AM — EGP closes at record low against the greenback

Good morning, wonderful people, and happy THURSDAY. We hope the last business day of September treats you well and, as is our custom for seven of the eight years we’ve been at this, we’re sending off the month with Green Day’s melancholic Wake me up when September ends. We hope October (and 4Q) is good to us all.

THE BIG NEWS here at home: We have dates for the Madbouly government’s economic conference. Ministers will get together with senior members of the business community 23-25 ​​October, according to a cabinet statement. Cabinet will release a detailed agenda and launch a website to receive proposals and opinions from the public next week, according to the statement. The venue is still TBD, but we figure we’re all heading to the new administrative capital for this one.

WATCH THIS SPACE- The Egypt and Qatar are edging toward their first joint business council meeting in years. After agreeing in June to revive the council, the two sides are now discussing when to hold the first meeting, cabinet said yesterday following talks between Prime Minister Moustafa Madbouly and Qatari ambassador to Egypt Salem Mubarak Al Shafi.

Remember: Qatar has pledged to invest as much as USD 5 bn in Egyptian companies as part of wider Gulf efforts to shore up our economy and provide us with vital FX. In recent weeks, President Abdel Fattah El Sisi has traveled to Doha for talks with Emir Tamim bin Hamad Al Thani and Madbouly has discussed investments with the country’s sovereign wealth fund.

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ICYMI- Did you miss the results of our Enterprise Fall 2022 Reader Survey? Your expectations that 2022 would be a good year to do business in Egypt have been dampened by global and domestic conditions — but you’re still optimistic that next year will bring a change in fortunes. What’s your view on the M&A and IPO outlook? Do you think the government is in sync with the needs of business?

^^ Tap or click here for the full rundown.

PSA #1- The last gasp of summer? The national weather service is suggesting we’re in for some warm weather through to Monday, with daytime highs of 35-38°C in the capital city and overnight lows in the 33-36°C range, it said (pdf) yesterday.

Things will then get really nice, really fast: Look for the mercury to drop to 32°C on Tuesday and as low as 28°C by next weekend, according to our favourite weather app.

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HAPPENING TODAY-

It’s the final day of HSBC’s webinar series on the energy transition: The series looks 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.

The Arab Pensions and Social Ins. Conference continues in Sharm El Sheikh, bringing together industry figures to exchange expertise on reforming and developing pension systems in the Arab region, according to a cabinet statement. Finance Minister Mohamed Maait will be among the attendees at the two-day gathering.

It’s the second and final day of the UN World Food Program and the International Cooperation Ministry’s conference on food security at the St. Regis Cairo Hotel, according to a press release (pdf). The conference is mainly focusing on the digitization of the agricultural sector, financial inclusion and social protection.

THE BIG STORY ABROAD-

No single story has captured the imagination of the global business press on this fine Thursday morning.

#1- The state of the UK economy is getting lots of ink after the central bank “took emergency action on Wednesday to avoid a meltdown in the UK pensions sector, unleashing a GBP 65 bn bond-buying programme to stem a crisis in government debt markets.” The FT and Bloomberg have more.

Want to kick the English while they’re down? Go read Janan Ganesh’s absolutely trenchant “Truss learns the hard way that Britain isn’t America.” We haven’t felt this bad for our UK friends since Brexit.

#2- Hurricane Ian has made landfall in Florida, knocking out power to more than 1.8 mn homes. It’s one of the most powerful storms to hit the United States in decades and leads the front pages of the New York Times and Wall Street Journal and is getting lots of ink from Reuters.

#3- Russia will formally annex a big chunk of Ukraine as early as tomorrow. Billboards have been spotted claiming the Donetsk, Luhansk, Kherson and Zaporizhzhia regions as Russian. “The results are clear. Welcome home, to Russia,” former Russian president Dmitry Medvedev said on Telegram. (Reuters | AP | Wall Street Journal)

ALSO WORTH KNOWING ABOUT- Iran is still simmering following widespread anti-government protests sparked by the death of a woman who was in custody for not living up to the country’s standards for public dress. “Iran is open to reviewing how it applies strict Islamic laws at the heart of widespread protests — but not the values that underpin them,” Bloomberg quotes President Ebrahim Raisi as having said.

COUNTDOWN TO COP-

Egypt wants to include “loss and damage” on the COP agenda. The Sisi administration wants to prioritize the conversation on compensation for countries that have experienced major economic losses on the back of climate change and its consequences, Egypt’s special representative of COP27 Wael Aboulmagd told reporters yesterday. The summit needs to address this issue “particularly when it comes to finding a creative way … to find financing for countries who are in extreme need to address the immediate losses and damages that wipe out a significant part of their annual GDP,” Aboulmagd said.

Leave politics at the door: Egypt is urging nations to not let tensions over the war in Ukraine and the food and energy crises that followed distract from the issue at hand during COP, Aboulmagd said. “Animosity will have a cost. We as responsible diplomats ask everyone to rise to the occasion and show leadership … Put political differences aside and come together.”

FROM THE DEPT. OF GOOD NEWS- Our friends at Hassan Allam Utilities have finished work on a 5 MW solar plant in Sharm: The investment and development arm of Egypt’s Hassan Allam Holding completed the construction of its 5 MW solar plant in Sharm El Sheikh, it said in a statement (pdf) yesterday. The plant was partially financed by Afreximbank and will generate over 10 GWh of power each year. The project “is the first to reach completion among other projects awarded under the [Grid to Power COP27] scheme,” the statement notes. Egypt’s hosting of COP27 underscores the country’s “commitment to a greener future and its ability to deliver on its pledges and translate them into actual implementation,” Hassan Allam Holding CEO Amr Allam said.

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MARKET WATCH-

Europe’s liquefied natural gas (LNG) purchases this winter could rise as much as 40% y-o-y to compensate for a complete cut-off of Russian imports, Bloomberg reports, citing a report from BloombergNEF. This increase in LNG purchase, coupled with an expected drop in demand from soaring energy prices for consumers, is expected to satisfy the continent’s LNG needs, the report says. Russian LNG, meanwhile, will likely be diverted to China.

Overall market supply is expected to remain tight, pushing up LNG prices, the report notes. BloombergNEF points to unspecified “supply issues” in Egypt and Nigeria, as well as delays in the US restarting its Freeport LNG facility in Texas. Egypt recently kicked off an electricity rationing strategy in a bid to redirect some of the country’s natural gas supplies for exports, particularly to Europe.

CIRCLE YOUR CALENDAR-

The Egyptian Museum and the Manial Palace Museum are hosting a month-long book fair, coinciding with the 200th anniversary of the deciphering of the Rosetta Stone, Al Masry Al Youm reports. The book fair kicked off earlier this week and is running through 27 October.

PSA #2- Women entrepreneurs: Are you looking for funding? The Facility Investing for Employment is looking to write co-financing tickets in the EUR 1-10 mn range for new projects at businesses that “contribute to sustainable job creation.” Its focus is on women entrepreneurs and women-led businesses, according to a press release (pdf). Entrants can apply starting 14 November.

PSA #3- Nominations for the “Africa grows green awards” are now open through 10 October. The initiative, launched by Egyptian NGO Istidama, aims to celebrate stakeholders involved in climate change action among COMESA member states, according to a statement (pdf). The awards also seek to develop climate entrepreneurship by connecting companies with VCs. For more information and to apply, you can visit the initiative’s website.

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

EGP WATCH- The EGP is officially the cheapest it’s ever been (against the USD, anyway): The EGP closed at a record low against the greenback yesterday, breaking past the December 2016 low seen in the wake of what was (at the time) an historic float. The EGP fell an additional two piasters yesterday to 19.5784 against the USD, breaching the record low 19.5605 low set five years ago. The EGP has lost 24.1% of its value against the USD since the devaluation in March.

It’s the story of a weak EGP — and a strong USD. While the EGP has slid against the greenback, it has appreciated 17% against the GBP, 13% against the JPY and 8% against the EUR since March as currencies around the world lost ground to the USD.

It was just a matter of time: Under the leadership of Hassan Abdalla, the central bank has been allowing the EGP to drop steadily against the greenback: The currency has eased almost 2% since 18 August, when he replaced Tarek Amer as governor.

Enterprise readers see the EGP dropping to 22.12. That’s the average figure the Enterprise Fall 2022 Reader Survey says we’re using to put together our 2023 budgets. 22% of respondents to our reader poll say they’re budgeting with the EGP in the 22-23 band and the same number of participants say they figure the greenback will be changing hands at EGP 23-24 next year. A recent Goldman Sachs report says folks they spoke with in Cairo see the EGP in the 22-24 band, while BNP Paribas forecast before last week’s CBE policy meeting that the currency would fall to 22-23 by the end of the year. Forward markets have priced in similar declines.

Do we continue a gradual decline or will securing an IMF loan require a dose of shock therapy? That’s the mn-USD question right now. With talks on a facility now widely believed to be in the final stages, we hope not to have to wait too long to find out.

Is Saudi fintech Sanad Cash moving in on Capiter? Saudi fintech platform Sanad Cash wants to acquire 60% of crisis-stricken B2B e-commerce startup Capiter, Al Mal reported last night, citing sources it claims are familiar with the matter. Sanad is reportedly offering to clear out Capiter’s debt in return for the shares.

Refresher: Capiter became the first high-profile victim of the slowdown on Planet Startup after the board unexpectedly fired its two founders earlier this month amid allegations of financial impropriety at the company.

Sanad Cash isn’t the only potential suitor to be floated by the press: Al Mal last week reported that Quona Capital, one of the company’s key investors, wants to snap up 70-80% of Capiter’s shares.

Long-awaited changes to the tax code are almost ready: The Tax Authority is close to finishing legal amendments to cut personal income tax, authority head Mokhtar Tawfik told reporters yesterday. The changes, first announced by Finance Minister Mohamed Maait over a year ago, would raise the personal income tax exemption threshold and introduce new EGX tax breaks including amending the tax treatment of investment funds. The bill will soon be sent to the House of Representatives for discussion, Tawfik said.

Remember: MPs are back at work on Saturday when the House of Representatives reconvenes from summer recess to begin the new legislative session.

The government’s automotive committee held its first meeting yesterday headed by Prime Minister Mousatafa Madbouly, cabinet said in a statement.

Automotive committee? The committee is tasked with following up on the government’s long-awaited automotive strategy, which aims to increase local assembly, grow the component manufacturing industry, up the sector’s competitiveness to become a regional manufacturing hub, and bolster export volumes. The committee approves policies and strategies for developing the auto sector, and will prepare quarterly reports on its work.

Sitting on the committee: A number of government officials and non-governmental “experts,” the statement said, without mentioning names.

The strategy has been a long time coming: The long-awaited automotive strategy has been repeatedly delayed over recent years. We were expecting some sort of announcement around the turn of the year, and though Madbouly gave a major speech about the strategy in June, there were precious few details about how the government plans to grow the local sector.

What we do know: The strategy will provide a number of incentives — including customs breaks — to automotive manufacturers and feeder industries. The customs breaks will be granted based on the company’s local added value, its annual production volume, the value of new investments, and its carbon emissions, the statement said. The committee is also looking at granting importers a three-month extension on their payments.

** What do automotive companies want? We spoke to them about what they want to see in the strategy for our industrial vertical, Inside Industry, earlier this year.

The Adly Mansour transit hub was named the best transport project of the year by the Engineering News-Record (ENG), according to a statement. The hub connects Cairo to the new administrative capital and includes a commercial investment zone alongside a full-service transport complex. Meanwhile, a 500 MW wind farm in Ras Ghareb was named the best industrial project of the year. The project is being carried out by a consortium made up of Orascom Construction (OC), Japan’s Toyota Tsusho Corporation / Eurus Energy Holdings Corporation, and France’s Engie.

ALSO from the ENG awards-

• The new capital’s Islamic Cultural Center won the merit award for best cultural project.
• The Toshka development project won the merit award for best environmental project. The project was submitted by Hassan Allam Holding.
• The renovation of Mohamed Mahmoud Khalil Museum won the merit award for best renovation project.

Carrefour Egypt partnered up with Merge to provide shoppers with hearing impairments access to sign language interpretation at no cost, according to a press release (pdf).

The automotive sector and El Ezaby’s rumored arrest all got airtime on last night’s talk shows.

The automotive strategy: Several shows dedicated time to discussing the government’s strategy for developing the automotive sector after its new auto committee held its first meeting yesterday. In a phone-in with Masaa DMC (watch, runtime: 7:49), Khaled Shedid, non-executive chairman of Al Nasr Automotive Company, spoke of the importance of attracting multinationals to invest in Egypt. Khaled Saad, head of the Egyptian Association of Automobile Manufacturer, emphasized the need to localize automotive supply chains in Egypt to lower import costs. “Our car import bill is now EGP 4 bn and is bound to reach EGP 8 bn unless something changes,” he told Salat El Tahrir (watch, runtime: 6:26).

We have full coverage of the committee's first meeting above.

FACT CHECK- Ahmed El Ezaby isn’t in cuffs: El Ezaby and Multipharma Chairman Ahmed El Ezaby joined Ala Mas’ouleety (watch, runtime: 3:11) last night to debunk rumors that he had been detained by authorities after a court ruling. He admitted to being in legal trouble regarding the company’s debts but said that it’s not something for which he will serve prison time. Yahduth Fi Masr (watch, runtime: 3:21) talked to El Ezaby’s lawyer Yasser Fathy regarding the news, who explained that Multipharma, like all other pharma distribution companies in the country, has been struggling with debt thanks to the challenges the market now faces.

Leading the conversation on Egypt in the international press this morning: Egypt’s presser with international as COP27 hosts, which we cover in What We’re Tracking Today, above. The Sisi administration is urging world leaders not to let tensions over the war in Ukraine distract from what needs to be done in Sharm El Sheikh. Reuters, Sky News and the Guardian all have the story.

A strict new dress code for women attending state universities is getting plenty of criticism. The newly-introduced dress code bans students from wearing anything “too tight,” short, or see-through, and has been criticized for being another measure “aimed at covering up female students, The National reports. The Higher Education ministry is out with a statement that chides us all to make “rational” use of social media, but that stops well short of denying the dress code is in effect.

Also getting ink:

• What’s preventing Egypt from the big leagues of solar generation? A pro-climate policy framework would help Egypt capitalize on its potential for solar power generation. We currently have the world’s fourth-highest PV potential but rank 30th in solar generation. (Reuters)
• CNN spotlights Egypt’s tomato farmers: Authorities are working with local tomato farmers to help them cut down on food waste, which can sometimes reach the 40% mark. (CNN | watch, runtime: 4:49)

And, finally: Front Office Sports takes note of our mulling an “historic” bid to host the 2036 summer Olympics.

Raya Holding’s Raya Electronics plans to expand into 10 new governorates next year, after inaugurating one of the biggest electronic stores in New Cairo, it said in a statement, pdf) yesterday.

Orascom Construction will build, own, and operate a EGP 1 bn warehouse in Fayoum for grain and other basic commodity storage as part of the four-warehouse agreement the Supply Ministry signed earlier this week. (Statement, pdf)

CORRECTION- In yesterday’s edition of Hardhat, we incorrectly reported that the four warehouses our friends at Hassan Allam Utilities, Orascom Construction, and Samcrete will cost a combined EGP 12 bn. The warehouses are each expected to cost EGP 1 bn, bringing the total cost to EGP 4 bn. We apologize for the error. The story has since been updated on our web edition.

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

• CVC Capital Partners and Sunny Varkey are looking to sell their stakes in global private school operator GEMS Education in a transaction that could value the company at up to USD 6 bn. (Bloomberg)
• EFG Hermes’ consumer finance arm valU will offer payment solutions on new memberships for Heliopolis Sporting Club at El Shorouk City. (Statement, pdf)
• EgyptAir is offering Egyptian expat families better pricing on all tickets to and from Egypt. The offer applies to bookings starting 1 October until the end of September 2023. (Statement | watch, runtime: 2:06)
• Egypt has imported some 3.5 mn tons of wheat since the beginning of FY 2022-2023. (Hapi Journal)

French and Egyptian naval forces carried out joint drills in the Mediterranean yesterday, a military spokesperson said.

Uptake of Russia’s MIR isn’t looking so good: Turkish state banks are planning to stop processing transactions made with MIR cards — Russia’s answer to MasterCard and Visa — after a stark warning from the US Treasury this month, Bloomberg reports, citing an unnamed Turkish official. The US Treasury’s Office of Foreign Assets Control warned there would be risks for any financial institutions if they enter new agreements or expand on existing ones with the Russian operator of MIR cards. Five Turkish banks adopted the payment system last month to transact with Russian banks outside of Swift, but it appears the decision has now been reversed.

The hometown angle: The Central Bank of Egypt had been working to link MIR with Egypt’s homegrown Meeza card network with a view to making life easier for Russian holidaymakers here. Egypt’s acceptance of the card would mean visitors can pay in RUB, use their cards, and access ATMs and thus ease their transactions and payments inside Egypt. This comes as Russian tourism is expected to pick up after Russian flag carrier Aeroflot said it will resume direct flights to the Red Sea as of this Saturday, 1 October.

The EU is looking into imposing new bans on Russian imports that could cost Moscow some EUR 7 bn in revenues, according to Bloomberg. The newly-proposed sanctions include a price cap on Russian oil sold to developing countries, prohibiting EU member states from sitting on governing bodies of Russian government-owned companies and even more bans on European services, European Commission President Ursula von der Leyen said in a tweet. Sanctioning individuals is also on the table, which would target senior Russian ministry officials and individuals involved in staging the recent referendums.

Lydia Schoonderbeek, founder and CEO of Source Beauty and chief creative officer at Egyptian Cosmetics Company: Each week, My Morning Routine looks at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Lydia Schoonderbeek (LinkedIn),

founder and CEO of source beauty and chief creative officer at Egyptian Cosmetics Company. Edited excerpts from our conversation:

My name is Lydia Schoonderbeek and I’m the founder and CEO of Source Beauty and the chief creative officer at The Egyptian Cosmetics Company (ECC). I'm half-Dutch and half-Egyptian. I was born in the UAE, but now I live between Cairo and London. I love being in Cairo — it's where I lived most of my life. I love being here with my team and my friends but I'm also very much at ease in London. My husband is English, and between the two of us, we have four boys and two golden retrievers.

I’ve always worked in the luxury industry. I worked in luxury fashion for 15 years including at Harrods, Harvey Nichols, and Vivian Westwood. Retail has really been ingrained in me from the day I started working.

The idea behind Source Beauty really came from the fact that I like to be dependent on products that are accessible to me locally. People shouldn’t have to buy beauty products abroad and that’s not feasible for everyone. Beauty products should be more accessible. The devaluation of the EGP and recent changes in import rules have made it more expensive and difficult to obtain products from abroad. As a result, these amazing local beauty brands started popping up.

But even local brands weren’t all available in one place. They either had a shop on Facebook, were selling at a Saturday market, or had an Instagram page. I decided to bring together all the beauty brands that I love, that are based in Egypt and are locally sourced, under an umbrella that would serve as a marketplace for all these products. Source Beauty started off with 10 beauty brands with around 300 SKUs. Now, we have 85 beauty brands with over 3500 SKUs.

I wake up between 5-5:30am every day. I am very much a morning person — I’m always the first one to wake up at home, so I get to enjoy quiet me-time. I take this time to review social media, check my emails, and read Enterprise. I do an outdoor activity one hour before work, either taking the dogs out for a walk or rowing on the Thames when I’m in London.

My work day always starts at 9am with an hour-long call with my team. Each member updates the rest of the team on what’s happening within their roles. It's a great way to give everyone on the team ownership of their tasks. It also really ensures that we’re all communicating since communication is not really my strong suit. It’s something I’m working on, especially since I frequently work remotely.

The fun part of our work is discovering and being introduced to new beauty brands. Our office in Cairo is like a Disneyland for beauty lovers, with rows upon rows of beauty products. We also closely monitor our KPIs, test the beauty products, and spend a lot of time fine-tuning our customer service experience from a customer’s first interaction with the website, through the ordering process, to receiving their package. Something that I work very hard on is creating a personal experience for the customer. Having worked at Harrods, I appreciate the detail that goes into the best customer service experience. And I’m very passionate about recreating that experience online.

The beauty industry in the Middle East is growing at a really quick pace. One trend that I am seeing in the industry is an increase in women-led brands, which is giving women a voice and an outlet. A lot of the brands we work with are small female-led businesses. It is really amazing being a part of these brands’ journeys and witnessing their growth, both personally and professionally.

Inclusivity has also been a major trend. Certain brands speak to a certain Egyptian consumer. Big beauty brands like L'Oréal and Maybelline used to have a top-down approach, wherein they would tell customers this is the way they need to look. But these days, the trend has shifted and consumers are telling the brands, this is the way I want to look and these are the products I need, so it’s become more of a two-way conversation.

My new role as chief creative officer of ECC, and ECC’s investment in Source beauty have kept me really busy. The investment has kick-started our growth plans. We’re looking to grow the Source Beauty team quite substantially so I’ve been recruiting. My role at ECC has been an amazing outlet for my creativity since ECC develops brands and handles the formulation and packaging. Developing new ideas and seeing them come to life has added an exciting element to my job. Letting go and delegating certain elements of growth to members of Source Beauty has been very difficult because for the last four years, I've had such a firm hand on every single detail.

I am not a TV person and generally not too big on screens, so I prefer reading. I am currently reading the Paper Palace. A book I highly recommend is Americanah by Nigerian author Chimamanda Ngozi Adichie. It’s a fantastic book that really moved me quite a bit.

Some really good advice I came across is to take an interest in and invest in relationships with people that you meet throughout your career, especially early in your journey during university and your first few jobs. Those people become your greatest lifelong friends, allies, and supporters. It’s very easy when you’re young and in a hurry to not appreciate those important connections. Making sure you stay in touch is very valuable.