AM — EFG Hermes, SFE’s Egypt Education Platform snap up majority stake in Selah El Talmeez

Good morning, folks. It’s apparently only Monday. But on the bright side, we’ve a fair bit of good news to share with you here at home this morning — even as politics outside our borders are started to look as volatile as global markets.

THE BIG STORY here at home this morning: An education M&A, courtesy our friends at EFG Hermes and the Sovereign Fund of Egypt’s education management firm, Egypt Education Platform (EEP). The transaction sees EEP snap up a majority stake in education platform Selah El Telmeez (SET). The SFE will also acquire a minority stake in the student lifeline. We have all the details in this morning’s newswell.

MEANWHILE- We’re holding our breath for both news that Egypt has closed an IMF facility — and for an agenda for the Cabinet-sponsored economic conference scheduled for this coming Sunday-Tuesday. There was no word on either front as of dispatch time this morning, and the IMF executive board’s public agenda for the week is still blank.

IT’S SHAPING UP TO BE A HUGE WEEK in global politics:

#1- MPs and leading business figures are pressing UK Prime Minister Liz Truss to step down. Expect more turbulence in the sterling and UK bond markets today, as the money people try to figure out where the rollercoaster of British fiscal policy is headed next under new chancellor Jeremy Hunt. The story is everywhere this morning: Reuters | AP | Financial Times | Bloomberg | BBC.

#2- Xi Jinping warned yesterday of “stormy seas” globally, signaling that “that U.S.-China confrontation will continue” as he kicked off a week that will see him appointed to an unprecedented third term in office. Xi warned of “grave international developments” not seen int he past century. China’s weeklong Communist Party congress is the lead story in the global business press this morning, topping the front pages of the Financial Times and the Wall Street Journal and getting lots of ink in the New York Times.

#3- There are plenty of tensions in our neighborhood, too:

• With an election looming, Erdogan is ramping up tensions with Greece: The Turkish leader recently warned that troops “may suddenly arrive one night” in Greece. Of particular interest in Egypt: Turkey’s regional energy policy is near the heart the turmoil.
• Uncle Joe doesn’t accept that other countries have their own economic considerations. After threatening Saudi Arabia with vague “consequences” for having slashed oil production last week, US President Joe Biden now faces pressure from Democrats to scale back arms sales to (and security ties with) Riyadh.

#4- There are 22 days left until midterm elections in the United States, so you can expect wall-to-wall campaign coverage in major global press outlets. Worth reading in that vein: A generation of combat vets, eyeing the House, strike from the right and

#5- Ethiopian and Eritrean troops are pounding civilians in a small Tigrayan city, “provoking horror from international leaders as the death toll climbs. … Tens of thousands of troops have been deployed by the Ethiopian, Eritrean and Tigrayan armies around the city, making it one of the biggest battles in the world today,” the Globe & Mail reports.

COUNTDOWN TO COP (20 days to go)-

Cairo Water Week enters its second day today and runs until this Wednesday, 19 October. Some 18.5k attendees from 90 international and regional organizations are convening at the Nile Ritz Carlton in Cairo for the event, according to its website. The focus of this year’s edition is on preparations to discuss water resources at COP27. Catch the full agenda here.

Today will see the fifth Egypt and UN-led regional climate finance roundtable ahead of COP27, in Geneva, Switzerland. Catch our recent Going Green story on how the roundtables aim to secure investment for climate projects in developing nations ahead of COP27.

The auto bill that would regulate EV assembly (among other facets of the industry) is up for debate today.

Part of our monorail will be launched during COP27, the cabinet said in a statement. Once completed, the project will span 22 stations over 56.5 km with 40 trains transporting people across Cairo. The Madbouly government plans to inaugurate the eastern segment of the monorail from the New Administrative Capital to Nasr City in time for COP27. The USD 4.5 bn project is designed, built, supplied and operated by a consortium of Alstom, Orascom Construction and Arab Contractors.

CLIMATE DIPLOMACY- India and Egypt want to expand their cooperation to include renewable energy, Indian Foreign Minister Subrahmanyam Jaishankar said at a press conference Saturday (watch, runtime 6:20) following a meeting with Foreign Minister Sameh Shoukry.

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Take our EV survey: Are you an ex-petrolhead shopping around for your first electric vehicle? EV-curious and wondering what all the fuss is about? Or are you not ready to say goodbye to that sweet smell of benzene as you wait at the gas station?

We want to hear from you: We’re taking the pulse on how the nation feels about Egypt’s nascent EV transition. Take a few minutes to fill out our short survey. We’ll be back soon with the results.

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ICYMI- Yesterday was a super Sunday for our sports stars:

Gohar secures US Open title: Women’s world number one squash player Nouran Gohar earned the 2022 US Open title after beating number three (and fellow Egyptian) Nour El Sherbini 3-1 in the championship final at the Arlen Specter US Squash Center in Philadelphia, Squash TV reports. Catch the highlights here on Youtube (watch: runtime, 11:03). This is Gohar’s 19th PSA title and her sixth this year. The next stop on the PSA World Tour is the Grasshopper Cup, which takes place in Switzerland from 18-23 October.

Peru's Diego Elias (world number four) walked away with the men’s title after Egypt’s Ali Farag (world number two) withdrew from the match after sustaining an injury.

And if you couldn’t hear the cheers from where you were — Liverpool star Mohamed Salah led the club to victory against Manchester City, picking the team up after it suffered its worst start to a Premier League season in a decade. Reuters has the report.

SIGNS OF THE (ECONOMIC) TIMES-

#1- The G20 is so divided that it took the group three days longer than usual to release a statement on its latest meeting, Bloomberg reports. Even then, the world’s wealthiest economies couldn’t get on the same page, with the statement hinting at differences over issues including the war in Ukraine, how to tackle climate change, global inflation, monetary tightening, and a strengthening USD.

#2- “Polycrisis on a global scale:” That’s the verdict of the Financial Times’ editorial board this morning on what kind of a moment we’re living through. “It is rare for so many engines of the global economy to be stalling all at once,” the board writes.

#3- A rising USD is hitting developed nations’ currencies harder than those of some EMs, in what Citigroup analysts are calling a “head scratcher,” Bloomberg reports. Traditionally safer currencies like the EUR, the JPY, and the GBP are taking a beating this year as they struggle to catch up with tighter US monetary policy that has sent the USD soaring. Meanwhile, the currencies of more volatile developing markets including Brazil and Mexico are showing more resilience, thanks to their central banks stepping in fast with early, steep rate rises that have kept the carry trade attractive.

CIRCLE YOUR CALENDAR-

The Suez Canal Economic Zone (SCZone) will launch a promotional campaign ahead of COP27 on potential investments in the zone next week, SCZone head Walid Gamal El Din said, according to a statement. The campaign will be launched domestically next Sunday, 23 October, before the international campaign kicks off on Monday, 24 October.

The Madbouly government’s economic conference takes place Sunday-Tuesday next week. We’re hoping for more details in the coming days.

Egypt and the UAE will host a two-day conference marking 50 years of bilateral ties. The gathering will take place next Wednesday-Friday, 26-28 October and is being produced in association with the two governments.

The EGX is looking to drum up interest in listed companies on a roadshow to Dubai and Abu Dhabi, an EGX source told Enterprise. The bourse has tapped Al Ahly Pharos to help manage the roadshow, with EGX boss Rami El Dokany set to meet with as many as 100 regional and international financial institutions, the source said.

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.

MORNING MUST READ-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we explained the “golden licenses” granted to industrial and other types of investors for specific types of projects, which streamlines the licensing process for certain projects. These licenses were introduced five years ago, but the government has recently been expanding their scope to spur investments.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed.

In today’s issue: We take a look at how Egyptian universities fared in some of the most closely-watched international university rankings.

Student lifeline Selah El Telmeez is going to have a new majority owner: EFG Hermes and the Sovereign Fund of Egypt’s (SFE) education management firm Egypt Education Platform (EEP) has inked an agreement to acquire an undisclosed majority stake in education platform Selah El Telmeez (SET), according to a statement (pdf). The SFE will separately acquire a minority stake in Selah El Telmeez, the statement said. EEP Communications Director Amr Sherif declined to disclose size of the stakes or value of the transaction when asked by Enterprise, noting that the transfer of shares is still in progress.

Selah El Telmeez is a national treasure: It’s the leading resource for K-12 students across a variety of subjects, offering assistance to those struggling with the national curriculum and providing learning guides that mns of families across the nation rely on. Along with its staple learning guides, the company is also behind a number of Egyptian book franchises and recently launched a mobile app offering students interactive games and educational videos.

The acquisition will help Selah El Telmeez expand digitally: EEP is committed to helping SET realize its growth potential by expanding its footprint of education content and teaching resources, EEP CEO Ahmed Wahby said in the statement. “We aim to accelerate the company’s digital transformation to unlock new innovative learning solutions,” he added.

The acquisition also aims to widen the platform’s market share: “Selah El Telmeez does not currently target international schools, so we are keen on giving them access to international schools, starting with the schools in our own portfolio, to really deploy their digital learning platform,” Sherif told Enterprise. “We’re looking at governorates where Selah El Telmeez is not yet dominant, and exploring how to expand and widen market share in those areas,” he added.

No changes at the top: SET will continue to hold on to its individual brand, with Waleed Hamdy as its CEO and Mostafa Hamdy as co-CEO, the statement read.

ADVISORS- EEP tapped White & Case as legal advisor, while Adsero-Ragy Soliman and Partners was counsel to the SFE. Al Tamimi & Co had sell-side duties.

A scheme to allow expat Egyptians to import cars into Egypt and draw back customs and other fees at a later date could raise USD 2.5 bn in FX: Expats could send more than EGP 50 bn (c. USD 2.5 bn) into Egypt under a cabinet program that will allow Egyptians living abroad to buy new cars in exchange for hard currency, Finance Minister Mohamed Maait said in an interview with Bloomberg Asharq (watch, runtime: 19:07). Maait was speaking on the sidelines of the IMF / World Bank meetings, which concluded yesterday.

How will this work? Cabinet hasn’t released details, but we expect expats abroad will be required to buy through authorized local distributors, who will place orders with manufacturers and assemblers and bring the cars into Egypt. Buyers will pay customs fees, VAT, and other taxes upfront in FX. They will then receive a full rebate on the dues in five years’ time — paid EGP at the USD-EGP exchange rate at that time and without interest. Cabinet unveiled the contours of the program last week.

The scheme will see the state ultimately forgo some EGP 20-25 bn in customs fees, VAT, schedule tax and development fees, Maait said.

The state is hoping to see domestic distributors import between 300-500k cars in the four month window during which the scheme will run — a significant jump from average annual car imports of 150k a year, Maait said.

The program could go live in 2-3 weeks’ time, Maait said. The bill establishing the scheme has wide support among MPs and so could be passed by the House of Representatives within days, Emigration Minister Soha El Gendy said in a televised interview on Saturday (watch, runtime: 4:04).

ALSO- Maait gave us some more reassurance on IMF talks: The FX rate flexibility the IMF is demanding will boost investor confidence, he said, and the Egyptian economy has diversified sources of revenues to help it absorb any shocks stemming from the float, Maait said. FX flexibility is a key point in talks between IMF and Egyptian officials, who came just short of finalizing an emergency loan agreement in Washington over the weekend. Egypt and the IMF have “agreed on all the necessary points and the agreement will be completed very quickly,” Maait added.

AND- The state’s economic conference will create a roadmap for the next 4-5 years, Mait said. The conference takes place Sunday-Tuesday next week.

The House yesterday approved in principle amendments to the Agriculture Act that would introduce harsher penalties for illegally building on agricultural land. Under the amendments, those convicted will be banned from receiving government food subsidies and could face jail terms ranging from two to five years as well as fines between EGP 500k and EGP 10 mn. The House Legislative and Constitutional Affairs Committee approved the amendments earlier this month.

What’s next? The amendments will go up for a final vote before the House, before getting handed to President Abdel Fattah El Sisi to be ratified into law. They then go into effect once published in the Official Gazette.

ALSO FROM THE HOUSE YESTERDAY-

Where do our bread subsidy reforms stand? Supply Minister Ali El Moselhy’s proposal to form an ad hoc committee to look into possible changes to the country’s massive bread subsidy program will be studied by the House’s Agriculture Committee, alongside a slated USD 500 mn loan from the World Bank to bolster wheat imports.

Some MPs are blaming the government for the poultry feed shortage: “The government should have intervened early enough to save the market … the culling of chicken will cause a shortage of poultry and eggs on the local market and lead their prices to skyrocket,” MP Hesham El Gahel said. Local media this week reported that some farmers are killing their chicks due to a lack of feed.

The Madbouly government is working to resolve the issue: The government has released some EGP 85 mn worth of soybeans since the beginning of the month and some EGP 40 mn worth of corn in efforts to calm the poultry market, according to a statement following a meeting on the issue headed by Prime Minister Mousatafa Madbouly yesterday. The PM said the government would coordinate weekly with the poultry union to decide how much feed to release into the market.

Tougher penalties for the use of unlicensed telecom equipment ahead: The House’s Telecom Committee will be looking into amendments to the Telecom Law cracking down on the import, possession, use, operation, and marketing of unlicensed telecom equipment that poses a threat to national security. Penalties range from one to five years in prison and fines of EGP 2-5 mn.

As macro-economic clouds have gathered around the world this year, the outlook in many places on everything (from growth and inflation to investments and returns) has darkened.

Here in the Middle East, however, there are reasons for optimism, and much of it has to do with the dynamism of the region’s newly-invigorated stock exchanges. An investor conference we held in London was a showcase of why the Middle East is in the spotlight right now — and why substantial new listings are set to be a feature of the market for years to come.

We brought together the Saudi Stock Exchange, Boursa Kuwait, the Abu Dhabi Securities Exchange, Dubai Financial Market, and the Qatar Stock Exchange for the first time. The atmosphere at the event was philosophical about present challenges, but also cautiously optimistic about the future.

IPOs of shares in Saudi Arabia and in the United Arab Emirates have soared and there is a robust pipeline from both countries into the future. This is hugely important for the prospects for prosperity regionally — and even globally: Bns of USD are being raised internationally to drive long-term investment in the region.

Portfolio investors see the robust pipeline of stock market listings; home-grown companies are investing to expand and diversify internationally; overseas corporates are seeking access to the region’s fast-growing consumer sector and the digital economy; and other clients are focused on the progress being made in the region’s transition to net zero.

In short, investors increasingly view the Middle East as a safe and reliable opportunity as well as a region that is open and eager for business.

We see this across our business, but nowhere is it clear than in our markets and securities services business, which in 1Q 2022 had its best quarter on record. HSBC has been involved in nearly all the IPOs of the past year: We helped clients in the region raise more than USD 19 bn from investors worldwide in 2021 — and more than USD 15 bn in the first half of this year.

There are many drivers of the current IPO boom. Stronger energy prices have created liquidity which, when combined with reform and deregulation in the region that has happened against a backdrop of economic challenge elsewhere in the world, has created an ideal environment for new listings.

This trend is particularly apparent in Saudi Arabia, where total foreign ownership of Saudi equities currently stands at USD 95 bn (including strategic investments). Meanwhile, consistently strong demand from international investors for IPOs in the UAE has been a key factor in substantial over-subscriptions for new share listings throughout 2022.

Egypt is getting ready to ride the wave. The government aims to attract USD 40 bn in investment over four years through privatizations under plans to reinvigorate the Egyptian stock exchange and encourage more international investor participation in the market.

The Sovereign Fund of Egypt has set up a pre-IPO fund to prepare state-owned enterprises for listing on the EGX, and stock market regulations have been amended to encourage companies to list.

Growth and optimism in the Middle East can help global investors weather the challenges they face elsewhere.

It is also a great opportunity for Middle Eastern companies and economies to take a leadership role in tackling those challenges — in every sector from food, energy, and supply chain logistics, to climate change, and the journey to Net Zero.

The fact that the next two UN Climate Change Conferences — COP27 and COP28 — are taking place in Egypt and the UAE shows how much the world is looking to our region for solutions and innovations in tackling pressing social and economic challenges.

Samer Deghaili (LinkedIn) is co-head of capital financing and investment banking coverage (CFIBC) and head of capital markets (MENAT), HSBC Bank Middle East Ltd.

The European Bank for Reconstruction and Development (EBRD) could commit EUR 20 mn to Malta-based impact investor Mediterrania Capital Partners’ fourth fund, which will invest in mid-cap companies in Egypt, Morocco and Tunisia, according to EBRD’s website. The lender is set to approve the investment by 30 November. The European Investment Bank is also considering investing EUR 15 mn in the fund.

About MC IV: The fund has an EUR 350 mn target close, according to the EBRD and EIB. We don’t yet know the timeline for its first close or its targeted ticket sizes or sectors. MC IV succeeds the MC III fund, which focuses on North African education, healthcare, B2C services, food processing, distribution, and export-bound manufacturing firms. MC III acquired diagnostics imaging network MetaMed in 2020, and carved out a 40% stake in Cairo Scan for a reported EGP 103 mn in 2018.

Gov’t puts several int’l disputes to bed: The state has settled disputes with international companies including Dutch Future Pipe and Italy’s Maire Tecnimont, as it looks to improve the investment environment and attract more foreign inflows, according to a cabinet statement. The government agreed to settle the following disputes:

#1- Future Pipe: The Dutch-incorporated, Dubai-based firm first filed an arbitration case against Egypt over a contract to build a water and sewage network in the new administrative capital back in 2017, according to records of the International Centre for Settlement of Investment Disputes (ICSID). The settlement will help protect joint Dutch-Egyptian investments and maintain economic relations between the two countries, according to the cabinet statement.

#2- Maire Tecnimont: Cabinet rubber-stamped a settlement agreement between state-owned Egyptian Chemical Industries (Kima) and the Italian contractor, according to the statement. Kima was last year reported to be in talks with a syndicate of banks to help it restructure EGP 6.8 bn in outstanding debt, reportedly linked to its EGP 11.6 bn ammonia-urea plant Kima-2 in Aswan, which Tecnimont constructed. Kima was last year reported to have agreed to assign the operation and maintenance of Kima 2 to Tecnimont. The companies also reportedly signed a separate settlement in 2020 over losses incurred by Tecnimont on the project thanks to the devaluation. The settlement will help the government continue to expand our ammonia and urea production with the help of Italian expertise, the statement reads.

#3- Disputes related to the Hekr Abu Doma development in northern Cairo. The statement doesn’t give any further details. Local media had reported disputes related to the development between the government and both a Bahraini developer and Qatari Diar in recent years.

REMEMBER- Attracting more FDI is a key pillar of the government’s economic strategy as it looks to compensate for the loss of so-called ‘hot money’ on the back of the global economic downturn. The state will look to raise USD 40 bn over the next four years through the sale of public assets. Expect to hear more on the strategy at next week’s economic conference.

Uber Egypt has appointed Youssef Abouseif (LinkedIn) as its general manager, succeeding Ahmed Khalil (LinkedIn), according to a company statement (pdf). Abouseif joins Uber from Amazon’s EU headquarters, where he oversaw expansion into new markets.

Ihab El Tahtawy has been appointed acting chairman of EgyptAir Airlines Company, succeeding company chairman and CEO Amr Nabil, Al Mal reports. El Tahtawy, whose last post was head of the EgyptAir training academy, will serve as acting chairman until the company’s general assembly meeting. Walid El Khafif has also been appointed acting chairman of EgyptAir Maintenance and Engineering Company.

The talking heads were counting chickens last night after both the House of Representatives and Prime Minister Moustafa Madbouly tackled the poultry feed shortage yesterday (more on that in this morning’s Legislation Watch, above).

The chairman of the poultry union welcomed the government’s move to release some feed from ports. Farms should see their feedstock replenished within the next three days on the back of the decision, Poultry Producers Union Chairman Mahmoud Al Anani told Kelma Akhira (watch, runtime:5:46). He said he hoped not to see a repeat of recent chick culls, saying farmers had been scared to keep the production cycle going without available feed in the market.

We need a monthly 250k tons of soybeans for feed, Deputy Agriculture Minister for Livestock, Poultry, and Fisheries Mostafa El Sayad told Kelma Akhira (watch, runtime: 19:52). Some 122k tons of soybeans have been released from ports so far this month, the government said yesterday. Al Hayah Al Youm (watch, runtime: 3:10) and Masaa DMC (watch, runtime: 7:44) also had the news.

ALSO- Some 25 pre-trial detainees received presidential pardons yesterday, Mohamed Abdel Aziz, a member of the presidential pardons committee, tells Masaa DMC (watch, runtime: 6:27).

Egypt is “uniquely placed to act as a bridge between the global north and south” at COP27, climate negotiator and Ambassador Mohamed Nasr sys in a wide-ranging interview with Euronews.

Reuters takes a look at the Abu Dhabi sovereign fund’s USD 6.6 bn in investments so far this year. Sources tell the newswire ADQ is using its purchasing power to solidify regional ties with countries including Egypt, Turkey and Israel.

Also making headlines this morning:

• Bloomberg revisits how USD shortages are impacting net importers in Asia and Africa, including Egypt.

• A local man was taken to hospital with light burns after he set himself on fire in protest at the refusal of his son’s school to allow him to use textbooks until they were paid for. (The National)

The Egyptian Electricity Transmission Company wants to pay in EGP for imported components in its future tenders in a bid to save valuable FX, Bloomberg Asharq reports citing an unnamed company source. Payments for foreign components, which usually make up 30 to 46% of any given tender, will reportedly be paid in EGP pegged at the exchange

State-owned consumer finance player One Finance has launched its services in the local market, according to a press release (pdf). The state’s Ayady Investments owns a 40% stake in One Finance, while the remaining 60% is split equally between microfinance player Tamweely and Post for Investment, Egypt Post’s investment arm. The company aims to open eight branches nationwide before the end of the year, after obtaining its consumer finance license from the Financial Regulatory Authority in April.

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

• Edtech platform iSchool is reportedly looking to raise a USD 4.5 mn round by the end of year to enter Saudi Arabia and the UAE. (Al Mal)
• Huawei is reportedly among bidders to become the private-sector partner in the state’s new EV charging company (Al Mal)
• Everest Business School has closed an undisclosed funding round led by a strategic Kuwaiti investor and with the participation of angel investors. The fund will help the company expand across the MENA region. (Statement, pdf)
• Raya Holding subsidiary Raya Foods is considering building an EGP 500 mn industrial complex. (Al Mal)
• Abu Dhabi Islamic Bank is lending HoldiPharma EGP 3.4 bn to bring its meds production up to international standards in a bid to boost exports. (Statement)
• The Egyptian Navy has received the first of four MEKO A200-class frigates from Germany’s Thyssenkrupp. (Statement)

President Abdel Fattah El Sisi reiterated Egypt’s commitment to resolving the GERD crisis through an agreement that’s fair to all parties during his speech opening Cairo Water Week, according to a statement. The president called on the international community to amp up its efforts to reach an agreement on the disputed Ethiopian mega-dam.

On food security: “Given that the amount of food we need is expected to see a 60% increase by 2050, it has become clear that water challenges and food security are one and the same,” El Sisi said.

Foreign Minister Sameh Shoukry also spoke on water scarcity issues in desert nations at yesterday’s opening, according to a statement.

El Sisi also rang up Iraq’s newly-elected president Abdul Latif Rashid to congratulate him on assuming the position, according to a statement. Rashid was elected by the Iraqi parliament last week and named Mohammed Shia al-Sudani prime minister-designate, putting an end to a political deadlock in the country since elections a year ago, Reuters reports.