AM — First day of government’s economic conference will address macroeconomic policy

Good morning, wonderful people, and welcome to what promises to be a very busy week on the economic policy front as politicians, cabinet members and folks from industry associations gear up for three big events ahead of COP27.

It starts today with the Madbouly governments Egypt Economic Conference 2022, which runs through Tuesday and will see heavy presence from members of the cabinet economic group. It’s still not clear to us who is attending from the private sector who doesn’t also hold a position at an industry association or chamber of commerce.

Are you attending? We’d love it if you plugged our five-step recipe for how to build a new Egyptian economy that puts FDI and exports at the heart of everything we do.

Focus is key: Technical committees associated with today’s conference are weighing some 480 proposals (we kid you not). The various sub-committees of the National Dialogue have sent in a barrel of questions of their own, on everything from inflation to the budget deficit. Folks, we need to focus. The government cannot be all things to all industries, and this conference is NOT the forum to bemoan L/Cs vs documentary collection, how far the EGP will need to fall against the greenback, or any of our other current problems.

Those issues are not what ails us — they’re symptoms of the real problem: Our failure to build an economy that prioritizes exports and FDI while simultaneously harnessing the power of the Arab world’s largest consumer market.

Lamees agrees: Kelma Akhira’s Lamees El Hadidi urged last night that we use the conference to set out clear, focused, measurable, and realistic goals for the economy (watch, runtime: 6:29).

“We need to focus. We need to have clear goals, and a clear path to achieve them,” says El Hadidi. “We can’t export everything, we can’t open every topic… If we decide to focus on industry, we need to choose a limited group of industries… five or six industries at most, [and say] these are the priorities, the ones we’ll support.”

If you’re attending, drop us a note later today by replying to this email and let us know how things are going or email patrick@enterprisemea.com.

^^ We have the inside track on what you can expect from the event in this morning’s news well, below.

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ALSO TODAY- Egypt plays host to the annual Gas Exporting Countries Forum meetings: Ministers from the 19 member countries as well as eight observer nations are in Cairo for the next three days for the annual meetings of the Gas Exporting Countries Forum.

Why this matters: Egypt has been positioning itself for some years now as the premier energy hub in the Eastern Mediterranean, serving as a hub for natural gas and electricity exports to Europe, the Levant, GCC, Sudan and North Africa. Throw in the energy war between Russia and Europe and things look very interesting right now.

MEANWHILE- Egypt and the UAE will host a gathering marking 50 years of bilateral ties. The conference takes place 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 from the two countries, while the following day will feature a cultural forum.

AND- The Suez Canal Economic Zone (SCZone) will launch a promotional campaign ahead of COP27 on potential investments in the zone. The domestic campaign will be launched today before the international campaign kicks off tomorrow.

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THERE’S NO SIGN THIS MORNING of an IMF facility. The IMF executive board’s public agenda page hasn’t been updated since before the IMF / World Bank annual meetings earlier this month. A senior government official said last week that Egypt expected the announcement would come “quickly.”

EGP WATCH-

In the absence of an IMF package, speculation on the “real value” of the EGP continues apace. Reuters is the latest to join the party, with a poll of economists predicting the EGP will ease to 21.16 to the USD by the end of the current fiscal year next June and 22.08 by the end of FY 2023-2024. That’s a faster pace than in the news organization’s July poll, when respondents forecast 19.86 to the USD by the end of FY 2023-2024. Reuters poll was carried out 10-19 October.

Others see a bigger drop: Enterprise readers are, on average, using 22.12 in their 2023 budgets. Goldman Sachs said last month that most folks it spoke with see the EGP settling somewhere between 22-24 to the greenback once an IMF package is in place.

Where do we stand now? The greenback was changing hands at EGP 19.7284 on Thursday. The EGP has lost a little more than a quarter of its value against the greenback this year, including March’s steep devaluation.

COUNTDOWN TO COP (13 days to go)-

We have just under two weeks to go before COP27 kicks off in Sharm El Sheikh.

A rare bit of good climate news: Global CO2 emissions from burning fossil fuels are forecast to rise by less than 1% this year thanks to the strong push into renewables and electric vehicles, according to the International Energy Agency. Emissions are set to rise by only 300 mn tons in 2022 to 33.8 bn tons — a much smaller jump than the 2 bn-ton increase last year, the organization said in a report.

The African Development Bank will unveil at COP27 a USD 1.5 bn green facility to help African countries develop clean energy and adapt infrastructure to handle the effects of global warming, the bank’s principal climate officer told Bloomberg. The bank will offer the funding to climate-related projects through partnerships with commercial banks and governments. The lender plans to raise USD 100 mn by the end of next year, and the full USD 1.5 bn by the end of 2025.

UK Minister for Africa Gillian Keegan was in town last week for talks ahead of COP27, meeting with Foreign Minister and COP27 President Sameh Shoukry and Electricity Minister Mohamed Shaker on the sidelines of Cairo Water Week, the UK Foreign Office said.

• UK firms investing in Egypt’s renewables sector was on the agenda — as was jailed activist Alaa Abdel Fattah: Keegan met with Alaa’s family “to express the UK’s sympathy and our commitment to his case,” according to the British statement.

Cairo’s bike-sharing program is finally live: Cairo Bike made its long-awaited debut on Thursday, introducing 250 bikes and 25 stations to the streets of downtown Cairo, cabinet said in a statement. A second phase will double the number of bikes to 500 when another 20 stations go live in Zamalek and Garden City. The project allows members of the public to rent bikes for EGP 1 per hour via a mobile app and is operated by European bike rental firm Donkey Republic.

Another mode of green transport getting traction: Rabbit Mobility’s e-scooters in Maadi — we seem to see more and more of them on the street every day. Rabbit CEO Kamal ElSoueni was our founder of the week earlier this year.

Some 422 startups from around the world applied to the ClimaTech Run competition, which offers startups a top award of USD 100k and the chance to pitch their product at COP27, the International Cooperation Ministry said Friday. The startups presented sustainable solutions in sectors including energy, agriculture, food security, transport, and urban development. Fifteen of them will be shortlisted to pitch at the global climate summit.

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THE BIG STORY ABROAD-

China’s Xi set for third term: Xi Jinping is on course to be nominated for an unprecedented third five-year term as China’s president after the Chinese Communist Party elected a central committee stacked with Xi loyalists at its congress, which wrapped yesterday. Key party leaders not seen as being close to Xi, Premier Li Keqiang and ex-Guangdong head Wang Yang, will retire early from the powerful seven-member Standing Committee, which will be revealed today. (Reuters | CNN | The Guardian)

MARKET WATCH-

EU moves closer to capping gas prices: EU countries tentatively agreed a plan to cap natural gas prices at a summit Friday after Germany dropped its opposition to the move, the Financial Times reports. Energy ministers are set to resume talks over the size of the price cap and details for its execution in the next two to three weeks. The main European benchmark index dropped 7.0% to EUR 115 per megawatt hour on Friday following the news.

*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: We dive into the local deep tech sector.

The Madbouly government’s highly-anticipated economic conference kicks off today and runs through Tuesday. The gathering will see government officials, experts, and economists come together with the aim of creating a roadmap for the country’s economic future.

Day 1: Today will see a discussion of macroeconomic policies, including how successive global economic crises and inflationary pressures are impacting our economy and what needs to be done to ensure sustainable growth and boost employment, according to a cabinet statement. May we suggest a focused program that puts exports and FDI at the center of our economic policy? With a private-sector-backed investment promotion authority?

Tomorrow, delegates will discuss the state ownership policy document — the government’s roadmap on restructuring the economy in favor of the private sector and ensuring competitive neutrality — according to a separate statement. A second session tomorrow will look at how to boost FDI to the private sector, especially for green projects. Day 2 of the conference will also see sessions dedicated to priority sectors, including renewable energy, electricity, EVs, waste-to-energy, desalination, and real estate.

Day 3 is all about industry. The third and final day of the conference will address ways to stimulate industrial investment, develop national industries, and address the financing gap for manufacturers, as well as solutions to recent import troubles, according to another cabinet statement.

Organizers of the National Dialogue have submitted eight questions to the government to address at the economic conference. The dialogue’s economic subcommittees are asking the state to respond to questions on its plans to tackle further inflation in the case of a more flexible EGP-USD rate; to narrow the budget deficit and bringing down public debt; to stimulate private investment and cut back on public spending; to prioritize industry; as well as questions about agriculture, tourism, and social welfare spending.

A technical committee is already looking into some 480 economic proposals for policies and measures to increase the flexibility and competitiveness of the Egyptian economy. They’re being filtered and passed on to the relevant authorities. At the end of the three days, a closing session will be held to draw attention to the conference’s outcomes.

Want to weigh in throughout the conference? Download the app. The Madbouly government has released the economic conference app for Android and iOS to give participants the chance to follow the proceedings and share their input. The conference’s sessions are set to be livestreamed in full online.

REMEMBER- This is one of two big state economic conferences taking place this week. Government officials and members of the private sector will also meet Wednesday-Friday for a conference marking 50 years of bilateral ties with the United Arab Emirates. Wednesday is the big day at the gathering as delegates meet for an economic conference.

S&P Global Ratings has affirmed Egypt’s B credit rating with a stable outlook on the back of expectations that fresh financial support from the IMF and the GCC will help us meet our “large” external funding needs. The ratings agency believes that the Madbouly government’s track record of reform and the country’s strong growth outlook will mean that Egypt will be able to count on lenders to meet its foreign funding needs for FY 2022-2023, which total around USD 18 bn.

FDI to provide the bulk of foreign currency: S&P says that Egypt will receive almost USD 10 bn of foreign direct investment during the current fiscal year, up from USD 8.9 bn last year.

International lenders to provide up to USD 6 bn: The rating agency expects the upcoming IMF package to be in the range of USD 2-3 bn, while another USD 2-3 bn could be raised from the international bond market.

That USD 2 bn shortfall? That’s where the GCC could come in. S&P thinks that GCC countries will pledge more funds to cover any funding gaps “given [Egypt’s] track record, the reduced funding needs, and the importance of stability in Egypt to the region as a whole.” The UAE, Saudi Arabia and Qatar have together pledged some USD 22 bn to Egypt since the start of the war in Ukraine, though USD 6 bn in FDI is yet to enter the country, the rating agency wrote.

Exchange rate flexibility — a key condition for the IMF agreement — will help “absorb the impact of future external shocks on the economy,” the rating agency wrote. Enterprise readers are using an average figure of EGP 22.12 to the greenback in their 2023 budgets, while business leaders told Goldman Sachs they see the EGP settling somewhere between 22-24. The EGP has lost a little more than a quarter of its value against the greenback this year.

The economy will grow at an average of 4.0% over the next two to three years, the ratings agency says, with the construction and energy sectors driving growth, alongside structural reforms and increased reliance on investments, exports, and private sector-led growth.

REMEMBER- The government wants to more than double the private sector’s role in the economy to 65% over the next three years, and attract USD 40 bn in investment by 2026.

Current account deficit to narrow to 3.0% in FY 2022-2023: “We expect import prices to moderate, while export volumes and remittances from Egyptians living abroad remain robust,” S&P Global writes, adding that tourism arrivals could improve on the back of COP27 and the Grand Egyptian Museum’s inauguration slated for later this year. The current account deficit narrowed to 3.7% in FY 2021-2022, buoyed by oil and non-oil exports, rising tourism receipts, and a jump in FDI.

Government spending to rise, budget deficit to remain at 6.0% over the next three years: The ratings agency sees the budget deficit hovering around 6.0% until FY 2024-2025, as government spending on subsidies, social benefits, capital investments and salaries rises. Our budget deficit narrowed to 6.1% in FY 2021-2022.

CBE’s move to hike reserve ratio gets thumbs up: The Central Bank of Egypt’s move to increase bank reserve ratios to 18% from 14% “should help manage inflation expectations and limit capital flight, to some extent, by increasing real returns on the government’s local currency debt,” the ratings agency said.

Maait welcomes the outlook: S&P’s outlook is a sign of the economy’s stability and its ability to handle external shocks, Finance Minister Mohamed Maait said in a statement.

CLARIFICATION- An earlier version of this story said that S&P Global Ratings had affirmed Egypt’s credit ratings as BB. This referred to the agency’s separate foreign and local-currency ratings.

A state committee left fuel prices unchanged at its latest quarterly meeting, defying expectations of another raise and ending a streak of six consecutive quarters of petrol price hikes, the Oil Ministry said in a statement yesterday. Fuel prices have seen a 23-28% hike since last April.

A further price hike had seemed likely: Former deputy chief of the Egyptian General Petroleum Corporation, Medhat Youssef, had said that the government would likely hike prices for the final quarter in response to rising prices.

The pause could be a welcome one amid price pressures: The committee’s decision comes after September data showed inflation hitting a four-year high of 15.0%, with transport costs up 17.9% y-o-y.

All prices will remain the same following across-the-board hikes last quarter:

• 95-octane is EGP 10.75 per liter.
• 92-octane is EGP 9.25 per liter.
• 80-octane is EGP 8.00 per liter.

Mazut (fuel oil) prices remained at EGP 5k per ton for all industries except food and electricity producers, who continue to be charged EGP 4.2k per ton. Diesel will remain at EGP 7.25 per liter, after the committee hiked its price for the first time in years at its last meeting.

SOUND SMART- Global oil prices have cooled somewhat from recent highs — but there are signs that could be short-lived. Fears of a demand dip on the back of a global recession had seen crude markets retreat after peaking above USD 120 per barrel thanks to the war in Ukraine. Prices have picked up again following OPEC+’s decision to go ahead with oil cuts of 2 mn barrels per day, as well as a coming EU ban on Russian fossil fuels. Brent crude is currently trading at USD 93.50 per barrel.

The story got attention from the foreign press: Reuters.

Local players eye regional renewables investments: Hassan Allam Holding and Masdar’s green hydrogen joint venture could see investments of USD 10 bn in the next decade. Meanwhile, Orascom Investment Holding is eyeing a push into Moroccan renewables.

Hassan Allam Holding and Emirati renewables player Masdar will invest some USD 10 bn in their green hydrogen project in the Suez Canal Economic Zone (SCZone) over the next seven to 10 years, Hassan Allam Holding CEO Amr Allam told CNBC Arabia (watch, runtime: 3:11). The project is a 50-50 partnership between the two firms, Allam said.

What green hydrogen project? The two companies will build green hydrogen plants that can produce up to 480k tons of green hydrogen a year. The first facility will produce 100k tons of e-methanol annually to use as green fuel for ships. The plant is set to become operational by 2026.

Hassan Allam and Masdar will sign the final agreement on the project during COP27, Allam said. “This reflects really well on the Egyptian market, seeing a company of Masdar’s size investing these great sums in it,” he added.

Pushing into logistics: Hassan Allam will invest USD 200 mn in the logistics sector and wants to expand its logistics business through acquisitions and establishing new projects, Allam said, without mentioning a time frame. He said the company had inked a logistics agreement with Danish shipping giant AP Moller-Maersk, without giving more details. Hassan Allam is also developing a 200k meter green logistics area in New Cairo, which will serve e-commerce players including Jumia and PepsiCo.

Hassan Allam is working on a major solar energy project with the state, with details to be announced at COP27, Allam said.

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OIH could invest USD 100 mn in Moroccan EV charging, renewables, agriculture: Orascom Investment Holding (OIH) is ready to invest up to USD 100 mn in the Moroccan market as soon the appropriate investment arises, CEO Naguib Sawiris said on the sidelines of an African business forum, according to Bloomberg Asharq. “We are looking into renewable energy, EV charging stations and the agro-industrial sectors,” he told CNBC Arabia (watch, runtime: 2:36).

Good timing: Morocco and the EU last week agreed to establish a “green partnership” that could boost the country’s ambitions to become a renewable energy export hub to Europe (a goal it shares with Egypt). Enterprise Climate has the full story.

OIH wants to get in on EV charging across Africa and is in discussions with several unnamed African governments on the topic, Sawiris told Asharq, reiterating comments he made earlier this month. The company is also looking at building new hotels in Tunisia, Senegal, and Sudan, Sawiris said to CNC Arabia, in addition to the four new local hotels he announced earlier this month.

Sawiris also called for a more flexible EGP: “A more expensive USD isn’t an issue — [the USD] has increased in value against the EUR and GBP as well. The issue is lack of availability, [and] trying to stabilize it by force isn’t the solution,” he said. “We need a more flexible EGP.”

WATCH THIS SPACE- Qataris eyeing Damietta Port? Representatives from Maha Capital, the investment arm of Qatar Investment Authority (QIA), visited Damietta Port last week, a month after signing an MoU with the Transport Ministry to explore investment in the country’s ports, the Damietta Port Authority said Thursday. Under the agreement, Egypt and Qatar are conducting feasibility studies for “joint projects in ports.”

Qatar to challenge DP World + Abu Dhabi Ports? Gulf involvement in the nation’s ports has so far been dominated by Dubai’s DP World and Abu Dhabi Ports, which have acquired several container terminals around the Suez Canal and the Red Sea. ADP has been contracted to develop and run a terminal at Safaga and Ain Sokhna ports and recently took a majority stake in a major local shipping and logistics firm. Meanwhile, DP World has been strengthening its position at Ain Sokhna port, completing a major expansion at the port late last year and recently signing an agreement to build a new logistics zone.

The day in M&A: Egypt-born startup ArabyAds closed a major international acquisition, while Refinitiv data puts Egypt at #3 in MENA for the value of inbound M&A in 9M 2022.

Egypt-born adtech startup ArabyAds has acquired global influencer marketing platform indaHash for an undisclosed sum, according to a statement. The acquisition — which comes just weeks after Dubai-based ArabyAds closed a USD 30 mn pre-series B funding round — will give it access to new markets across the world. The founders of indaHash will continue to run the company under the larger ArabyAds brand, according to the statement. Launched in Poland in 2016, indaHash has run influencer marketing campaigns in 115 markets for brands including, Danone, McDonald’s and Samsung.

More acquisitions in the cards for ArabyAds? “We will continue our commitment to associate with technology leaders who share similar business synergies and strengthen our entry into new markets,” said Gulrez Alam, chief investment and strategy officer at ArabyAds.

About ArabyAds: Founded in 2013 by Mahmoud Fathy (LinkedIn) and Mohammad Khartabil (LinkedIn), the Egypt-born company is currently headquartered in the UAE and has offices in Egypt, Tunisia and Jordan. ArabyAds offers online and in-app marketing and data insight tools in more than six countries, and last year acquired influencer marketing agency Dmenta, which also operates in Egypt.

EGYPT #3 FOR INBOUND M&A IN MENA-

Egypt attracted USD 6.5 bn in inbound M&A during the first nine months of 2022, making it third-biggest destination in the MENA region after the UAE and Saudi Arabia, according to Refinitiv data cited by Zawya. At USD 21.3 bn, the UAE accounted for more than half of the region’s inbound M&A between January and September, while Saudi received USD 7.1 bn.

Dealcount at record high: The value of M&A in the region fell 17% to USD 69.7 bn in 9M 2022, though the number of agreements climbed 5% to reach the biggest first nine-month total since records began in 1980.

The biggest transactions with MENA involvement: Canadian investment fund CDPQ’s purchase of a stake in DP World for USD 5 bn. E&’s USD 4.4 bn acquisition of 9.8% of Vodafone came in second.

Tax breaks for FX: Companies that use hard currency to fund at least half of the investment cost of industrial projects in Egypt could be handed generous tax breaks under plans greenlit by ministers last week, cabinet said in a statement Thursday. Under proposed amendments to the 2017 Investment Act, companies would receive a tax cut of up to 55% on income generated by projects funded by FX, a move designed to attract more hard currency into the country and shore up its external position.

What we know so far:

• At least 50% of the project’s cost must be funded by FX;
• The project should be in operation within six years of the law coming into force;
• The rebate would be paid to companies within 45 days of the tax return submission deadline.

More details to follow: There’s no word yet on which industries would have access to the incentives. Cabinet said it will issue a decision on eligible projects along with other details on the terms of the incentives.

What’s next: The amendments have been referred to the House of Representatives for discussion and a vote, a source at the House told us yesterday.

Gold miner Centamin’s revenues rose 19% y-o-y to USD 218.1 mn in 3Q 2022 despite a 3% y-o-y fall in gold prices, driven by lower costs, a 22% rise in sales volume, and higher production, according to the company’s earnings release (pdf).

Going solar: Centamin’s solar facility at the Sukari mine is in the final stage of commissioning and, at current prices, will save the company USD 20 mn a year on fuel. The company has invested USD 40-45 mn in the installation, Country Manager Amr Hassouna reportedly told Al Mal.

Our talking heads lauded yesterday’s decision to keep fuel prices unchanged. The government’s fuel pricing committee kept prices in place after six consecutive quarterly hikes. We have the full story above.

Stable fuel prices could attract foreign investors: “This move reassures Egyptian citizens and it will encourage foreign investors to come to Egypt, seeing as our fuel prices are somewhat stable and reasonable,” Essam Khalil, head of the Free Egyptians Party, told Masaa DMC (watch, runtime: 3:39).

The move came as a surprise, Ahmed Ghoneim, economics professor at Cairo University, told Salet El Tahrir (watch, runtime: 6:00). Al Hayah Al Youm also covered the story (watch, runtime: 1:12).

Our long awaited economic conference kicks off today — and it couldn’t have come at a better time, especially seeing the inflationary waves the world is experiencing, Hanan Wagdy, head of political participation at the conference, told Masaa DMC (watch, runtime: 23:57). We have the full rundown on the conference and its agenda in the news well, above.

The conference will be livestreamed in its entirety on the event website to make it accessible to all citizens, Heba Abdel Moneim, head of the technical office at cabinet’s Information and Decision Support Center, told Kelma Akhira (watch, runtime: 6:23). The technical committee has so far received over 480 economic proposals, she added.

The private sector will have a more prominent role than the government in the sessions, Gihan Saleh, Prime Minister Moustafa Madbouly’s economic advisor, told Hadret Al Mowaten (watch, runtime: 9:47). The government will be doing more listening than talking, she said. The conference also got coverage from Al Hayah Al Youm (watch, runtime: 2:03).

AND- Saudi wants more Egyptian tourists: The Saudi Tourism Authority met with a number of tourism experts here with the aim of boosting tourism to the KSA and attracting more Egyptian tourists. El Hekayah had the story (watch, runtime: 5:57).

It’s all about human rights in the foreign press this morning after climate activist Greta Thunberg, the family of imprisoned activist Alaa Abdel Fattah, and Amnesty International criticized Egypt’s human rights record. Thunberg called on her social media followers to sign a petition condemning arbitrary arrests, while UK Shadow Foreign Secretary David Lammy joined Sanaa and Mona Seif at a protest in London calling for the release of Abdel Fattah, who has been on a hunger strike for weeks. Sky News and Quartz have more.

Not all foreign media is viewing COP27 through the prism of human rights: Euronews looks at the Children and Youth Pavilion, which will provide a space for children to discuss policy in a first for a COP event.

Banks are issuing high-interest CDs to help them cushion the impact of the CBE’s new reserve requirements. A number of banks have issued three -year certificates of deposit (CDs) at interest rates of between 13.5-15.0%, including QNB Al Ahli, Mashreq Bank, Banque Misr, National Bank of Egypt, Credit Agricole, and the Arab African International Bank, Bloomberg Asharq reports.

IN CONTEXT- Last month, the central bank bumped up its reserve requirement for all banks to 18% from 14%. The reserve ratio regulates how much capital commercial banks are required to hold in their reserves. “The rise in costs in light of the CBE's decision to increase the reserve ratio pushed banks to issue certificates with competitive returns to attract deposits exempt from the ratio,” one banking official is quoted as saying.

MEANWHILE- Rare earths in Egypt are getting attention after last week’s announcement that a “black sands” project, executed by a unit of Hassan Allam Holding for the military, had been completed. Fortescue Future Industries will send a team to Egypt to explore investments in our mining sector, with a particular interest in rare earth elements and minerals including silica, used to produce solar panels. (Statement)

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

• Telecom Egypt said in an EGX filing that it has not received any official bids for its minority stake in Vodafone Egypt, publicly stating what a company source told us last week. Press reports had claimed that Qatar’s sovereign wealth fund is in advanced talks to buy up 20% of the company. (Disclosure, pdf)
• Fintech startup PayMint could become the official payment platform for the soon-to-be-launched Egycomex commodities exchange after reportedly signing a partnership agreement with the EGX. (Al Mal)
• French container giant CMA CGM has announced a new USD 500 / TEU overweight surcharge on containers heading from Egypt to the US and Canada that weigh more than 20 tons.