AM — Is the Qatari sovereign fund closing in on a 20% stake in Vodafone Egypt?

Are talks between TE and Qatar’s sovereign fund over Vodafone Egypt hotting up? The Qatar Investment Authority’s (QIA) talks with Telecom Egypt over the potential purchase of a 20% stake in Vodafone Egypt have “accelerated” and could close “very soon,” Bloomberg Asharq reports, citing two sources it says are in the know.

The Qataris are reportedly offering more than USD 1 bn for the 20% stake, according to the news outlet, valuing Vodafone Egypt at USD 5 bn at least. That’s more than South Africa’s Vodacom is paying for its ongoing acquisition of a 55% stake in Vodafone Egypt from Vodafone Plc, which values the company at around EUR 4.25 bn (USD 4.4 bn). That transaction is still waiting on approval from Egyptian regulators.

REFRESHER- QIA and the national telecoms provider have reportedly been in talks over the transaction since September, as the Qatari sovereign fund looks to invest as much as USD 2.5 bn to purchase state-held stakes in unlisted companies. The EGX-listed telecoms giant holds a 45% stake in Vodafone Egypt and the government owns 80% of TE.

QIA isn’t the only interested party: TE is in talks with three Arab sovereign funds to divest part of its stake in Vodafone Egypt, though the telecoms giant has yet to receive any official bids, a source close to the matter previously confirmed to Enterprise. We’ve previously reported that QIA, Saudi Arabia’s Public Investment Fund, and Abu Dhabi’s ADQ are all in talks with the government over a piece of Vodafone Egypt. TE could come to an agreement with one of the Arab sovereign funds by the end of the year, our source said.

This could still take some time: QIA earlier this month deposited USD 1 bn with the Central Bank of Egypt as a stop-gap while it completes due diligence and finalizes agreements on potential stake buys.

A decision by the government to end the central bank’s role in subsidizing loans has not been received well by some sections of the business community, with the Egyptian Businessmen’s Association (EBA) and some MPs calling on ministers to rethink their plans.

Refresher: A decree issued by Prime Minister Moustafa Madbouly earlier this week will see the CBE stop providing funding for subsidized loans, and pass the responsibility to the housing, finance and tourism ministries. The central bank currently backs soft loans for key areas of the economy, including construction, industry, agriculture and tourism, as well as mortgages and some cars. It has allocated hundreds of bns of EGP to financing borrowers in these sectors with loans at an interest rate of 8%.

The IMF wants this to stop: In the weeks leading up to last month’s loan agreement with the IMF, reports in the press had suggested that ending subsidized loans was one of the conditions attached to fresh financing. Under its 2020 standby loan program, the central bank had pledged not to renew the programs past FY2021-2022 but still hasn’t pulled its support. The IMF argues that providing loans at below-market rates complicates monetary policy, but is willing to allow them to continue provided the costs are borne by the government and not the central bank.

Industry figures aren’t happy: “The export-led industrial and agricultural sectors will be the ones most negatively impacted by the decision,” said EBA chairman Ali Eissa. “This decision will push the export-led sectors out from competition on the world markets, cut industrial investments and compel most industrial businesses to lay off workers.”

The EBA appears to have sympathizers in the House: Rep. Mahmoud Essam, who sits on the House Industrial Committee, has called on the government to listen to the industrial committee’s concerns. “Many start-up industrial projects depend on subsidized loans and the halt of these will put them in a serious mess,” he said.

Cue an appeal to the president: The EBA’s industrial, agricultural and tourism committees will meet today to discuss their response to the decree, and will draft a memorandum that will be submitted to the Supreme Investment Council, which is chaired by President El Sisi. The industry body will propose setting up a fund at the Finance Ministry to help fund the loans, and phasing out the central bank’s involvement over the next five years, said Mageddin El Manzlawy, chairman of the EBA’s industrial committee. “Most of the loans are directed to buying raw materials and production inputs and a sudden halt of them will throw companies into a state of disarray,” he said.

They want others on board: The EBA is in talks with the Federation of Egyptian Industries (FEI) and the Chambers of Commerce to form a unified position. The FEI, led by businessman Mohamed El Sewedy, is yet to reveal his position on the issue.

The EGP might not be out of the woods yet: Japanese bank Nomura thinks that Egypt is the most vulnerable emerging-market country to a currency crisis over the next 12 months, according to a report. Egypt is ranked highest of the 32 EM nations included on the bank’s Damocles Index, indicating a strong chance that the country will suffer an exchange-rate crisis in the coming months.

The sword: Nomura describes its Damocles Index as an “early warning model of EM exchange rate crises.” It uses eight indicators — focusing on FX reserves, debt levels, the exchange rate and capital inflows — to produce a score. Anything over 100 signifies a 64% chance that the will experience an exchange rate crisis in the following 12 months, the bank says.

Egypt is currently significantly higher than that: Nomura gave Egypt a score of 165 in the latest index, joining six other countries on the bank’s most-vulnerable list, among which are Romania (145), Sri Lanka (138),Turkey (138) and Pakistan (120). “Though the currencies of Egypt, Sri Lanka, Turkey and Pakistan have depreciated sharply in the last 12 months, Damocles indicates that they are not yet out of the woods due to their still-weak economic fundamentals including high inflation,” the bank wrote.

The EGP has already seen a significant drop in value this year: The EGP has fallen to a record low against the USD this year as tightening financial conditions and spillover effects from the war in Ukraine hit Egypt’s external position. The currency has been one of the world’s worst-performing currencies, tumbling 56% against the USD since March after the central bank twice devalued the currency. Since the central bank announced a floating exchange rate at the end of October, the currency has fallen 24.5% and has continued to gradually slide through November.

The float, together with the reassurance of a new IMF program, has begun to bring foreign currency back into the country — at least into the stock market, which has surged almost 20% since the central bank’s announcement last month. Data released in the coming months will give us an idea of the impact on the local bond market and the current account.

The Damocles Index doesn’t paint a good picture for EM: Most countries listed on the index saw their currency risks rise, with the aggregate score rising sharply to 2,234 from 1,744 in the previous update in May. “This is the highest aggregate score since July 1999 and is not too far from the peak of 2,692 during the height of the Asian crisis, an ominous warning sign of the growing broad-based risk in EM currencies,” the bank wrote.

Ministers approved a draft bill that would establish the Egyptian Intellectual Property Authority, a public body to regulate and protect intellectual property rights in the country, cabinet said in a statement following its weekly meeting yesterday.

The authority is key to the government’s new five-year intellectual property strategy which was announced in September as part of broader efforts to improve business conditions, strengthen the private sector and boost innovation. The authority would be tasked with preparing and overseeing the implementation of the strategy, coordinating policy making, and raising awareness of IP rights among businesses and researchers. The authority is expected to launch in 2024.

Also approved at yesterday’s meeting:

#1- Tougher measures to curb building violations: Cabinet approved legal amendments that would allow authorities to disconnect electricity, water and gas connections to buildings illegally built on agricultural or state land.

#2- The mystery Forward Egypt company that is manufacturing footballs for the World Cup is getting its own freezone in Tenth of Ramadan city. The zone will have three factories for the manufacture of footballs, sports shoes, and sportswear with a capital of USD 10 mn and investment costs estimated at USD 22 mn. We’ve been unable to find any information about this company but according to the government it is the only factory approved by Adidas in the Middle East.

#3- More power for the EMA: Ministers approved a draft bill to restructure the Egyptian Meteorological Authority (EMA) as a public body that manages and provides meteorological services and provides general policy in the field nationwide.

Our friend Hisham Ezz Al Arab has resigned from his post as an advisor to CBE Governor Hassan Abdalla in the wake of his return to CIB’s board as non-executive director, he told Al Arabiya. Ezz Al Arab said he plans to help CIB implement the bank’s plans in the coming period. Asked about media reports suggesting he could return to the top job next year, he said he cannot talk about his future and stressed his focus on his duties as a board member.

Communications platform provider Cequens has hired five new executives as part of a five-year expansion plan, according to a company statement (pdf):

• Ahmed Shabrawy (LinkedIn) was appointed chief research and innovation officer;
• Hussein Malhas (LinkedIn) is the company’s new VP of growth and revenue operations;
• Yara Milbes (LinkedIn) was appointed VP of global marketing;
• Nermeen Sobhy (LinkedIn) is the new VP of carrier relations;
• Muhammed Nauman (LinkedIn) was appointed VP of operations.

Hossam Seifeldin was appointed the Egypt CEO of French consulting firm Capgemini, according to a company statement (pdf). Seifeldin has years of experience in the tech sector, and worked at IBM for 27 years prior to joining the firm.

Amany El Wesal was appointed to head the Trade Ministry’s anti-dumping policy unit, sources at the ministry reportedly told Al Borsa. El Wesal, who heads the Export Development Fund, will replace Ibrahim El Seginy, who will maintain his position as assistant minister for economic affairs and the head of the trade remedies sector.

Football continued to dominate proceedings on the airwaves last night — and expect this to continue all the way through to 18 December when the tournament ends.

Most of the talking heads focused on Germany’s shock defeat by Japan: Comparisons with Saudi Arabia’s stunning win against Argentina on Tuesday were made, and most of the hosts didn't try to hide their happiness at the German loss. Ala Mas’ouleety (watch, runtime: 4:04) and Al Hayah Al Youm (watch, runtime: 8:59) both recapped the game, while Masaa DMC dedicated airtime both to the Japanese fans cleaning seats after the game (watch, runtime: 9:28) and the German team’s pre-match silent protest against Fifa’s decision to ban the OneLove armbands. “I don’t understand why there’s an abnormal Western push for such a thing,” show host Ramy Radwan said, voicing opposition to LGBTQ rights (watch, runtime: 4:03).

MEANWHILE- Not many businesses have signed up to the government’s e-invoicing system: Only 150k companies have registered on the e-invoice system ahead of a 15 December deadline, Tax Authority Deputy Head Rasha Abd El Aal told Al Hayah Al Youm (watch, runtime: 11:25). Around 1 mn companies will be required to start issuing electronic invoices for B2B and B2C transactions via the government portal from the middle of next month.

What e-invoicing system? The government is working to digitize all B2B and B2C invoices, a move designed to give the government greater oversight over tax and reduce the size of the informal economy. The Tax Authority launched a pilot in late 2020 and has been gradually extending the system since then. All B2B and B2C invoices across the country are expected to be fully automated by December.

Almost 20k expats have registered on the government’s app to import cars to Egypt since it launched on 15 November, Tax Authority spokesperson Ali Galal told Masaa DMC (watch, runtime: 9:09). Some 1.7k people have obtained a payment order, with total orders estimated at USD 25.8 mn, Galal said, adding that USD 1.3 mn has been already transferred to a set up bank account by the government.

ICYMI- The government is trying to draw more foreign currency into Egypt by incentivizing expats to import cars. Expats will receive rebates on all customs and import taxes within five years provided they pay them up from in hard currency. The scheme has a four-month window, with expats allowed to import cars within a year of obtaining necessary approvals on USD payments. The government had originally said the scheme will pave the way for 300k-500k cars being imported, drawing USD 2.5 bn in foreign currency in the process, yet officials have recently backtracked on the ambitious targets.

On a slow morning in the foreign press, the EGX’s bull run is getting attention from Bloomberg, which notes that the benchmark EGX30 has soared 47% from its July low, helped by last month’s currency float and announcement of a USD 3 bn IMF bailout.

Among the other stories we’re paying attention to this morning:

TRANSPORT- The Transport Ministry is in talks with three unnamed French financial institutions for a concessional EUR 2 bn loan to fund development works for Cairo Metro Line 6, sources familiar with the matter reportedly told Al Mal. They said the financing represents half of the line’s total cost, with the remainder being funded by the state budget. The report comes less than a week after French rolling stock manufacturer Alstom signed a framework agreement on the sidelines of COP27 with the National Authority for Tunnels to design, build and maintain the line. The French firm didn’t disclose which other companies will work on the project or the value of the contract.

TECH- The 2Africa subsea cable being laid around Africa has made its first landing in Egypt at Ras Ghareb with another landing set to follow in Port Said, Meta and Telecom Egypt said in a joint press release (pdf) Tuesday. The subsea cable, which will be the longest in the world, is being laid by a consortium of global telecom companies, and will significantly upgrade Africa’s broadband and mobile connectivity when it’s finished in 2024. The 45k-km cable will link 46 locations across Africa, Europe and Asia.

BANKING- The Financial Regulatory Authority has approved Abu Dhabi Islamic Bank Egypt’s proposed EGP 1 bn capital increase, it said in a statement (pdf) Monday, allowing the bank to publish an invitation to subscription for existing shareholders. ADIB will offer an additional 100 mn shares at EGP 10 per share to existing investors.

FINANCIAL SERVICES- Jordan trading platform CFI Financial Group has acquired Egyptian brokerage El Mahrousa for Securities Trading and plans to launch CFI in Egypt in early 2023, Al Borsa reports.

LEGISLATION- The Senate Housing Committee approved legislation designed to accelerate the reconciliation process for illegal buildings.

Egypt has expressed “great concern” at recent attacks on Kurdish groups by Turkey and Iran. In a statement yesterday, Foreign Ministry spokesperson Ahmed Abu Zeid called on the two countries to halt the attacks which he said were violating the sovereignty of Iraq and Syria. The Turkish military has targeted YPG units in northern Syria in the wake of last week’s terror attack in Istanbul while Iran has hit targets in Iraqi Kurdistan.

Turkey to launch ground incursion into Syria: Turkish President Recep Tayyip Erdogan yesterday threatened to launch a ground offensive into northern Syria to push the militia back from the border, saying that the recent wave of airstrikes were “only the beginning,” according to Turkish state media.

The handshake: This comes just days after President Abdel Fattah El Sisi and Erdogan expressed hopes that the two countries could improve ties after meeting for the first time since El Sisi came to power in 2013. The two were pictured shaking hands and conversing on the sidelines of the World Cup in Qatar on Sunday, and the day after both said the meeting could serve as a starting point for improving relations.

Karim Rogers, executive director of El Alsson British and American School: Each week, My Morning Routine looks at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is El Alsson British and American School Executive Director Karim Rogers (LinkedIn). Edited excerpts from our conversation:

I'm a father of four. I'm a people person who enjoys being social and active. I enjoy food and travel. Every day at work is different for me; there is no such thing as a routine. There's always something going on at school, and I'm constantly learning new things alongside the students.

I am in charge of all school operations. I have two principals who handle daily education operations with their teams, while I handle operations. I am involved in education, but not in its administration. My responsibilities include finances, human resources, licensing, admissions, buses, medical care, and all operations and resources required to keep the school running. My team includes the CFO, the head of human resources, the marketing and business development teams, as well as the buses and clinics. These are the people I work with every day.

In many schools, the principal is also in charge of operations. We don’t have that. The principal comes into my office and tells me what they require, and I handle it, so they aren't preoccupied with logistics that have nothing to do with them, such as licensing for operations or foreign employees, or where to get the money. Instead, they focus on education quality assurance.

My morning routine is determined by how well I slept the night before because of the kids. I get up and spend some time alone in the morning. I'll go to the club at 6am and do some kind of sport, either jogging, swimming, or going to the gym. I drop my youngest child at the nursery, and my other children take the bus. Then I'm in work mode.

I arrive at the office between 8-8:30am. My favorite thing in the morning is to drink my espresso. I have my own espresso machine and coffee blends. Then my assistant usually has a stack of documents for me to sign. I handle my finances, then I follow up on different departments and our weekly tasks. For example, right now it is admissions season, so I would be dealing with the registrar. I'm not involved in the nitty-gritty of operations. I try to delegate and empower others so that they can get on with the job.

The highlights at school for me are the activities, whether sports, arts, or theater — I like being a part of it. I try to schedule an hour-long walk around the school every day. I'll go floor by floor through all of the buildings — early years, primary, and secondary. I have my meet and greet and get to see everyone.

I’m generally a well-organized person. I'm the type who prepares my clothes for the next day at night so I don't have to worry about it in the morning. I keep a to-do list and keep track of what I've accomplished and what I haven't. If I haven't completed all of my tasks, ​​I'm disciplined. I'll return home to complete it. I believe that being organized is a requirement of our job. We also need to be easily accessible.

In my line of work. I'm always looking for ways to improve myself. My professional development is a top priority for me and I enjoy attending conferences and taking courses. I always look at the half-empty cup and try to fill it up. I like to think about how I can improve and learn from others. I try my hardest to provide the best possible outcome for our students.

Work-life balance, in my opinion, is a conscious decision that must be made. If I have any work obligations when I return home, I’ll do them. If not, it's either family time or alone time for me. It’s essential for everyone, whether they’re a father, a mother, or a director, to have their alone time. You require time to reflect. Work-life balance is essential to me. I don't believe you should work until 7-8pm every night. I won’t respond to emails or work matters after 5pm unless it’s really urgent.

I enjoy going for a walk in the club after I finish work, or watching my children at their sports training. If it's the weekend, we have our family breakfast or lunch. At night, I catch up on Netflix. I can't keep up with all of the shows, but there are a few that I'm currently watching, like House of Dragons and Suits, and I enjoy cooking shows. I also keep up with my social media, which is fun. I'm not a book reader; I prefer to read articles and journals. I enjoy watching National Geographic and the Discovery channel.

I enjoy both cooking and eating. When I travel, I always research cuisines and the best places to eat before going. I make a point of not only focusing on Michelin-starred restaurants, but also on street food. One of my favorite ways to unwind is to take my wife out to eat, which is great because Egypt has recently become a foodie entertainment hotspot.

The best piece of advice I've always followed is to be patient, listen, and learn. You must be patient because everyone eventually gets their slice of the pie. And in order to lead, you must be an excellent listener. You must also learn from others.