEMBER- The government is aiming to position Egypt as a regional hub for green energy, with the government making moves to capitalize on investment momentum ahead of COP27. Major global companies have signed USD 18 bn worth of preliminary agreements to establish green ammonia and hydrogen projects in Ain Sokhna this year.

This is Maersk’s second venture in Egypt in two months: Maersk signed an agreement with the Suez Canal Economic Zone (SCZone) to invest USD 500 mn to expand the Suez Canal Container Terminal (SCCT) in East Port Said port in August.

The news was picked up internationally: Reuters.

Angel investment group Cairo Angels will reach a third and final close of USD 5 mn on its micro-VC fund this quarter, CEO Aly El Shalakany (LinkedIn) told us, confirming news first published by Amwal El Ghad. The fund reached its second close earlier this year, after closing its first round in late 2021, El Shalakany said, without mentioning the size of either round.

About the fund: The Cairo Angels Syndicate Fund (CASF) was launched last year with the aim of investing USD 100-250k in 20 startups in the Middle East and Africa over two and a half years, with a focus on Egypt, the UAE, KSA, Nigeria, Kenya and South Africa.

CASF has so far deployed eight of those 20 investments: The fund has invested in scientific research startup Nawah Scientific, edtech startup Orcas, Kenyan fintech startup FlexPay, fintech startup Finclusion Group, and Nigerian BNPL fintech startup CredPal. The remaining three investments are yet to be announced, El Shalakany told us.

More investments earmarked for 2022: The fund will invest in three more startups before the end of the year — a local fintech firm, an Egyptian agritech company, and a third startup that has yet to be chosen, El Shalakany said, without disclosing any further details.

Another fund already in the works: Cairo Angels is looking to launch its second, larger fund before the end of the year, El Shalakany said, without specifying figures. It will have a very similar strategy to CASF, with a focus on early-stage startups across Egypt, Africa and the Middle East, he added.

No single story dominated airwaves yesterday, with talking heads devoting coverage to an assortment of issues from Egypt’s debt levels to more details on the Smart Green Governorates initiative.

The Smart Green Governorates initiative received more coverage, with the initiative’s coordinator, Hisham Badr, telling Kelma Akhira (watch, runtime: 2:27) that 162 projects selected out of 5.4k bids would be presented at a national conference by the end of October for the private sector. “We will then select 18 projects represented under the initiative’s six categories to be presented at COP27 in November to vie for [international] funding,” he said.

Ala Mas’ouleety’s Ahmed Moussa took it on himself to assure citizens that the government’s rising debt levels remain safe, despite investor unease about the possibility of default. A day after former PM Hazem El Beblawy appeared on his show to warn about the country’s indebtedness, Moussa sang from the same hymn sheet as the Finance Ministry, which yesterday released an infograph to fight what it called “false rumors” about the country’s debt levels (watch, runtime: 11:25).

It’s a slow morning in the international press as far as Egypt is concerned.

Shalakany Law Office successfully defended a “major French automotive company” against an EGP 3 bn claim before a Cairo Court, the law firm said in an emailed statement. Shalakany partner Omar Sherif declined to comment on the subject of the litigation or disclose the names of the parties.

Guess who: Those looking to decode the mystery French company might look to Peugeot and its years-long legal battle with Arabia Investments Holding (AIH). AIH filed an EUR 150 mn lawsuit against Peugeot in 2018, after the French firm unexpectedly ended the 41 year-old partnership. A Cairo court in March upheld AIH’s appeal of a January 2021 ruling from an Egyptian court that it lacked jurisdiction to consider the case.

CFC to launch two technical schools to train industrial workers: Emirati fertilizer company CFC Group will establish two technical schools for heavy industries and fertilizer production at a total investment cost of EGP 70 mn, in cooperation with our friends at USAID and the Education Ministry, CFC CEO Ahmed Khalifa reportedly told Al Mal. The schools will be located in Qena and Menoufia and are set to kick off operations in the 2023-2024 academic year. CFC will earmark EGP 12 mn for the projects. CFC recently said it will invest USD 400 mn to build an industrial complex in Qena under the new joint industrial partnership between Egypt, the UAE, Jordan and Bahrain.

More polymer banknotes in the making: The Central Bank of Egypt (CBE) will kick off 2023 with the release of EGP 20 polymer banknotes, Masrawy reports, citing unnamed banking sources. The central bank introduced the first polymer notes in July with the debut of the EGP 10 note.

Egypt + India to share military tech? President Abdel Fattah El Sisi and Indian Defense Minister Rajnath Singh discussed cooperating over military manufacturing and the sharing of technologies during talks yesterday, Ittihadiya said in a statement.

Prime Minister Moustafa Madbouly attended the funeral of Queen Elizabeth II in London yesterday on behalf of President Abdel Fattah El Sisi, cabinet said in a statement.

The US would militarily defend Taiwan against an attack, US President Joe Biden has said — marking the second time the president appears to have strayed from the official US policy of not explicitly saying whether it would come to Taiwan’s defense if China were to invade the island. The Biden administration was forced to clarify that it has made no change to its policy of “strategic ambiguity” over Taiwan, after the president said the country could intervene militarily “if there was an unprecedented attack," in an interview Sunday with CBS News (watch, runtime: 00:53). Tensions have been escalating between the US and China over the status of Taiwan, with Beijing stepping up military drills around the island in response to US House speaker Nancy Pelosi’s visit last month.