AM — Waiting and waiting — for devaluation and for an IMF package…

Good morning, wonderful people. We’ve got a steady stream of news this morning to see us into the long weekend.

Say “long weekend” once more — you won’t be hearing that phrase again until 2023. Banks and the stock market will be off tomorrow in observance of Armed Forces Day — the final long weekend of the year — according to the Central Bank of Egypt and the EGX. Cabinet had already announced the holiday for both public and private sector workers. For those who usually work Saturdays, this coming Saturday, 8 October, is also an official holiday to mark the Prophet Muhammad’s birthday.

Your next day off will be 1 January (falling on a Sunday and traditionally a holiday for banks) and then Coptic Christmas (January 7, which falls on a Saturday in 2023).

EnterprisePM will be out as usual this afternoon and readers of Enterprise Climate will have their morning read in their inboxes tomorrow. Both our AM and PM editions in Egypt are off tomorrow — we’ll be back in your inboxes at the usual time on Sunday morning.

THE BIG STORY HERE AT HOME? It’s all about the EGP, and it seems we’re going to have to keep holding our breath a little bit longer to see how it plays out.

FOR STARTERS- MPs have summoned senior cabinet ministers to discuss the import and FX crisis. The finance, planning, and trade and industry ministers will appear before the House Industry Committee next week to discuss the pileup of goods at ports and the availability of FX, committee head Moataz Mahmoud tells Al Mal. President Abdel Fattah El Sisi has in recent days urged the government and the central bank to normalize the situation by November. The president also said yesterday in a televised address that he’s confident we’ll make it through this bottleneck (we have more on that in Last Night’s Talk Shows, below).

The news came as the EGP continued its slow slide against the USD yesterday, easing four piasters against the greenback to 19.7084. The EGP has been marking fresh record lows against the US currency in recent days, after it last week breached the record 19.5605 low set five years ago on the back of the historic 2016 float.

The EGP has lost around a quarter of its value this year against the greenback thanks to a toxic mix of domestic economic pressures, the global economic fallout from Russia’s war in Ukraine, and the strengthening of the USD against just about every major global currency. The central bank went for a snap 15.9% devaluation in March, with the rest of the slide happening in gentle (but steady) increments since then.

Where will it settle? Enterprise readers see the EGP dropping to 22.12 — the figure they’re using (on average) for their 2023 budgets, according to our fall reader survey. Goldman Sachs sees the EGP settling in the 22-24 band, while BNP Paribas is forecasting the currency to fall to 22-23 by the end of the year. Bloomberg, which has been leading the charge for a weaker pound, is now saying that some market watchers are calling for an end to the “drip, drip, drip” devaluation in favor of a more sudden move. Bloomberg Economics thinks a rate of EGP 24.60 to the greenback would “bring Egypt’s trade deficit to a reasonable level.”

ENTER THE IMF: Speculation about how much Hassan Abdalla’s central bank will allow the currency to slide is mounting after the IMF signaled that it is working on a “sizeable” assistance package for Egypt that could get approval “within days or weeks.”

The IMF executive board would have to approve the facility — and Egypt does not currently appear on the institution’s public calendar ahead of the IMF and World Bank annual meetings set to take place next week. So, yeah: We’re going to have to keep holding our collective breath for a little while longer, folks.

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WHAT’S HAPPENING TODAY-

The world is bracing for a significant oil cut when OPEC+ meets today. The cartel of oil producers is expected to slash daily production by more than 1 mn barrels in a bid to bring up prices, which have sagged after spending March through July comfortably above the USD 100 / barrel barrier. Public figures in the US are positioning the Saudi led move as playing into Vladimir Putin’s hands. The Financial Times notes the move could anger the US.

The hometown angle: Policymakers here have penciled oil in at about USD 80 per barrel in the 2022-2023 state budget. Brent crude was at about USD 85 last week — and is hovering just under USD 92 this morning. There’s no word yet on when the Oil Ministry’s petroleum products pricing committee will next meet to set prices at the pumps here in Egypt/

Austrian water companies continue investment talks in Egypt: Eight Austrian water companies are in Egypt (pdf) to meet with government officials and local business leaders to discuss investment in Egypt’s water, wastewater and desalination projects.

The Nobel Prize laureate(s) for chemistry will be announced today at in Stockholm. The Nobel Prize in Physics was awarded yesterday to Alain Aspect, John Clauser and Anton Zeilinger for their work on quantum-information science.

NEXT WEEK-

IMF + WB annual meetings: The IMF and World Bank annual meetings will take place in Washington, DC, on 10-16 October.

COUNTDOWN TO COP (33 days to go)-

The British Embassy in Egypt launched its Climate Finance Accelerator (CFA) program yesterday. The GBP 10.8 mn, four-year technical assistance program will build a pipeline of bankable low-carbon projects and give them access to financing. Piloted in Colombia, Mexico and Peru, the CFA is now looking to expand in Egypt, Nigeria, Pakistan, South Africa and Turkey. The program — which is looking to select 8-12 projects — is currently accepting proposals for projects seeking USD 1 mn in funding. You can apply here through 16 October.

Who is involved? The program is funded by International Climate Finance (ICF) through the UK government’s Department for Business, Energy and Industrial Strategy. It is being delivered locally by PricewaterhouseCoopers UK, and implemented by Genesis Analytics and Acumen Consulting Egypt.

Egypt’s FRA and UK’s FDS Africa also signed an MoU on environmental ins. at the ceremony: Egypt’s Financial Regulatory Authority and the UK’s Financial Sector Deepening Africa signed an MoU to explore ins. products for issues pertinent to the environment. More on all of this in the embassy’s press release (pdf) on the event, out overnight.

Enterprise Climate attended yesterday’s launch — and sat down with UK Ambassador to Egypt Gareth Bayley, where they talked about King Charles II not attending COP27 in person and how newly-appointed UK Prime Minister Liz Truss will tackle climate development financing for Egypt.

^^ We’ll have the full story in tomorrow’s edition of Enterprise Climate.

African countries will lobby for a shared energy position at COP27, highlighting the importance of fossil fuels for economies and securing access to electricity in the short term, Reuters reported. While the use of fossil fuels may be a viable option for some countries, it is not a one-size-fits-all solution, African Union Commissioner for Infrastructure and Energy Amani Abouzeid said, according to the newswire.

THE BIG STORY ABROAD- Elon Musk may be buying Twitter after all in a bid to head off a costly lawsuit. With just two weeks to go before Musk and Twitter were set to tangle in court, the Tesla and Space X boss sent a letter to Twitter on Monday night saying he was in for the original USD 44 bn transaction — contingent on debt financing coming into place and the court agreeing to scrap the trial. Musk tweeted yesterday that “buying Twitter is an accelerant to creating X, the everything app.”

Need to go deeper? Check out coverage in the Financial Times | Wall Street Journal | Reuters | Bloomberg. Or get into the nitty-gritty with Casey Newton’s Platformer.

The story that we’re more interested in: China’s property crash: “a slow-motion financial crisis.” It’s the first in a series from the FT that says the “impact of falling house prices is spreading to local government finances and the broader economy.”

MEANWHILE- Bridgewater founder (and Principles author) Ray Dalio has handed over control of his firm, stepping down as co-head of investment at the asset manager, which has USD 150 bn in assets under management. The move caps a yearslong succession process. The WSJ has more.

AND IT’S OFFICIAL- Apple will bid farewell to its beloved Lightning port. The European Commission has passed a law requiring all new electronics sold in the EU to be equipped with a USB-C charging port by 2024 — including mobile phones, tablets, cameras, games consoles, headphones, and speakers. Laptop-makers have until 2026 to comply with the decision

CIRCLE YOUR CALENDAR-

UPCOMING NEWS TRIGGERS- Here are some data points and news triggers to be on the lookout for in this month:

• Foreign reserves: The Central Bank of Egypt (CBE) should be out with September’s foreign reserves figures later this week. Reserves remained flat at around USD 33.1 bn in August, having fallen 20% since March due to headwinds caused by the war in Ukraine and tightening financial conditions.
• Inflation to notch new highs? Analysts are expecting inflation to have continued rising in September due to the weakening EGP after reaching highs not seen since November 2018 in August. We’ll find out when Capmas and the CBE release the figures next week.

Fuel prices to rise this month? We’re expecting the government to hike fuel prices for the seventh consecutive quarter when the fuel pricing committee meets this month. Fuel prices have risen by as much as 28% over the past 18 months in response to heightened international oil prices, which surged earlier this year on the back of Russia’s invasion of Ukraine.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Renewables and diesel fuel could contribute more to our electricity generation as natgas is directed for export to help generate hard currency.

Activity in Egypt’s non-oil private sector contracted at the same pace in September as it did in August, according to S&P Global’s latest purchasing managers’ index (pdf). The PMI index was flat month-on-month at 47.6, remaining below the 50.0 threshold that separates growth from contraction for the twenty-second consecutive month. September’s contraction was attributed primarily to sustained inflationary pressures, weaker consumer demand, and the implications of the energy rationing measures enforced by the government.

Inflationary pressures are still affecting costs: Imports — which have slowed due to restrictions imposed by the Central Bank of Egypt earlier this year, and become more expensive on the back of a weakening EGP — drove up input costs, forcing businesses to increase price tags, according to S&P Global. This led to weak consumer demand, resulting in a sustained decline in output. The output sub-index declined for the thirteenth month in a row and new orders fell to their lowest level in seven months.

Global macro conditions and the war in Ukraine continue to weigh heavily: “Russia's war on Ukraine led to sharp uplifts in energy costs and the introduction of energy rationing policies. At the same time, unfavorable EGP-USD exchange rate movements added to already steep price pressures," S&P Global Economist Shreeya Patel said.

ON THE UPSIDE- More people are snagging jobs — and optimism is rising: Hiring rates rose marginally for the third consecutive month. Confidence in future growth improved from August’s historically low forecast in future business activity conditions. This echoes the results of our Fall 2022 Readers Survey, which showed almost half of respondents anticipating that 2023 will bring better conditions for the business community.

FROM THE REGION-

Saudi Arabia’s non-oil private sector activity expansion slowed in September with the PMI (pdf) dropping to 56.6 from 57.7 in August, despite a strong pickup in output and new orders. Purchasing activity increased with higher client appetite but dipped lower than August‘s figure. Headcounts increased marginally, growing at their slowest pace in six months.

September PMI data for the UAE will be released at 6:15am CLT today. You’ll find it here when it’s out.

Venture capital firm Algebra Ventures’ second fund has reached a USD 100 mn first close, surpassing the USD 90 mn initially targeted, according to a company statement (pdf). The VC outfit plans to invest USD 15 mn in startups by the end of this year and to reach final close on the fund by the end of 1Q 2023, the statement reads.

Who’s in for the first close? The Egypt-dedicated fund was backed by international limited partners including the IFC, EBRD, and EAEF (all of them LPs in Alegbra’s first fund) as well as FMO, BII, MSMEDA, DGGF and regional family offices, which were all first time investors in Algebra.

Wait, Enterprise — you told us that there’s a slowdown in fundraising for venture and that VCs are going to have a tough year. Yep. They will. The exception: Folks like the gang at Algebra who are targeting LPs that include development finance institutions and Gulf family offices. DFIs, particularly those in Europe, have a clear mandate to invest in our part of the world — that hasn’t changed despite turmoil on the continent and in the UK. And the Gulf has an additional USD 1.3 tn in excess liquidity sloshing around over the next four years thanks to high oil prices, meaning they’re going to be allocating to a wide range of assets for the foreseeable future.

So where’s Algebra investing? Algebra’s managing partners told TechCrunch that they hope to back 31 startups pursuing early-stage investment opportunities in sectors like fintech, agritech, edutech, logistics, e-commerce and healthcare. Ticket sizes for investments will range between USD 500k to USD 3 mn, Managing Partner Karim Hussein told us last year. The second fund has already backed Sylndr, a used-car retailer that raised USD 12.6 mn in a pre-seed round in May, as well as three other startups. While the fund is focused on Egypt, it will also explore investment opportunities in East and West Africa.

Refresher: Founded in 2016, Algebra backed some 21 startups with its inaugural USD 54 mn fund as of last year, including bold-faced names such as Halan, Brimore, Trella, Khazna, Yodawy, Mozare3 and Shift EV. The VC firm’s six most established companies were valued at more than USD 350 mn in 2021.

Solutions by STC has completed the acquisition of 88.2% of Giza Systems, it announced in a statement (pdf) yesterday. The company didn’t disclose the final value of the transaction, but said Giza Systems has an enterprise value of USD 158 mn, almost 10% above the initial valuation back in April. In a separate statement (pdf), major shareholder B Investments said it sold its 44.7% stake at an equity valuation of USD 119 mn.

The selling shareholders: Solutions by STC was on course to take an 89.5% stake in Giza Systems from SPV Inergia Technologies, in which B Investments is the majority shareholder. Inergia holds a 65.7% stake in Giza Systems (including B Investments’ stake). It’s not known who the other sellers are.

What they said: “We made this strategic decision to acquire Giza Systems in order to accelerate our growth and consolidate our position as the leader in the telecommunications and information technology market at a regional level. Giza Systems will remain independent and we will work together in order to diversify our offering to our clients within Saudi Arabia and beyond," CEO of Solutions by STC Omar Al Nomani said.

More of this, please: “We are glad to have led one of the few management buyout transactions in Egypt,” added BPE Partners CEO Mostafa El-Anwar. B Investments is a unit of BPE Partners which El-Anwar said “supported management in growing and transforming the business through a series of value-added strategies.”

About Giza Systems: Giza Systems is present in 15 countries and has an annual turnover north of EGP 5 bn (USD 254 mn).

ADVISORS- SNB Capital was Solutions by STC’s financial advisor and Matouk Bassiouny & Hennawy and Freshfields acted as counsel. White & Case was international and local legal counsel on the sell side.

STC WANTS TO MAKE SAUDI A REGIONAL DATA HUB-

The Saudi telecom giant plans to spend about USD 1 bn to transform Saudi Arabia into a regional data hub and is considering a stake sale in its Center3 business to finance the plans, Bloomberg reports. KSA would invest the funds on building data centers and submarine data cables in order to host more media, gaming and corporate data, Center3 chairman Mohammed Alabbadi tells the business newswire. The firm has had talks with potential investors and is analyzing whether to pursue a direct equity share or an IPO, Alabbadi says.

The Central Bank of Egypt’s decision to increase the reserve ratio to 18% was “logical” given current global economic conditions, HSBC Egypt CEO and Deputy Chair Todd Wilcox told CNBC Arabia (watch, runtime 2:34). Wilcox said the decision would have a “minimal effect” on HSBC’s bottom line in the short term, but expects it to lead to growth in the long term.

Refresher: The central bank last month bumped up its reserve requirement for all banks to 18% from 14%, which it said would “complement the tightening stance that the CBE is maintaining.” The reserve ratio regulates how much capital commercial banks are required to hold in their reserves. By raising the ratio, the central bank is aiming to restrict lending, tighten financial conditions, and support the currency — all without raising the cost of borrowing for the government or the private sector.

HSBC wants to get more involved in SME lending: SMEs account for some 20% of the bank’s total financing portfolio, Wilcox said, adding that HSBC is looking to expand in the Egyptian market, particularly in the SMEs sector, with a focus on companies in import and export, technology, green energy, sustainability, and women-led businesses.

**Read more about what our friends at HSBC have in store for SMEs in our recent Coffee With interview with Wilcox.

ALSO FROM THE CBE- Banks now have until 14 September 2023 to comply with the new capital requirements required by the 2020 Banking Act after the central bank agreed to extend the deadline by another year, according to a decree published in the Official Gazette. This is the second year-long extension the CBE has granted banks. The central bank has not publicly commented on the reasons for the extension.

The requirements: Under the legislation, banks have to have at least EGP 5 bn in liquid assets, a tenfold hike from previous minimim. Foreign lenders’ minimum capital was raised threefold to USD 150mn, while forex bureaus’ increased fivefold to EGP 25 mn.

Microsoft Egypt General Manager Mirna Arif (LinkedIn) landed a global leadership award at nonprofit Women in Tech’s MENA awards, according to a statement (pdf).

Egypt’s Yasmin Halawa earned first place in her age category at Ironman Barcelona, allowing her to qualify for the 2023 World Championship in Kona, Hawaii. Ironman Barcelona is one of the biggest triathlon events in the world.

It was a slow night on the airwaves: With some of our go-to talking heads off for the night, top billing went to President Abdel Fattah El Sisi’s speech in celebration of Armed Forces Day on 6 October. Masaa DMC (watch, runtime: 3:57) and Al Hayah Al Youm (watch, runtime: 5:00) both covered El Sisi’s speech.

The president struck a reassuring note on the economy: “We will by the grace of God sail through these difficult circumstances,” El Sisi said, in an apparent reference to the economic woes facing the country — from high inflation to a weakening EGP and a shortage of FX for imports — as a result of global headwinds spurred by war in Ukraine.

Also worth noting:

• School safety: Following two tragic accidents, the Education Ministry has issued a decision to shut down any school building whose structural integrity is compromised in a way that could pose a danger to students or staff. Masaa DMC had the story (watch, runtime: 11:02).
• How have import issues impacted our clothing sector? Mohamed El Sallab, deputy chair of the House Industry Committee, explains to Hadrat El Mowaten (watch, runtime: 4:56).
• Bringing the Rosetta stone home: Zahi Hawass will soon share an online petition to bring the stone back to Egypt from the UK, he said in a phone call to Hadrat El Mowaten (watch, runtime: 5:19).

It often feels to us like folks in the business community are damned when they do, damned when they don’t: Egypt is taking fire this morning for taking Coca-Cola on as a sponsor (pdf) of COP27 — a move the activist set is calling “greenwashing.” Per the Guardian: “Over four years, we’ve found Cola Cola to be the world’s top plastic polluter in our annual brand audits … It’s astounding that a company so tied to the fossil fuel industry is allowed to sponsor such a vital climate meeting,” the newspaper quotes an activist from Break Free From Plastic as saying.

We get it. Plastic absolutely sucks. And while you’re at it: Added sugar in drinks is horrible for human health. But if businesses can’t be part of the conversation, how do we move the discussion forward in the absence of national legislation to, say, ban plastic bottles by 20xx? And how happy would the activist set be if big businesses were not kicking in money to help make COP a reality? Don’t like plastic bottles? Push like hell to tax (or regulate) the things out of existence.

Elsewhere, police seized 54 ancient artifacts in Assiut and arrested four people suspected of smuggling them, Xinhua reports.

Illegally building on agricultural land could soon cost you up to EGP 10 mn and up to five years in prison: The House’s Legislative and Constitutional Affairs Committee approved amendments to the Agriculture Act introducing harsher penalties for illegally building on agricultural land, after cabinet greenlit the amendments earlier this year. Parliament will discuss the amendments when MPs reconvene on 16 October.

The World Bank is giving us improved marks on governance: Egypt improved on five out of six sub-indicators in the World Bank’s latest global governance rankings. Our overall score in the Worldwide Governance Aggregate Indicators (WGIs) jumped to 27.5 from 25.6 in 2020, according to the World Bank figures. The WGI measures political stability, rule of law, control of corruption, government effectiveness (the only metric where we didn’t see an improvement), voice and accountability, and regulatory quality. The Planning Ministry picked up the news.

Methodology: The WGIs are based on more than 30 data sources produced by survey institutes, think tanks, NGOs, international organizations, and private sector firms. They have been covering over 200 nations since 1996. You can check out Egypt’s rankings over the past two decades here.

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

• Alborg Scan opened a new EGP 50 mn branch in Maadi and has three more branches in the pipeline worth a combined EGP 200 mn. (Statement, pdf)
• An Egyptian-Portuguese investment forum in Lisbon sees 80 companies looking at opportunities in Egypt’s textiles, construction, and pharma sectors. (Statement)
• The National Fund of Greece has become a member of the “collaborative network” of European, Middle East, and North Africa (EMENA) sovereign funds, joining the Egyptian, Maltese, French, and Spanish sovereign funds. (Statement, pdf)