Wednesday, 5 October 2022

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

TL;DR

WHAT WE’RE TRACKING TODAY

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.

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*** 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.

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Somabay Golf Open Tournament 6-8 October: The Somabay Golf Open in Partnership with the Cascades Golf Resort Spa and Thalasso is just around the corner. This event has been a permanent fixture of the Egyptian Golf Calendar for over 20 years and is a great weekend of friendly competition that brings together players from across Egypt and the Region. The event features a practice round and two days of competition, a lavish welcome reception, and gala dinner. Room rates start from EGP 6,250 per person. For booking inquiries, contact +20 (0)100 340 0300 or reservation@thecascadeshotel.com.

ECONOMY

PMI is flat month on month, with private sector still in contraction territory

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.

STARTUP WATCH

Algebra Ventures nets USD 100 mn first close on second fund

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.

M&A WATCH

Solutions by STC now owns 88.2% of Giza Systems

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.

BANKING

CBE move to raise up reserve requirements “logical,” says HSBC Egypt CEO

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.

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KUDOS

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.

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LAST NIGHT’S TALK SHOWS

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).

EGYPT IN THE NEWS

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.

ALSO ON OUR RADAR

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)

PLANET FINANCE

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Could snap up remaining global oil reserves? The CEO of Saudi Aramco has warned that China will likely snap up spare oil capacity when it lifts its covid-zero strategy, Bloomberg reports. Crude oil prices dropped below USD 90 a barrel partly due to China’s strict covid restrictions suppressing demand. Analysts say there’s only about 2 mn barrels a day of capacity that could be brought online quickly in the event of a supply shutdown. The warning reiterates Aramco and Saudi Arabian officials' call for more investment in exploration projects off the back of this year’s spike in oil and natural gas prices.

The speculation comes as the G7 group of industrialized nations is imposing caps on Russian oil imports rather than a complete ban in a bid to curb economic damage while limiting the Kremlin’s financial ability to fund its invasion of Ukraine, Reuters reports.

Is the price cap good news for emerging markets? The US Treasury says the price cap is expected to save emerging markets around USD 160 bn annually on oil imports, the Financial Times reports, citing a yet to be released study by the US Treasury Department. The price cap would stabilize global energy prices and help ease the impact being felt by emerging markets, according to a Treasury official.

Up

EGX30

9,924

+2.5% (YTD: -17.0%)

Up

USD (CBE)

Buy 19.60

Sell 19.71

Up

USD at CIB

Buy 19.63

Sell 19.69

None

Interest rates CBE

11.25% deposit

12.25% lending

Up

Tadawul

11,780

+1.5% (YTD: +4.4%)

Up

ADX

9,909

+1.5% (YTD: +16.7%)

Up

DFM

3,379

+1.8% (YTD: +5.7%)

Up

S&P 500

3,791

+3.1% (YTD: -20.5%)

Up

FTSE 100

7,086

+2.6% (YTD: -4.0%)

Up

Euro Stoxx 50

3,484

+4.3% (YTD: -18.9%)

Up

Brent crude

USD 91.87

+0.1%

Down

Natural gas (Nymex)

USD 6.80

-0.5%

Up

Gold

USD 1,733.60

+0.2%

Up

BTC

USD 20,202

+2.8% (YTD: -56.0%)

THE CLOSING BELL-

The EGX30 rose 2.6% at yesterday’s close on turnover of EGP 1.1 bn (12.8% above the 90-day average). Foreign investors were net sellers. The index is down 17.0% YTD.

In the green: Mopco (+5.4%), Fawry (+4.9%) and Heliopolis Housing (+3.9%).

In the red: Ibnsina Pharma (-0.9%), and CIRA (-0.7%).

Asian markets are largely up in early trading this morning and futures suggest European indices will open in the green across the board as equities ride a burst of October optimism. Things look less rosy across the pond, with the three major Wall Street indices set to open in the red later today.

hardhat

Could the government rely more on renewables and diesel fuel for our electricity generation to shunt more natural gas into the export pipeline? Egypt is looking to take advantage of skyrocketing energy prices in Europe by redirecting some of the country’s natural gas supplies for export through an electricity rationing strategy. The strategy is meant to alleviate the burden on state coffers, particularly with rising global commodity prices and a weakening local currency, by providing us with more FX income from natgas exports. To make this happen, natural gas will be partially diverted away from domestic consumption, offering more room for different sources of fuel to satisfy our local energy needs.

There’s no clear date for the end of the rationing strategy, but there are already positive indicators that the move is bearing fruit, Electricity Ministry spokesman Ayman Hamza tells us. Egypt was able to export two additional shipments of natural gas since implementing the strategy, Prime Minister Moustafa Madbouly said last month, without specifying the value or amount of gas sold.

REFRESHER- How much natgas does Egypt have? Egypt produced some 73.4 bn cubic meters (bcm) in FY 2021-2022 — thanks in large part to the Zohr field, which yielded 28 bcm, the Raven gas field in Alexandria (8.7 bcm), and the Nile Delta Nooros field (4.6 bcm), according to government figures. Our natural gas output has been at a surplus for some time now, with production in FY 2020-2021 coming in at 66.2 bcm, leaving a 3.3 bcm surplus after satisfying domestic consumption needs. The previous fiscal year also yielded a 3.5 bcm surplus, with 63.2 bcm of gas produced, according to cabinet figures.

The surplus is a solid source of FX income: Egypt’s LNG exports hit USD 8 bn in FY 2021-2022: Egypt’s liquefied natural gas (LNG) exports reached USD 8 bn last year, cabinet said recently. These figures are cause for optimism that we could export more, just as long as domestic consumption is curbed, industry sources tell Enterprise.

We’re also exporting electricity, but the financials are just better for natgas exports: In recent years the country has seen an influx of requests from neighboring countries looking to purchase our surplus electricity capacity through interconnection grids. Sudan, for example, has already requested that we up the electric capacity flowing through our shared grid from 75 mw to 300 MW, according to Hamza. Jordan and Libya have also requested we increase electric capacity flowing through our interconnection lines. That’s not to mention our USD 4 bn agreement with Greece and Cyprus to supply Europe with electricity via a new subsea electric cable. Though talks are still ongoing and no start has yet been set, allowing renewable energy to feed the country’s electric grid is a good step towards exporting more electricity, Hamza said.

How much does it cost to use natural gas for electricity? Natural gas is now being supplied to power plants at USD 3.25 per MMBtu, with the Electricity Ministry paying for USD 3 while the Finance Ministry pays for the remaining USD 0.25. When it comes to diesel fuel the Electricity Ministry pays a flat EGP 2.5k per ton, even though current diesel prices are about EGP 4.2k for fuel and about EGP 5k for industrial use.

So, what’s the plan for our electricity generation? The Electricity Ministry by late last year had brought the use of natural gas in electricity generation to some 98.2%, according to an Egypt Electric Company report seen by Enterprise. Currently, the government is looking to add some 4.8 GW to our energy capacity over the coming five years, in addition to the some 4.8 GW it expects to bring online once the Dabaa nuclear facility is functional. The five-year plan is looking to bring total capacity to some 70 GW.

Renewable energy is already going to contribute more to our energy mix: Egypt has great potential to expand renewable energy production with the natural resources at our disposal, New and Renewable Energy Authority head Mohamed El Khayat tells us. We currently have a total of some 1.4 GW of wind capacity annually. Power generated from the Karimat solar/thermal station came at 140 MW last year. Private sector operators from the Benban Solar Park generated some 1.5 GW of electricity last year while the Kom Ombo solar facility is capable of generating some 26 MW of power. There’s also some 217.2 MW of electric capacity contained in facilities not connected into the national grid and backup generators around the country. The government is looking to have renewable energy account for 42% of our energy mix by 2030.

So could diesel fuel, even if it isn't exactly the most efficient: Positioning natural gas as a means of securing foreign currency has already seen more diesel being used to power electric facilities as a substitute, sources tell us. This shift is not without its downsides: Electricity produced using natural gas is about 1.4x more efficient than using diesel fuel, former deputy chief of the Egyptian General Petroleum Corporation Medhat Youssef tells us. But the upside seems to be worth it: Exporting natural gas will yield somewhere between USD 70-80 for every 1 mn units of liquefied gas, he says.

Green + renewable energy sources are the future: The country is now producing over 7 GW of wind, solar and hydroelectric power every year and is expected to reach some 10k mw next year. There’s already loads of demand from foreign companies looking to invest in renewable energy in Egypt, El Khayat tells us. Green hydrogen is also picking up pace in Egypt, with more than 15 MoUs for green hydrogen plants already signed over the past few months, signaling that the fuel source could soon become a significant part of our energy mix moving forward.

Where does all this leave our plan to run cars on natgas? Despite all these changes, the government’s plan to have most of the country’s cars running on natural gas is still underway, initiative spokesman Tariq Awad tells us. Global supply chain disruptions from the pandemic and the war in Ukraine have really reduced the volume of new contracts and the production of new vehicles globally — not to mention create new challenges for domestic importers, he explained. So far, some 22.5k natgas-powered cars have been delivered since the start of the initiative in 2020, he said.


Your top infrastructure stories for the week:

  • Kuwait’s Agility Logistics plans to invest USD 60 mn to set up and operate two customs and logistics services hubs in Ain Sokhna and East Port Said.
  • The World Bank has approved a USD 400 mn financing agreement to boost the performance of the country’s transport and logistics sectors and support a shift towards low-carbon rail.
  • The Supply Ministry is launching tenders for four logistics and retail hubs, along with three cooking-oil complexes worth a combined USD 321 mn.
  • The Local Development Ministry has launched a tender for the construction of four solid waste recycling and treatment facilities in Dakahlia and Kafr El Sheikh governorates.
  • The General Authority for Land and Dry Ports will receive technical proposals from companies interested in managing and operating the Damietta Dry Port this month.
  • Japanese subway operator Tokyo Metro has “expressed a strong interest” in managing and operating the Cairo Metro Line 4 in partnership with Mitsubishi.

CALENDAR

SEPTEMBER

27 September-27 October (Tuesday-Thursday): The Egyptian Museum and the Manial Palace Museum host a book fair.

OCTOBER

October: Air Sphinx, EgyptAir’s low-cost subsidiary to commence operations.

October: Fuel pricing committee meets to decide quarterly fuel prices.

3-4 October (Monday-Tuesday): Pre-COP27 Climate Summit, Kinshasa, Congo.

4-8 October (Tuesday-Saturday): The Chemical and Fertilizers Export Council of the Trade and Industry Ministry is organizing a trade mission to Kenya.

6 October (Thursday): Armed Forces Day, national holiday.

8 October (Saturday): Prophet Muhammad’s birthday, national holiday.

10 October (Monday): The CEO Women Conference.

10-14 October (Monday-Friday): Gitex Global, Dubai International Convention and Exhibition Centre, Dubai, UAE.

10-16 October (Monday-Sunday): World Bank and IMF annual meetings, Washington, DC.

15 October (Saturday): Cairo Metro will launch a global tender for maintenance work on the power stations and overhead catenary system of Line 1.

16-19 October (Sunday-Wednesday): Cairo Water Week 2022, Nile Ritz Carlton, Cairo.

17 October (Monday): Fifth Egypt and UN-led regional climate roundtable ahead of COP27, Geneva, Switzerland.

18 October (Tuesday): The Egyptian-Swedish business forum, Stockholm, Sweden.

23-25 ​​October (Sunday-Tuesday): Egypt economic conference, Cairo, Egypt.

24 October (Monday): Empowering Sustainable Trade Flows with Factoring conference, St. Regis Cairo.

27 October (Thursday): European Central Bank monetary policy meeting.

27-30 October (Thursday-Sunday): Cairo ICT, Egypt International Exhibition Center, New Cairo.

30 October – 1 November (Sunday – Tuesday): Egypt Energy, Egypt International Exhibition Centre (EIEC) in New Cairo.

Late October-14 November: 3Q2022 earnings season.

Late October: First Abu Dhabi Bank to complete full integration with Bank Audi’s Egyptian operations after merger.

NOVEMBER

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

1-2 November (Tuesday-Wednesday): Arab League annual summit, Algiers, Algeria.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

3-5 November (Thursday-Saturday): Egypt Fashion Week.

4-6 November (Friday-Sunday): Autotech auto exhibition, Cairo International Exhibition and Convention Center.

6-18 November (Sunday-Friday): Egypt will host COP27 in Sharm El Sheikh.

7 November (Monday): The inauguration of the first line of the high-speed rail.

9 November (Wednesday): Finance Ministry to host “Finance Day” at COP27.

7-13 November (Mon-Sun): The International University Sports Federation (FISU) World University Squash Championships, New Giza.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

DECEMBER

3 December (Saturday): Dior Men’s pre-fall collection show in Giza.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

13-15 December (Tuesday-Thursday): US-Africa Leaders Summit.

15 December (Thursday): European Central Bank monetary policy meeting.

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

December: The Sixth of October dry port will begin operations.

December: Egyptian Automotive Summit.

December: Egypt to expand Sudan electricity link capacity to 300 MW.

JANUARY 2023

January: EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

January: Fuel pricing committee meets to decide quarterly fuel prices.

1 January (Sunday): Use of Nafeza becomes compulsory for air freight.

1 January (Sunday): Residential electricity bills are set to rise as per the government’s six-year roadmap (pdf) to restructure electricity prices by 2025.

7 January (Saturday): Coptic Christmas.

24 January-6 February: The 54th Cairo International Book Fair, Egypt International Exhibition Center

25 January (Wednesday): 25 January revolution anniversary / Police Day.

26 January (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

FEBRUARY 2023

11 February (Saturday): Second semester of 2022-2023 academic year begins for public universities.

13-15 February (Monday-Wednesday): The Egypt Petroleum Show (Egyps), Egypt International Exhibition Center, Cairo.

23-27 February (Thursday-Monday): The eighth annual Business Women of Egypt’s Women for Success conference.

MARCH 2023

March: 4Q2022 earnings season.

23 March (Wednesday) — First day of Ramadan (TBC). Maghreb will be at 6:08pm CLT.

APRIL 2023

17 April (Monday): Sham El Nessim.

22 April (Saturday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

27 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC).

Late April – 15 May: 1Q2023 earnings season.

MAY 2023

1 May (Monday): Labor Day.

4 May (Thursday) National holiday in observance of Labor Day (TBC).

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

JUNE 2023

19-21 June (Monday-Wednesday) Egypt Infrastructure and Water Expo debuts at the Egypt International Exhibition Center.

28 June-2 July (Wednesday-Sunday): Eid El Adha (TBC).

30 June (Friday): June 30 Revolution Day.

JULY 2023

18 July (Tuesday): Islamic New Year.

20 July (Thursday): National holiday in observance of Islamic New Year (TBC).

23 July (Sunday): Revolution Day.

27 July (Thursday): National holiday in observance of Revolution Day.

Late July-14 August: 2Q2023 earnings season.

SEPTEMBER 2023

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

OCTOBER 2023

6 October (Friday): Armed Forces Day.

Late October-14 November: 3Q2023 earnings season.

EVENTS WITH NO SET DATE

2H 2022: The inauguration of the Grand Egyptian Museum.

2H 2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

2H 2022: The government will have vaccinated 70% of the population.

3Q 2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release its first financing product.

3Q 2022: Swvl to close acquisition of Urbvan Mobility.

4Q 2022: Infinity + Africa Finance Corporation to close acquisition of Lekela Power.

4Q 2022: Electricity Ministry to tender six solar projects in Aswan Governorate.

4Q2022: Raya Holding subsidiary Aman and Qalaa Holdings’ Taqa Arabia to launch their fintech company.

4Q 2022: Saudi Jamjoom Pharma to inaugurate its EGP 1 bn pharma factory in El Obour.

End of 2022: Decent Life first phase scheduled for completion.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

1Q 2023: Adnoc Distribution’s acquisition of 50% of TotalEnergies Egypt to close.

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