AM — First IMF loan tranche could land this month, says Maait

Good morning, friends, and happy Monday.

We’re looking forward to meeting many of you tomorrow at 8am at the Grand Egyptian Museum for our inaugural Enterprise Climate X Forum.

If you’re attending: Please plan to arrive on time for our 8am standing networking breakfast. Traffic in the area surrounding the GEM has been heavy of late, so you will likely want to leave a few minutes early.

** You will need a special QR code to gain admission to the GEM. Everyone who received and completed our online registration form got their QR code by email yesterday. If you registered online and did not receive a QR code, please reach out to us today.

We regret that overwhelming demand from the community meant we could not welcome everyone who expressed interest in attending.

STAY TUNED- The Enterprise Climate X Forum is our first large-scale event, but it’s not our last. We look forward to welcoming many more of you at our slate of Enterprise X Forums coming up in 2023.

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HAPPENING TODAY-

It’s PMI day: S&P Global will tell us how Egypt’s private sector performed in November when it publishes its latest purchasing managers’ index a few minutes after we hit send on this morning’s issue. You’ll find it here at about 6:15am CLT.

REWIND- The private sector was continuing to struggle with the impact of inflation and supply chain snarls in October, with the PMI remaining effectively unchanged at 47.7, firmly below the 50.0 threshold that separates growth from contraction.

The smart money: Expect the contraction to have deepened in November on the back of the EGP float and heightened inflationary pressures.

FYI- Another month of contraction and it will have been two years since private-sector business activity last recorded growth — the last time the PMI was in the green was all the way back in November 2020.

MEANWHILE- It’s the opening day of Food Africa 2022 at the Egypt International Exhibitions Center. More than 440 exhibitors from 28 countries will be at the food expo, which runs through to Wednesday.

On the House agenda today:

• Competition Act: The remaining articles of the Competition Act are set to be discussed and passed by the House today, with a final vote expected tomorrow.
• Western Desert exploration agreements: The General Assembly will discuss three oil exploration agreements in the Western Desert signed with Energean and Croatia-based INA; Kuwait Energy Egypt; and Egyptian National Petroleum For Exploration and Development Company (Enpedco).
• FRA boss to discuss fintech regs: Financial Regulatory Authority Chairman Mohamed Farid will appear before the House Economic Affairs Committee to discuss the legislative impact of amendments to the Fintech Act and the Capital Market Law.

LATER THIS WEEK-

Samir in the hot seat: Trade and Industry Minister Ahmed Samir will face questions from MPs tomorrow on issues facing manufacturers, including on licensing and exports, as well as what the ministry is doing to solve the crisis in the automotive industry.

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WATCH THIS SPACE-

#1- The Electricity Ministry will start allocating land for the nine green hydrogen projects signed at COP27 within the next few days, Electricity Minister Mohamed Shaker reportedly told Al Mal. The cabinet had signed off last week on agreements with international power companies to construct nine green hydrogen and ammonia facilities in the Suez Canal Economic Zone, which were made during last month’s climate summit and could require as much as USD 83 bn to complete. The facilities would collectively produce up to 7.6 mn tons of green ammonia and 2.7 mn tons of hydrogen a year when fully operational.

#2– Expect new rules for short selling to arrive in 1Q 2023: That’s according to Al Shorouk, which reported comments made by FRA boss Mohamed Farid at an event yesterday. Farid’s statements come as authorities look to boost short selling, which was introduced in Egypt in 2019 but has failed to take off. The FRA, EGX and Misr for Central Clearing and Depository (MCDR) have been in talks with foreign investors and experts, including Citibank, on best practices to boost short selling activity and improve clearing procedures in the country.

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WORLD CUP-

France to take on England in World Cup quarter-final: France and England eased through their round of 16 ties yesterday, setting up a tasty quarter-final clash later this week. It was a comfortable 3-0 victory against Senegal for the Three Lions, with Harry Kane getting his first goal of the tournament and Jordan Henderson and Bukayo Saka also finding the net. Earlier in the day, Kylian Mbappe continued his ruthless form in front of goal, scoring twice in France’s 3-1 win against Poland and putting him ahead in the race for the Golden Boot.

The R16 continues today (all times CLT):

• Shock Group E winners Japan play 2018 finalists Croatia at 5pm.
• Tournament favorites Brazil will take on South Korea at 9pm.

THE BIG STORY ABROAD-

Leading the conversation in the global business press this morning: Oil is surging this morning as traders react to yesterday’s OPEC+ meeting, the introduction of the Russia oil price cap, and the easing of covid-19 curbs in China — all of which look set to tighten global supply. Brent jumped 2.3% to USD 87.38 a barrel in Asia this morning while US crude was up 2.1% to USD 81.66.

OPEC+ left oil output unchanged at its virtual meeting yesterday as it assesses the impact of Western sanctions on Russian crude and the relaxation of China’s covid restrictions on the global market, Bloomberg reports. The alliance, which is led by Saudi Arabia and Russia, had made a surprise 2 mn barrels-per-day production cut at its last meeting in October in efforts to support falling oil prices.

G7 price cap + EU embargo now in force: Today marks the start of an EU embargo on Russian seaborne crude and the introduction of the G7’s price cap mechanism, which bans shipping and ins. companies from transporting Russian oil priced at more than USD 60 a barrel.

Moscow’s response could have major implications for the oil market: Russian Deputy Prime Minister Alexander Novak said yesterday that Russia will refuse to sell oil subject to the price cap and will opt to reduce production, potentially removing mns of barrels from the global market. Reuters quoted him as saying.

OPEC+ at the ready: The alliance said following its meeting it could “meet at any time” and could “take immediate additional measures” in response to market instability, according to the Financial Times.

MARKET WATCH-

Investors are calling the Fed’s bluff: Traders in US treasuries are predicting that the Federal Reserve will resort to two rate cuts at the end of next year as the economy slows, despite the Fed’s signals that it will not be reversing course on its monetary tightening cycle, the Financial Times reports. Treasuries futures markets are penciling in a peak for interest rates in May 2023, before they fall back by about 50 bps by the end of the year.

Fed head Jerome Powell recently said the US central bank could start slowing the tightening cycle as soon as its next meeting on 13-14 December, though he also reiterated that more evidence is needed to prove inflation is declining. A strong US jobs report (pdf) published over the weekend also means the Fed is likely to stay on course with its tightening cycle.

ICYMI- Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we asked whether Egypt has what it takes to become an electronic design and manufacturing hub.

CIRCLE YOUR CALENDAR-

Key news triggers to keep an eye on this week and beyond:

• Inflation: Inflation data for November will land on Thursday, 8 December.
• Foreign reserves figures for November should be out sometime this week.
• Interest rates: The Central Bank of Egypt’s Monetary Policy Committee meets on Thursday, 22 December to review interest rates.

The cabinet’s Information and Decision Support Center (IDSC) will kick off the first session of its new intellectual forum on Thursday, 8 December, according to a statement. The weekly forum will see experts including government officials, academics, representatives of multilateral institutions, MPs, and national dialogue members meet to discuss key policy questions and make recommendations on them to the prime minister.

Thursday’s session will cover fiscal discipline and sustainability. The remainder of the December sessions will focus on our investment environment; ways to support sustainable agriculture in line with Europe’s Green Deal; and the latest in Ukraine.

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

*** 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.

We recently had breakfast with 20 top CEOs to talk about why exports and FDI are key to our economy going forward. After reading our five-step recipe for turning Egypt into a global export hub and FDI magnet, participating CEOs agreed to answer two questions on the record for our latest CEO Poll.

We’ve already heard from: GSK’s Mohamed El Dababy | McKinsey’s Jalil Bensouda | Somabay’s Ibrahim El Missiri | ALC Alieldean Weshahi & Partners’ Bahaa Alieldean | HSBC Egypt’s Todd Wilcox | Actis’ Sherif El Kholy.

TODAY- Omar Elsahy (LinkedIn) is general manager of Amazon Egypt. He brings to the table a rare mix of experience: He runs a major multinational company in Egypt, he’s an entrepreneur who has started and run his own businesses, and he’s a mentor and consultant. His industry experience ranges from sales to outsourcing and retail, much of it with a tech bent. Omar was also the subject of one of our weekly My Morning Routine interviews back in 2020.

ENTERPRISE- Which industry would you put on a focused short list — and why?

OMAR EL SAHY- Before you pinpoint an industry, there are a couple of things to take into consideration when you’re talking about a country taking a path of progress. Egypt has many different types of resources, but when it comes down to it, it’s the people. You try to extract on capacity building, creating jobs, but also leveraging infrastructure and tech advancements. If you look at the human capital, the young age group and the tech savviness of the youth gives an optimistic view of where the country can go.

If I translate that into what can use a lot of tech and scale — and flourish if you invest in the capacity of people — I feel strongly about local manufacturing. This is not about 10 big companies doing the manufacturing and then exporting, but more about investing in small and medium-sized enterprises (SMEs) as they are the engine of the country’s economic growth. We need to drive manufacturing through SMEs if we’re going to leapfrog. A lot of it comes down to the private companies and the industry leaders working closely with the government to empower SMEs and integrate them in the formal economy. Nevertheless, there's a piece missing. We need to start bringing tech into local manufacturing.

If we’re saying we want to focus on local manufacturing, people think we should do what we did before at scale and really invest in it. But the question is, if we’ve been doing this for so long, why hasn’t it been working?

I think what could be developed further is tech and the digitization of local manufacturing and SMEs growth. We need to continue building on the export of physical goods, but also build on digital exports. When I say local manufacturing, people think of garments. But I also want to talk about how to do that in an era of digital transformation. This will help create a lot of new value, especially if we can streamline or optimize operations to address supply chain issues.

E: Why are exports and FDI the way forward?

OS- FDI and exports are the most sustainable economic growth measures compared to something like hot money. So, we are in alignment that they are essential for the country’s path towards progress. But we should not limit our thinking on how we get more FDI or how we can export more goods. We need to take a step back to prepare ourselves a bit more. We need to look at the different things happening around the world, disruptions and catastrophes, like COVID and recessions, for example. We need to start predicting when these things will happen so we can prepare ourselves before we engage so that we can build more on mitigation.

Egypt is very resilient in that sense, but the planning is probably where we have a little more work to do. There’s a lot of positives that have come behind that — in ready-made garments, agriculture, and other industries, but the core is planning.

We need to be able to say no to a lot of things. We’re going to have to drive a lot more focus on the industries that are most efficient for us. We can almost take a mental model of where we should be growing (strategic areas), taking very specific categories, and becoming very strong at those. Agriculture, clothing, and garments are things that we want to focus on, rather than vehicles for example. So, we really need to drive our focus where it needs to be, build from there, and import the rest. We’re not going to become an export country overnight, so we need to make sure that we can source the raw materials for the industries that we want to grow.

Could we see the first chunk of our IMF loan as soon as this month? Egypt could receive the first tranche of its new IMF loan before the end of the year, Finance Minister Mohamed Maait has said, according to Bloomberg Asharq. Speaking at a conference yesterday, the minister said that Egypt could receive USD 750 mn this month, equating to 25% of the USD 3 bn loan program announced at the end of October.

Hold your horses: The loan program isn’t yet a done deal. The staff-level agreement we reached in October still needs the sign-off of the lender’s executive board. As of this morning, Egypt’s program isn’t yet scheduled on the board’s public agenda, which runs through 14 December.

ICYMI- The USD 3 bn, 46-month extended fund facility (EFF) will provide much-needed foreign currency to Egypt’s financial system which has come under significant liquidity stress on the back of tightening global financial conditions and the spillover effects of the war in Ukraine. It could be topped up with around USD 5 bn from unnamed “multilateral and regional partners,” the IMF has said, plus another USD 1 bn that we’re applying for from the lender’s resilience and sustainability trust.

PANDA BONDS COMING IN THE NEW YEAR?

Egypt is planning to take its inaugural USD 500 mn panda bond issuance to market in 1Q 2023, Al Mal quotes Maait as saying. Plans to issue the CNY-denominated bonds have been in the works since 2019, but were put on hold due to the pandemic. Vice Finance Minister Ahmed Kouchouk previously said the ministry could issue the panda bonds before the end of this year.

All part of our debt diversification strategy: The government is also looking to issue sukuk and “green” versions of samurai and panda bonds, following the ministry’s JPY-denominated bond issuance in late March. The issuances are part of efforts to diversify our debt and move away from hot money, which has seen some USD 22 bn in outflows this year, according to Maait.

PRIVATIZATION PROGRAM COULD RETURN IN 1Q 2023

Stake sales on EGX before March? The government could sell stakes in companies in the banking and oil sectors before March 2023, the minister said, without providing further information.

One state-owned bank we know for sure is planning to go public: Banque du Caire (BdC) has long planned to IPO on the EGX but has repeatedly delayed its plans in response to periods of market turmoil triggered by the pandemic and the war in Ukraine. The bank was planning to make its debut this year but decided in July to postpone the sale until market conditions improve. BdC has until 31 March 2023 to finish the IPO procedures.

Other state companies are looking at going public in 1Q 2023: Damietta Container & Cargo Handling Company and Port Said Container & Cargo Handling Company — both subsidiaries of the Holding Company for Maritime Transport — could both sell 25% stakes on the EGX during the coming quarter.

Both companies took a step towards a share sale yesterday: The ordinary general assemblies of both companies have approved the plans, Al Mal reported yesterday, citing informed sources.

REFRESHER- The government is looking at how and when to reboot its privatization program with recent listing changes and a new pre-IPO fund set up by the Sovereign Fund of Egypt (SFE) in September. The fund will offer stakes in state-owned companies to strategic investors and sovereign funds ahead of listing them on the bourse. The fund plans to market several state companies — including the military-owned firms Safi and Wataniya — to strategic investors ahead of IPOing them on the EGX.

A big gas find in the EastMed: Chevron has discovered an offshore gas field in the Mediterranean estimated to hold 3.5 tn cubic feet of gas, a source tells MEES. The US energy giant made the finding drilling its first ever offshore well in Egypt at its Nargis block off the coast of North Sinai, in which it holds a 45% operating interest. Italian major Eni owns 45% while the state-owned Tharwa Petroleum holds the remaining 10%.

Production has been slipping: The find comes at a good time for Egypt, which has seen output fall from a peak of 7.2 bn cf per day last September to 6.5 bn cf/d in 3Q 2022, according to MEES.

And good news for our push to become energy BFFs with Europe: Egypt signed a nine-year agreement with the EU and Israel earlier this year to increase gas exports to Europe.

Chevron has become a key player in the EastMed following its 2020 acquisition of Noble Energy. It now operates Israel’s two largest gas fields — Tamar and Leviathan — and is developing Cyprus’ Aphrodite field.

The report got attention on the airwaves last night: Kelma Akhira (watch, runtime: 3:03) and Masa’a DMC (watch, runtime: 4:31).

MPs give initial approval to new and improved Competition Act: The House of Representatives yesterday gave its initial approval on amendments to the 2005 Competition Act, which would grant the Egyptian Competition Authority (ECA) more power over M&As.

What’s at stake: Introduced early last year by the government, the amendments would give the ECA the power to block M&As that could harm market competition and promote monopolistic practices. The authority is currently only able to voice concerns after transactions are concluded. The changes have proved controversial, with disagreements between regulators resulting in the bill being kicked to the current legislative session.

What’s next: House Speaker Hanafi Gebali said the Competition Bill’s remaining articles will be discussed today, with a final vote of approval expected tomorrow. Along with the preliminary approval, the House passed amendments to Articles 11 and 18 yesterday.

We dive deeper into what this means for our business community here.

ALSO FROM THE HOUSE- The House Legislative and Constitutional Affairs Committee began discussing amendments to the 1950s Criminal Procedures Act.

Metito, a leading sustainability business, is able to unlock large scale circular water projects in MENA via sustainability-linked funding from HSBC: The world’s natural water resources are facing an unprecedented challenge. The global rate of water consumption has grown twice as fast as the world population in the last century, according to UN Water statistics. Dubai-based water and wastewater treatment player Metito is leading industry and governments through sustainable innovation, showing how circular water systems can resolve water shortages and other water-related challenges.

The United Nations, World Economic Forum and the World Bank all recognize water security, including resources and conservation, as a major environmental priority and a catalyst for positive change. Countries, cities, and industries are increasingly turning to circular water systems and Metito is playing an active role to make that vision a reality in key markets across the globe.

Metito has developed over 3k projects in more than 50 countries across Africa, Eastern Europe, the Middle East and Southeast Asia.

But it wants to do more. To meet the increasing international water demand, Metito has utilized a USD 120 mn Sustainability-Linked Loan (SLL) from HSBC to further its ability to move into new markets and enhance its presence in existing ones where it is developing large-scale projects.

“Metito’s vision to be the world’s leading provider of intelligent water management solutions is supported by the company’s three founding principles of Impact, Sustainability, and Innovation,” said Metito Chief Investment Officer Talal Ghandour. This loan underscores one of our key attributes of providing sustainable infrastructure to our municipal and industrial clients. The funding from HSBC and the wider consortium will strengthen our ability to grow across our target markets and marks an important step in our green transition and in achieving a circular economy through the provision of sustainable water infrastructure in nations that most need them.”

The sustainable finance solution, which is the first-of-its-kind in the Middle East’s water sector, will facilitate the expansion of Metito’s wastewater treatment projects and boost an ambitious growth strategy over the next five years. Metito is now further enabled to help more developing nations meet their environmental commitments.

“Not only is Metito a major player in intelligent water management solutions, but it is an ambitious business with a strong strategy to target international growth and unlock new markets. At HSBC, we take great pride in supporting businesses that are helping to create positive environmental impact, with a global commitment of up to USD 1 tn to support clients in transitioning to net zero,” Patricia Gomes, regional head of commercial banking, MENAT, HSBC said.

It was a packed evening on talk shows last night, as Kelma Akhira’s Lamees El Hadidi tried to understand the opposition of self-employed professionals to the Tax Authority’s e-invoicing system.

REMEMBER- The Tax Authority is requiring self-employed professionals, including doctors, engineers, lawyers and artists to register on the e-invoicing system by 15 December.

The Pharmacists’ Syndicate has come out in opposition to e-invoicing: In an interview on Kelma Akhira (watch, runtime: 3:11), Mahfouz Ramzy, head of the Pharma Manufacturing Committee at the Cairo Pharmacists’ Syndicate, called on Finance Minister Mohamed Maait to scrap or delay the 15 December deadline to register on the system until a meeting is held between the syndicate and officials at the ministry.

What’s the issue? Pharmacists argue they can’t stomach the costs: Ramzy said that annual expenses to register through the system “would be five times” taxes already paid by pharmacists. “We can’t incur such expenses,” he said, pegging the costs at over EGP 30k a year. The expenses include installing a designated system at pharmacies and paying monthly and annual subscription fees for the system, he said.

The Doctors’ Syndicate also has concerns: Syndicate chiefs are set to meet ministry officials tomorrow to discuss their concerns, the syndicate’s treasurer Abu Bakr El Qady told El Hadidi (watch, runtime: 3:37). El Qady believes it would be difficult to oblige private clinics in rural areas for example to register on the system, given its costly expenses and hurdles to implement the system.

The Bar Association is arguing that lawyers don’t provide services and so shouldn’t have to file e-invoices: Its deputy head, Magdy Sakhy, told Kelma Akhira (watch, runtime: 9:49) that lawyers “do not provide a service or sell a product” to have them obliged to register on the system. “I take part with the authority to achieve justice,” Sakhy said, stressing that his profession was not one of a service provider. Tens of lawyers recently staged a protest in front of the Lawyers Syndicate against the mandatory registration on the e-invoicing system.

Enterprise says: If the rest of us have gotta sign up for e-invoicing and pay our taxes, so do you.

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Pharmacists will continue to be allowed to administer some injections — but only for patients who have a prescription: Pharmacists will now only be permitted to administer intramuscular or subcutaneous injections that have been prescribed to patients by a doctor, the Health Ministry said yesterday. They will also have to pass a course designed by the ministry in order to administer injections, the statement reads.

More details: Health Ministry spokesman Hossam Abdel Ghaffar spoke to Ala Mas’ouleety on the decision (watch, runtime: 8:32) and confirmed that only doctors, nurses and accredited pharmacists who have passed the course would be authorized to administer injections, he said. The ministry announced a week ago that it would begin holding one-day courses at certain hospitals and medical centers, he said.

Why now? The decision came weeks after a pharmacist and her assistant were arrested in Alexandria over the death of two young sisters after taking injections at the pharmacy. They were referred to trial on charges of practicing medicine without a license.

Pharmacists are not happy: The Cairo Pharmacists’ Syndicate’s Mahfouz told El Hadidi (watch, runtime: 13:16) that the issue is bigger than the pharmacists administering the injections, and that any solution needs to consider the role of doctors handing out prescriptions. He called for pharmacists to have more power to intervene when they believe a doctor has wrongly prescribed a shot and rejected the idea that they should be held accountable for doctors’ actions.

Enterprise says: If all of the rest of us have gotta sign up for e-invoicing and pay our taxes, so do you.

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Egyptian journalist and television presenter Mufid Fawzy passed away at the age of 89, Ahram Online reports. Fawzy was a renowned television presenter, interviewer, and journalist. He served as host of the talk show Hadeeth Al Madena for nearly 26 years. He was also a co-host for Al Qahira Al Youm and the editor-in-chief of Rose Al Yusuf’s Sabah Al Khayr magazine.

Fawzy’s passing got the talking heads talking about his legacy, with coverage from El Hekaya (watch, runtime: 19:04), Ala Mas’ouleety (watch, runtime: 9:12) and Al Hayah Al Youm (watch, runtime: 3:55).

Dior’s dramatic Pre-Fall Men 2023 runway show at the Giza pyramids complex is continuing to get attention in the international fashion press this morning: The event, which showcased the work of English menswear designer Kim Jones, featured 75 models trekking through the desert beside the pyramids, and drew high profile guests including Formula One driver Lewis Hamilton, British model Naomi Campbell and others. “Bagging Egypt, ancient and modern, was quite a diplomatic flourish,” Vogue writes in its coverage of the show. Fashion industry journal Women’s Wear Daily (WWD) also covered the event.

Also getting attention: The fiance of a US-Egyptian dual national arrested in UAE is voicing concern over his possible extradition to Egypt following his criticism of Egyptian authorities ahead of the COP27 summit last month, according to Reuters.

CUSTOMS-

New customs rules aim to clear backlogs at ports: The Customs Authority is obliging importers to submit import approvals from the General Authority for Freezones and Investment (GAFI) before they request an ACID number for their shipments, Al Borsa reports. Importers were previously able to apply for GAFI approval after receiving an ACID number — a unique ID number that importers obtain through the digital Nafeza customs window at least 48 hours before their goods are shipped. Flipping the order in which the documents are supplied is meant to help ease logjams at ports and crack down on evasion of customs duties.

INDUSTRY-

Industrial projects take a step closer to golden licenses: Eight industrial projects have had their applications for golden licenses preliminarily approved by a government committee tasked with speeding up licensing in the industrial sector, cabinet said in a statement yesterday. Cabinet will decide on whether to give final approval in an upcoming meeting.

REMEMBER– The approvals come weeks after President Abdel Fattah El Sisi ordered that all investors be granted three-month golden licenses, making it easier for them to set up projects. It’s unclear if the approvals for the selected projects yesterday would only be set for three months.

INVESTMENT-

TCV eyes three investments next year: Private equity firm Tanmiya Capital Ventures (TCV) plans to add three companies to its portfolio in 2023, Ahmed El Guindy, founding and managing partner at the firm, reportedly told Al Mal.

NBFS-

Non-bank lenders will be required to have solvency ratios of at least 12% at any time, rather than by the end of each quarter, the Financial Regulatory Authority said in a statement (pdf) yesterday. The decision is part of efforts to improve financial stability in the NBFS sector.