AM — House of Representatives passes automotive assembly + expat car import bills

Good morning, nice people, and happy almost-THURSDAY. It’s another heavy news morning here in Omm El Donia, so we’re going to jump right in.

But first: A huge thank you to everyone who wrote in yesterday with words of encouragement and new ideas after reading our five-step recipe to boost exports + FDI. We’re wading through our inbox and WhatsApps and will reply to you all over the coming day or two.

We’re not done with the idea. We’re asking those of you attending next weeks’ Egypt and Egypt-UAE economic conferences to champion the idea — and we’ll have more for you in the weeks to come.

THE BIG STORY here at home dovetails nicely with our (not so) little project: The House passed yesterday the legislative framework that would set up a council to make policy for the automotive assembly industry. We’re (very) cautiously optimistic that after years of fits and stars on the so-called “automotive directive” this could signal today’s policymakers are more serious than were their predecessors about turning Egypt into an assembly and export hub for cars (conventional and EVs alike).

The background: After opening the door to investment in a domestic assembly industry in the 1990s and early 200s — and seeing Hyundai, Mercedes, Jeep, BMW and Toyota models put together here — we allowed policy drift to settle in and lost our first-mover advantage to regional competitors.

How did we mess up? In plenty of ways, but this was the big one: Officials at the time knew our trade agreements with the European Union and Morocco would provide offshore assemblers with zero-customs access to our market — and did absolutely nothing about it. Lots of lip service was paid to the notion of helping prepare the industry for the shock through an “automotive directive” that would help the industry move forward. Until the talk stopped and the market was flooded with EU, Moroccan and now Chinese imports. Let’s hope we’re serious this time — as we noted yesterday, two of the smartest guys we know think we could still build a car industry that exports to the GCC, Europe and Africa.

ALSO- Fundraising may have slowed down on Planet Startup, but fintech is still looking really interesting. We have at least four stories this morning with a fintech flavor to them, including an investment round led by our friends at e-Finance and Yalla super app’s push into the UAE and beyond.

^^ More on all of this in this morning’s news well, below.

EGP WATCH- The EGP will weaken to EGP 21 against the greenback by the end of the year, Fitch Solutions predicts in its latest MENA monthly outlook (pdf) report. “A strong USD and delays in reaching an IMF agreement have led to a faster depreciation than we had expected,” Fitch writes. The research house does not see the pace of depreciation slowing before 2H 2023, when it expects the USD to peak and our economy to stabilize as capital inflows start trickling in.

REMEMBER- The EGP has lost a little more than a quarter of its value against the greenback this year. Pundits see the currency settling somewhere between 22-24 to the USD — and Enterprise readers think the EGP will settle at 22.12 on average.

COUNTDOWN TO COP- We have 18 days to go and you can expect a whole lot of talk about green hydrogen in Sharm El Sheikh as Egypt prepares to announce framework agreements for the burgeoning industry, Enterprise Climate reports this morning.

HAPPENING TODAY- Cairo Water Week enters its final day: Some 18.5k attendees from 90 international and regional organizations are convening at the Nile Ritz Carlton in Cairo for the event. The focus of this year’s edition is on preparations to discuss water resources at COP27. Catch the full agenda here.

THE BIG STORIES ABROAD- Geopolitics + the energy crisis are still getting top billing in the international press. US President Joe Biden is expected to today announce the release of another 15 mn barrels of oil into the markets from strategic reserves in December, the FT reports. Expect an official announcement from the Biden administration today, along with a plan on how to replenish dwindling US stockpiles.

ICYMI- Biden wants more supply in the global oil markets to face down a looming winter energy crisis in Western nations, putting him at loggerheads with OPEC+ leader Saudi Arabia, which is cutting output on predictions of a recession induced demand slump.

ALSO- Egypt is getting lots of ink in the new issue of National Geographic, which shines attention on the Grand Egyptian Museum, the new administrative capital, and the centenary of the discovery of King Tut’s tomb. Meanwhile, Global Construction Review reports that the GEM is 99.8% complete. The NatGeo stories are:

• Egypt’s new bn-USD museum is fit for a pharaoh: The Grand Egyptian Museum is a monumental showcase for all 5,000 of King Tut’s treasures—and a symbol of a nation that has reclaimed its past.
• Egypt’s audacious plan to build a new capital in the desert
• How was King Tut’s tomb discovered 100 years ago? Grit and luck. (Grit — that one is for you, Tarek El Nahas…)
• Seven days of unwrapping the king
• How King Tut’s treasures stack up
• The enduring power of King Tut

MEANWHILE- Apple unveiled two new iPads last night — and the release date for the next iterations of iPadOS and macOS. Here’s the rundown:

• The new entry level iPad (just iPad) gets its own keyboard with a function row and (at last) a FaceTime camera on the long edge of the device. It also now comes in four colors.
• The new iPad Pro line (11” and 12.9”) keeps the same design for a fourth year and doesn’t get the FaceTime camera on the long edge (which is a crying shame considering how many of us would use them for video calls). Tentpole features include the new M2 processor, upgraded cameras, 5G, faster wifi, and a funky new feature for the Apple Pencil.
• The latest versions of iPadOS (with a version of windowing) and macOS will drop on 24 October.

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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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CIRCLE YOUR CALENDAR-

The Madbouly government’s economic conference takes place Sunday-Tuesday next week. You can find the agenda for the conference here.

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. Day one is an economic forum featuring ministers, senior officials and business leaders, while the following day will feature a cultural forum, according to a statement.

The Suez Canal Economic Zone (SCZone) will launch a promotional campaign next week to drum up interest in investing there, SCZone head Walid Gamal El Din said, according to a statement. The pre-COP campaign will launch domestically next Sunday, 23 October, before the international campaign kicks off on Monday, 24 October.

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

CORRECTION- In Monday’s edition of EnterpriseAM, we incorrectly said in Blackboard that nine Egyptian universities fell out of the Times Higher Education 2023 ranking. These universities were “reporter” universities for this year’s rankings — meaning they provided data for the scoring but were unranked.

CLARIFICATION- Price caps for unsubsidized bread only apply to bakeries who take up GASC’s offer of flour. We reported in Monday’s EnterprisePM that the government was reintroducing price caps on unsubsidized bread for a month. We were slightly off the mark: The price caps apply only to those bakeries who use the flour offered by state grain buyer GASC, which is making stock available to the private sector for a month while wheat cargoes remain stuck at ports amid an FX shortage. We have since amended the story on our website.

*** 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: We look at how the Universal Health Ins. System is drawing in more private-sector investment. The system, which will allow patients to select their service providers — both private and public — is encouraging investments and improving healthcare quality as it expands the participation of the private sector, a recent World Bank report suggests.

Auto assembly legislation + expat car import scheme get parliament sign-off: The House of Representatives’ general assembly gave its final approval yesterday to two separate bills of particular interest to car assemblers and distributors. The first is legislation that will see the establishment of a new council to set policy for local vehicle industry (including EV assembly), alongside a new fund for environmentally-friendly cars. The second is a bill that will allow Egyptians living abroad to import cars and get customs and fee rebates.

Automotive bill #1: The House passed legislation that will establish a new regulatory body to set policy for the Egyptian automotive industry and launch a fund to provide incentives to businesses that assemble more environmentally friendly vehicles. The Supreme Council for Vehicle Manufacturing will draft policies, strategies, regulation and legislation governing the wider automotive industry, including EVs.

The council’s purview: Laying out policies and a general strategy to develop the local automotive industry, including legislative and administrative reforms, taking “any steps it sees fit” to create a business environment suitable for automotive assembly, and working to bring in institutional knowledge and know-how, according to a copy of the bill seen by Enterprise.

About the incentive fund: The fund is designed to help develop the domestic production of environmentally friendly cars, including putting in place incentive programs to encourage innovation and otherwise make the sector competitive. The law defines “environmentally-friendly vehicles” as those with zero emissions or a smaller carbon footprint than traditional cars (including electric vehicles, dual-fuel, and other hybrid cars), with details on emissions standards for eligibility to follow.

Automotive bill #2: The bill allows Egyptian expats to import new cars and get an eventual rebate on all related fees if they pay upfront in FX. Expats will have four months following the publication of the law in the Official Gazette to register their personal information, details of the car they want to buy, and pay the required fees and taxes (customs fees, VAT, and other taxes) upfront to the Finance Ministry in FX. They’ll then have a year to finalize the purchase of their car and can get a full rebate on the dues in five years’ time in EGP, at the USD-EGP exchange rate at that time and without interest.

The details: The Finance Ministry is expected to publish a detailed list of the customs and required FX deposit sizes for different car models within two weeks of the law being published in the Official Gazette. Importers can also switch car models after registering their details as long as it’s still within the one-year window and they settle any difference in the value of the FX deposit.

FinMin expects big inflows of FX and cars: The scheme could raise up to USD 2.5 bn in FX, Finance Minister Mohamed Maait said earlier this week. The state is hoping to see domestic distributors bring between 300-500k cars in the four-month window — a significant jump from average annual car imports of 150k a year, Maait said.

WHAT’S NEXT- The bills should now go to President Abdel Fattah El Sisi for signoff. Policymakers then have up to six months to finalize and publish the executive regulations for the bills.

This morning brings updates on two M&A stories we’ve been tracking: Saybad’s bid for Pachin, which looks to be dead in the water following delays; and Egypt Education Platform and the Sovereign Fund of Egypt’s play for what we now know is a 56% stake in Selah El Telmeez.

Saybad Industrial Investment has abandoned its bid to take over EGX-listed paint company Paint and Chemical Industries (Pachin) after not being able to do due diligence on the firm, Maged Shawky, chairman of the company’s financial advisor, Catalyst Partners, told Enterprise. “The company’s tender offer — which was valid for 60 days — has expired, without Pachin allowing due diligence or conducting a fair value study,” Shawky said. Pachin came out with its own disclosure (pdf) to the EGX on Monday, claiming it had not been notified of Saybad’s decision.

Refresher: Saybad had been an eager bidder for Pachin, upping its offer by as much as 14% to EGP 16.50-18.75 per share after the company rejected its initial bid. The revision came on the heels of a rival bid from Universal Building Materials and Chemicals (Sipes), which had said it would purchase up to all of the company’s shares at EGP 17.50-18.50.

Where’s that fair value study? Pachin is expecting the results of a fair value study it told us it was planning to commission in August to come in by the end of this week, a source close to the transaction told Enterprise. Shawky told us yesterday that the firm is yet to share the results. “The fair value study’s results should be shared with the bidders in order for them to gauge whether the offer price is appropriate,” Shawky said.

Pachin could look to start the bidding afresh: Pachin plans to solicit interest from investors using the fair value study as a benchmark price, our source said, adding that the company would welcome offers from all investors — including those who already made prior bids — on that basis.

REMEMBER- The play for Pachin comes amid the government’s privatization push, which should see it reduce its involvement in or exit certain industries to make way for the private sector. Pachin is currently approximately 54% owned by state-owned companies and banks.

Advisors: Catalyst Partners acted as Saybad’s financial advisor. Adsero-Raji Soliman & Associates is the firm’s legal advisor. Pachin had tapped Al Ahly Pharos to help it “differentiate between bids submitted and negotiate the highest possible value for the share price.”

EEP + SFE get 56% of Selah El Telmeez: Egypt Education Platform (EEP) is acquiring a 51% stake in education platform Selah El Telmeez), a source with knowledge of the transaction told Enterprise. EEP is owned by EFG Hermes and the Sovereign Fund of Egypt (SFE). The SFE is separately acquiring a 5% stake as part of the transaction.

REFRESHER- EEP inked an agreement to acquire a majority stake in Selah El Telmeez last week. The acquisition will help the platform expand its digital footprint and widen its market share.

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.

US- and locally-listed firms are steering their stock through choppy waters: Over on Wall Street, Cairo-born Swvl is reportedly considering combining (through a reverse stock split) or canceling some of its shares as it looks to avoid delisting due to low trading price. Closer to home, Orascom Investment Holding is the latest EGX-listed firm to announce a buyback program to support its stock.

Swvl could face delisting from the Nasdaq unless it can goose its share price: The ride-hailing startup has consistently traded below USD 1.00 per share since 20 September and is currently changing hands at around USD 0.64 per share. According to Nasdaq delisting rules, the index sends a deficiency notice to any company whose share price remains below USD 1.00 for 30 consecutive business days. The listed firm then has 180 calendar days to get its share price back up above the minimum threshold, or face delisting.

By our count, Swvl has until Monday, 31 October to bring its share price up before the Nasdaq sends it a deficiency notice.

Swvl wants to hold on: The company is looking into options including a reverse split or canceling shares in order to bump its share price and avoid getting kicked off the index, Al Mal reports, citing sources it says are in the know. Swvl shares have been steadily declining since the company’s Nasdaq debut at nearly USD 10.00 per share via a SPAC merger back in April.

Swvl is far from the only newly public firm that could stage a retreat: More than three quarters of US corporations that listed during pandemic bull times are now trading below their offering price, forcing the likes of ForgeRock, Poshmark and Casper Sleep to reverse course and return to the private markets, the Financial Times reports. Some 76% of the c. 400 US companies that listed between 2019 and 2021 and have raised a minimum of USD 100 mn have lost value, with a median return of -44% since their initial debut, the news outlet said, citing its analysis of Dealogic data.

PE firms are circling: Wall Street insiders say that private equity groups are on the lookout for bargains as valuations continue to tank amid a broader market rout. “When you think about the amount of private capital that has been raised that hasn’t been deployed, then look at how public equity valuations have re-rated, it feels like it’s going to be a natural pairing up,” said David Bauer, head of equity capital markets at PE giant KKR.

HERE AT HOME- Orascom Investment Holding (OIH) plans to buy back as much as 10% of its shares over the next 12 months, it said in a disclosure (pdf) to the EGX yesterday. The company said that the board has approved a plan that will see it purchase from the market up to 524.6 mn shares between now and 17 October, 2023. OIH did not disclose how much it expects to spend on the buyback program. Enterprise was unable to reach a company representative for comment.

OIH’s shares are down 9% YTD (better than the 15% dip of the wider EGX30). The company’s shares rose 3.9% during trading to close at EGP 0.21 yesterday.

The market downturn has led a number of companies to launch buyback programs this year: Egyptian Kuwait Holding, e-Finance, and Edita are among the major listed companies to have announced plans to buy back some of their shares in a bid to prop up their share prices.

Fintech startup Nexta has closed a USD 3 mn round led by EGX-listed e-payments giant e-Finance, according to a press release (pdf).

About Nexta: Founded by Ibrahim Farag (LinkedIn) and Ahmed Hisham (LinkedIn) in 2021, the company allows users to transfer money and aggregate their payment cards into a single Nexta card. The company concluded its first funding round in March, raising USD 2.2 mn led by Disruptech.

E-Finance “attaches great importance to supporting digital banking startups” in line with the central bank’s financial inclusion push, said e-Finance chief Ibrahim Sarhan. E-Finance has been on an aggressive expansion drive since listing, rolling out new lines of business, pushing into new geographies, and looking at what technologies it needs to incorporate into its platform going forward.

E-commerce startup Kenzz raised USD 3.5 mn in a seed funding round led by Outliers Venture Capital, according to a statement (pdf). Other participating VCs include HOF Capital, Foundation Ventures, and Samurai Incubate, alongside unnamed angel investors.

What’s Kenzz? Founded earlier this year by Ahmed Atef, Mahmoud Al Silk and Moataz Sami, the company’s e-commerce platform offers products direct from manufacturers and importers, emphasizing reliability and a sustainable growth model, according to the statement. It aims to bring a social dimension to online shopping by offering steeper discounts to customers who share or buy with friends and family.

Where will the money go? Kenzz will invest in expanding its team and product range, and to launch a new app.

Yalla Super App is heading to the Gulf: Digital payments firm PaySky plans to launch its payments superapp Yalla Super App in the UAE next month as part of its USD 50 mn expansion to several countries in the region, PaySky founder and CEO Walid Sadek (Founder Of The Week) tells Enterprise. PaySky first launched its superapp in the local market with Egypt Post and Visa at the start of the year.

First up, UAE — with an eye on Egyptian expats’ remittances: PaySky will launch in the UAE in partnership with Visa, with plans to roll out its digital financial accounts Yalla Card, according to a press release (pdf). The app is targeting the estimated 800k Egyptian expats in the country, helping to easily transfer money to their families. The transferred funds could be withdrawn from any local ATM or branch of Egypt Post, the release reads.

Yalla is set to expand to Saudi Arabia and Kuwait in the first quarter of 2023 and to Pakistan in 2Q 2023, Sadek tells us. He said that PaySky has set up shop in the KSA, partnering with an unspecified financial institution. KSA is among the region’s most developed fintech markets, he said, and Riyadh offers an easier process in setting up business and a low cost to obtain licenses.

BACKGROUND: The Yalla Super App and card allows customers to transfer money, pay bills, and shop online. Institutions and merchants can collect payments, sell products online, disburse salaries to employees, and pay suppliers through its platform.

GO DEEPER ON SUPER APPS- Egypt and the wider region are proving fertile ground for the do-everything apps, with MNT-Halan and MyFawry joining Yalla Super App among key players in the market. Head to our three-part What’s Next series tackling superapps’ emergence in Egypt, the challenges they face, and why they’re probably still worth the investment.

OTHER FINTECH NEWS worth knowing about this morning:

• EFG Hermes’ consumer finance platform valU will offer installment services to WE customers under an agreement signed with Telecom Egypt. (Statement, pdf)
• Fintech startup Mazaid will provide financial services to dentists and their patients under an agreement with the Egyptian Dental Syndicate. (Statement, pdf)

Impact investor Catalyst Partners has launched a corporate VC arm, dubbed Serv Startup. The unit will look to acquire minority stakes primarily in the fintech and digital lending sectors, Chairman Maged Shawky told Enterprise. Serv Startup is looking at early-stage startups that have already developed minimum viable products, he said. Shawky declined to say how much the unit has to invest.

Serv Startup will be looking to acquire a “handful” of minority stakes in firms that it hopes to integrate into Catalyst Partners’ business at a later stage, provided they support the firm’s business well, Shawky said. The company is looking to make its first investment in 1Q2023, he added.

SOUND SMART- Corporate VC is what it sounds like — when established companies invest in startups. Corporate VCs often invest in startups that complement the investing companies’ operations, writes Harvard Business Review. Among the first to jump on the trend in Egypt was CIB’s CVentures.

ALSO- Catalyst’s SME-focused fund is in talks to acquire a pharma company and another in the industrials sector, Shawky said, without disclosing the names of the companies. The acquisitions are awaiting final approval from the company’s board of directors, he added. The Catalyst Capital Egypt Fund — which reached its targeted EGP 450 mn first close earlier this year — focuses on sectors that are “defensive” in terms of growth and earnings, including agricultural manufacturing, pharma, and logistics.

Hilton has appointed Ahmed El Hady (LinkedIn) as its new country manager and senior director of operations for Egypt, it said in a statement (pdf). El Hady has almost 30 years of experience in the hospitality industry and joins Hilton after a five-year stint as the general manager of Doha-based hotel investment firm Al Rayyan Tourism Investment. He will now be responsible for leading Hilton Egypt’s operational strategy, which will see a number of brands such as the Waldorf Astoria entering Egypt for the first time.

Payment facilitator CowPay has appointed Mohamed Abu Khadra (LinkedIn) as its CEO, succeeding Hussain Al Manawi, who joined the company’s board, Zawya reports. Abu Khadra joins the firm from Huawei where he served as a marketing director. He has previous experience working in fintech having spent 10 years as marketing director at Bee Smart Payment Solutions.

El Sisi’s meeting with industry players dominated the airwaves last night. President Abdel Fattah El Sisi held a meeting with a delegation of Egyptian business leaders and investors a range of industries yesterday, Ittihadiya said in a statement. Government officials showcased potential projects and highlighted incentives to boost local and foreign investment. Kelma Akhira (watch, runtime: 5:00) and Al Hayah Al Youm (watch, runtime: 7:53) were among those covering the news.

ICYMI- We have a few ideas of our own on the once-in-a-century chance to boost FDI and turn the country into an export powerhouse. Consider discussing them when you attend the Madbouly government’s hotly anticipated economic conference, which will take place Sunday-Tuesday next week.

Keeping communication lines open: The president highlighted the significance of maintaining direct communication with investors and the local business community as part of the state’s efforts towards comprehensive development, the statement read. Some of the other main talking points out of yesterday’s sit-down:

• Around “75% of the Egyptian economy is in the hands of the private sector,” El Sisi said, according to Kelma Akhira (watch, runtime: 3:15).
• El Sisi said import issues will be resolved in a month or two, Agriculture Export Council head Abdel Hamid El Demerdash told Salat El Tahrir (watch, runtime: 5:04). “The meeting was very fruitful and encouraging,” he added.

ALSO- Car dealers are all for the expat car import scheme that the House passed yesterday: “This move will help stabilize prices and once again stimulate the local passenger car market,” one car dealer told Kelma Akhira (watch, runtime: 1:52). Used car dealers will benefit most from the decision, another said. Catch the full story on the scheme in our Automotive section, above.

The decision will also help reduce the black market for passenger cars, Noureldin Darwish, vice president of the Chamber of Commerce’s auto division, told Hadret Al Mowaten (watch, runtime: 4:38).

Milk expats for FX: Hopefully this will be the first in a series of decisions aimed at attracting more FX from Egyptian expats, head of the car traders’ federation Osama Abou El Magd told Al Hayah Al Youm (watch, runtime: 11:43).

German media is looking at our green hydrogen plans this morning: Public broadcaster Deutsche Welle notes that COP27 will see the unveiling of the government’s hydrogen strategy as well the signing of final contracts for several production facilities.

Also making headlines:

• The AP takes another look at how the surging USD has made local currencies — including the EGP — weaker, driving up the cost of basic goods and services, making imports more expensive and “causing pain” across the world. (AP)
• The Guardian is out with two pieces on human rights: An interview with prominent human rights activist Sanaa Seif and a long-read from Naomi Klein, who argues that the upcoming COP27 summit is helping the government “greenwash” its human rights record.
• DIY electric car: One Egyptian teacher spent EGP 60k to transform his 1985 Fiat into an EV. (Reuters | watch, runtime: 1:57)

Tutoring centers could go legit: Private tutoring centers will have to get licensed by the Education Ministry, Education Minister Reda Hegazy yesterday told the House of Representatives, according to Youm7. Last year, the Tax Authority demanded that tutoring center owners start paying taxes, though the industry remains part of the informal economy and isn’t governed by legislation.

5-star schools? Private schools will soon be classified using the star system, like hotels, Hegazy told the House, Al Mal reports. The rating will measure the quality of education and will affect the price points set by certain schools. The ministry will also launch a digital platform for the school licensing process, he added.

MEANWHILE- KarmSolar will build an EGP 500 mn solar plant to power dairy company Juhayna’s Wadi El Gedid farm. (Zawya)

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

• Officials from the Oil Ministry have held talks with Finnish telecoms company Nokia over potential cooperation on the ministry’s digital transformation strategy for the mining and oil and gas industries. (Statement)
• The Musicians’ Syndicate announced a temporary ban on mahraganat singers to “study their case to preserve Egypt’s artistic value.” (Statement, pdf)