AM — Saudi sovereign wealth fund could finalize United Bank acquisition this year, says Bloomberg

Good morning, ladies and gents: We have a packed issue for you this morning so let’s jump right in.

HAPPENING TODAY-

President Abdel Fattah El Sisi is in Washington for the three-day US-Africa Leaders’ Summit, which starts today. The event will be the first meeting of African heads of state and a US president in Washington since 2014 and the biggest international gathering in the city since before the covid-19 pandemic in 2020.

On the agenda: Russia’s war in Ukraine, climate change, trade and covid-19 among other things, according to the Associated Press. President Joe Biden will address a US-Africa business meeting, hold meetings with individual African heads of state and host a dinner at the White House. Al Masry Al Youm reported yesterday that US officials intend to discuss the disputed Grand Ethiopian Renaissance Dam (GERD). It is unknown whether El Sisi will hold talks with the US president or meet with Ethiopian President Sahle-Work Zewde during his stay in the US capital.

A play for Africa: As Russia and China strengthen their ties with the continent, the summit is part of the US’ play to increase its influence among African leaders following four years of disengagement under Donald Trump. The administration will offer a sweetener and declare support for making the African Union a permanent member of the G20, a long-standing ambition of African nations that the Washington Post suggests could help the US get them on side on issues such as the war in Ukraine and climate change.

The Federal Reserve starts its two-day policy meeting: Several months of positive inflation data have raised market expectations that the Fed will temper the pace of interest rate increases with a 50-bps hike this week. This would bring to an end a string of four consecutive 75-bps hikes in what has been the central bank’s most aggressive tightening cycle in years.

A lot will depend on today’s inflation release: Analysts expect inflation to have further slowed in November to 7.3%, allowing the Fed to ease the pace of its rate hikes. That said, a hotter-than-expected print could see the central bank go ahead with yet another super-sized hike.

** The Federal Reserve will announce its policy decision at the end of the meeting tomorrow evening.

On the legislative agenda today:

• Unified Tax Procedures Law amendments: The House Budget Committee will discuss and vote on a controversial one-article amendment to the Unified Tax Procedures Law that would allow foreign tax authorities to access individuals and businesses’ financial information.
• Digital Egypt bill: The Senate is expected to give a final approval to legislation that would set up a fund to support the Communications Ministry’s Digital Egypt initiative.

HAPPENING THIS WEEK-

Will we finally close an IMF facility this week? The IMF’s executive board will discuss Egypt’s request for a new extended fund facility on Friday, 16 December. Egypt and the Fund reached a staff-level agreement for a USD 3 bn, 46-month loan program at the end of October, but the arrangement needs the sign off from the board before the loan can start to be disbursed.

Another analyst has forecast a surprise interest rate hike before the IMF meets: BNP Paribas’ MENA economist, Mohamed Abdelmeguid, is the latest analyst to predict an unscheduled central bank policy meeting this week, writing in a note that policymakers could raise rates by 200 bps before the IMF board meets. The bank says that the CBE will likely need to “move more decisively toward a floating currency framework” before the IMF agrees to disburse the first USD 750 mn tranche but warns that a further devaluation “would fail to stabilize the market.”

Others have predicted something similar: Al Ahly Pharos expects the central bank to meet before its scheduled meeting on 22 December and raise rates by 200 bps. This would put the overnight deposit rate at 15.25% and the lending rate at 16.25%.

What’s next for the EGP + consumer prices? Abdelmeguid expects the EGP / USD exchange rate to fall to 33 by the end of the year and 37 during 1Q 2023. This will push urban inflation past 25% during the next quarter and leave it averaging 22% through 2023. Inflation rose to 18.7% in November, its highest level in almost five years.

PSA- Three days until the e-invoicing deadline: Companies have until Thursday to register with the Tax Authority’s e-invoicing system. Only 150k companies had signed up to the new system ahead of the previous deadline of 15 December, according to the Tax Authority’s most recent tally at the end of November, which is well below a sought goal of 1 mn companies to register under the system.

REMEMBER- This deadline no longer applies to the self-employed: The Finance Ministry pushed the deadline for self-employed professionals — including doctors, pharmacists and lawyers — to 30 April 2023 after widespread opposition to the system.

WORLD CUP 2022-

All eyes on Argentina v Croatia tonight: The semi-finals of the 2022 World Cup are finally here, with Argentina going head-to-head against Croatia at 9pm tonight for a place in the final. The stakes are high for Lionel Messi, for whom this is likely the last opportunity to win the World Cup. The Argentines are the stronger team on paper — even if they have struggled to fire this tournament — though Croatia should not be underestimated. They are bidding to make their second consecutive World Cup final (having lost 4-2 to France in 2018), and knocked out tournament favorites Brazil in the last round.

THE BIG STORIES ABROAD-

SBF is in cuffs: Sam Bankman-Fried, the embattled co-founder and ex-CEO of collapsed crypto exchange FTX, has been arrested in the Bahamas after the US government filed criminal charges, a day before he was due to testify before Congress. Speculation that the company had misused client funds has swirled since it abruptly fell into bankruptcy last month. The New York Times is reporting that the criminal charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. SBF, the biggest name in the crypto industry until a few weeks ago, could now be extradited to the US to face criminal proceedings.

The news is dominating the front pages everywhere this morning, including in Reuters, the Associated Press, Bloomberg and the Financial Times.

EU-Qatar bribery scandal widens: Belgian police yesterday seized at least EUR 750k in cash amid ongoing raids in relation to a probe into alleged bribery involving European lawmakers and Qatar, Bloomberg reported. Greek MEP and Parliament Vice President Eva Kaili is among six people to have been arrested and a number of parliamentary offices and residences have been raided as authorities investigate claims that European lawmakers took bribes from Qatari officials.

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CIRCLE YOUR CALENDAR-

Enactus Egypt and the Citi Foundation launched the second phase of social entrepreneurship program Impact@Work, according to a press release (pdf). Some 54 university teams representing 9.7k students from various governorates will participate in the competition in July 2023 to demonstrate their efforts in generating a social impact based on their entrepreneurial ideas. The winning team will compete in the Enactus World Cup in the Netherlands in October 2023.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Egypt’s renewable energy capacity is on track to grow 65% by 2027, according to the International Energy Agency.

PIF could acquire United Bank this month for USD 600 mn: Saudi Arabia’s sovereign wealth fund could acquire the state-owned United Bank for around USD 600 mn as soon as this month, Bloomberg reports, citing sources with knowledge of the matter. The Public Investment Fund (PIF) is in “advanced talks” over the acquisition and plans to purchase the bank through its Egypt-based investment vehicle, the Saudi Egyptian Investment Company, according to the business news outlet. A representative from United Bank denied having knowledge of the transaction when we asked yesterday, noting that any negotiations over a sale would go through the Central Bank of Egypt (CBE).

Refresher: Reports on the PIF’s interest in the lender have been floating around since May, with sources cited by local media saying the acquisition could close before the end of the year. The CBE owns 99.9% of United Bank, which it created in 2006 through the merger of smaller entities near the end of its well-regarded cleanup of the banking sector nearly two decades ago.

A long time coming: In 2017, the CBE said it intended to sell the bank to a strategic investor and appointed EFG Hermes and New York’s Evercore to advise on the transaction, before the covid-19 pandemic put the sale on ice.

Advisors: Reports in local media have suggested that PIF has appointed our friends at EFG Hermes as financial advisors and US law firm Akin Gump as counsel. CI Capital is reportedly acting as United Bank’s advisor.

REMEMBER- KSA is on a spending spree here in Egypt: The PIF earlier this year acquired minority stakes in four EGX-listed companies through its newly established arm for Egyptian investments in August. The buys are the first of USD 10 bn pledged by the fund earlier this year as part of Saudi efforts to support Egypt’s external position, which has been rocked by soaring commodity prices, large portfolio outflows, and a weaker EGP.

valU closes third securitized bond issuance: EFG Hermes’ consumer finance arm valU has issued EGP 854.5 mn worth of securitized bonds, according to a statement from our friends at EFG Hermes. The single 12-month tranche is the third in valU’s EGP 2 bn maiden securitization program and holds a Prime-1 rating from Middle East Rating Services (MERIS).

The company has now issued more than 85% of its EGP 2 bn securitization program, which kicked off last year with an EGP 323 mn bond issuance and was followed by a second EGP 532.6 mn issuance earlier this year.

Advisors: EFG Hermes acted as sole financial advisor, sole transaction manager, bookrunner, underwriter, and arranger on the issuance, according to the statement. CIB and the National Bank of Egypt were underwriters and aiBank subscribed to the issuance.

A bumper year for securitizations: The total value of securitized bond issuances brought to market this year now stands at some EGP 45.2 bn, almost triple the EGP 15.8 bn taken to market last year.

Local healthcare company EDAM has new shareholders: PTS Investments Holdings’ Egyptian arm PTS Projects has acquired a minority stake in local healthcare startup EDAM in a USD six-figure transaction, marking its first transaction in our local market, PTS Investments Managing Director Maha Mandour told Enterprise.

Going digital: EDAM will use the proceeds from the acquisition to develop a digital platform with PTS Projects and US-based Kemtix Technologies that it hopes to launch during 1H 2023, Mandour said. The company aims to hit 2.5 mn users by the end of 2023, it said in a statement (pdf).

About EDAM: Founded in 2019, EDAM runs a health services network that connects patients with over 3k medical services providers.

More investments in the pipeline: PTS Projects is looking at making acquisitions in the health, education, transport, logistics and energy sectors, Mandour told us.

DENTACARTS TO ENTER SAUDI-

Egyptian dental marketplace DentaCarts will launch in Saudi Arabia during 1Q 2023, co-founder and CEO Ahmed Yahia told Enterprise. The company has already received a Saudi entrepreneur license, giving it the greenlight to kickstart operations there.

A big funding round in the works? The startup hopes to close a USD 10 mn funding round next quarter to fund its planned expansion into new markets, which include Kenya and South Africa, Yahia reportedly told Al Mal.

About DentaCarts: Founded in 2017, the startup allows dentists to purchase equipment and supplies online, offering financing solutions in partnership with EFG Hermes’ BNPL platform valU.

Gold could be listed on the newly-launched Egyptian Mercantile Exchange (EMX) in 1Q 2023, Nagy Farag, an advisor to the Supply Ministry on gold, told Enterprise. The ministry is hoping to complete the listing procedures within the next three weeks.

This would be the second commodity available on the exchange: Traders are currently only able to buy and sell wheat on the exchange. The EMX launched late last month with offers of wheat to traders from state supplier GASC.

Reminder: Traders aren’t (yet) able to buy and sell futures contracts on the EMX. The exchange is currently only a spot market, meaning commodities are bought and sold at their current market prices.

Turmoil in the gold market: Local gold prices have surged to record highs this month as people try to protect their savings following October’s devaluation. The price of 21-carat gold rose to EGP 1.8k for the first time ever, prompting merchants to suspend pricing amid confusion about the EGP’s value against the greenback. The official rate currently pegs the EGP at 24.69 to the greenback, a 25% decline since October, but the currency has been selling for more than EGP 30 in the parallel market in recent days.

ALSO- Fintech player Paymint will develop the exchange’s internal payments system under an agreement signed between the startup and the EMX, it said in a statement yesterday.

Owners of illegal buildings situated next to the Nile won’t be permitted to pay reconciliation fees and legalize their status under the new iteration of the building violations reconciliation law being discussed by lawmakers. The House Housing Committee yesterday voted to exclude the buildings from the legislation — along with structures built on archaeological land and plots allocated to public car parks — following a heated debate on Sunday that saw some lawmakers warn that allowing buildings to stand next to the Nile could be in breach of the constitution.

The problem: The decision means that almost a third of the 2.8 mn reconciliation requests received by the government will fall outside the scope of the law. Ahmed El Seginy, who chairs the House Local Administration Committee, said this week that the bill will prevent 920k buildings from being reconciled.

Does that mean that all these buildings will be bulldozed? It’s not clear… El Seginy is calling on lawmakers to come up with solutions that don’t involve demolishing thousands of buildings and leaving mns of people homeless.“What will happen to the 500k illegal buildings which have an average population of 2.5 mn people?” he asked in an interview on El Hekaya last night (watch, runtime: 28:40).

REFRESHER- The original legislation gave owners the option to pay to reconcile illegal buildings but authorities have only responded to a fraction of the requests and fines have gone unpaid. Lawmakers are now drafting a new bill to replace the 2019 legislation, though the original reconciliation requests will remain valid.

No deadline on authorities to respond: A proposal to impose a deadline for authorities to respond to reconciliation requests was rejected by the government yesterday. Authorities have responded to only 180k of the 2.8 mn requests submitted since 2020.

Violators will have six months to submit reconciliation requests from the date stipulated in the new law’s executive regulations. They will have to pay an inspection fee of not more than EGP 5k and 25% of a “seriousness fee” that will be set by the regs. The new bill will try to make it easier for people to pay, according to Local Development Minister Hesham Amna, who said that it will allow people to pay the fees in installments over five years, as well as a 25% discount if made in a single payment.

FROM THE SENATE-

Digital Egypt Fund draft bill gets a nod from the Senate: The Senate gave a preliminary approval to the Digital Egypt Fund draft bill. The 30-article draft bill, approved by the Cabinet last year, would set up a fund to support the Communications Ministry’s Digital Egypt initiative. The fund’s HQ will be in Cairo, with potential to add other branches later in other governorates.

What’s next? The Senate is expected to give a final approval of the bill today. It will then make its way to the House for discussions and a vote ahead of being signed into law by President El Sisi.

A conversation with Leslie Reed (LinkedIn), mission director for Egypt at USAID, at Enterprise Climate X Forum: The inaugural Enterprise Climate X Forum we held last week saw us dive deep into the climate economy in Egypt, from green hydrogen to the recently launched Nexus on Water, Food and Energy (NWFE) and climate finance. Among our on-stage interviews, we spoke with Leslie Reed, mission director for Egypt at USAID, about how development agencies can support the green transition in emerging markets and what the agency has in store for Egypt.

Egypt, like other emerging markets, is facing a number of deeply interconnected challenges — particularly on climate and the economy, Reed said. “The economy is growing, but it’s not growing as fast as the population, so the government and service providers will be challenged,” she said. This is exacerbated by the fact that women, who make up half of the population, do not participate in the economy at the same rate as men, she said.

Why is this important for the green transition? “Egypt is a young country and it’s growing very fast,” Reed said, meaning there is a more demand for jobs than there are businesses and organizations who can provide them — let alone offer training to develop the needed skill sets among job seekers. When it comes to operating large-scale renewable energy projects — like the Benban solar power park for example — training is key, Reed noted.

That’s why a big part of what USAID does is invest in talent and capacity building: USAID partnered with the Education Ministry back in 2018 to develop a curriculum that trained over 300 technical school students in Aswan and Hurghada on renewable energy, in particular solar and wind power. “You need a lot of people to operate and maintain a huge solar park,” Reed said. “And we made sure women were part of that, so right now, we have 300 women who have the technical skills to engage in operations and maintenance at Benban and across the country.” The curriculum is now in three technical schools in Egypt, and it’s “building the workforce of the future,” Reed said.

The development agency also recently launched a climate-focused scholarship for Egyptian students: USAID at COP27 launched a scholarship program for students seeking training in sectors relevant to Egypt’s climate goals. The program will offer full benefits to some 700 students..

But there’s a missing puzzle piece: the private sector. “We want and need to partner with the private sector as we help the government develop curricula, as we help build out the skills base of young students,” Reed said.

Private investors are “less naturally attracted” to adaptation and resilience, Reed said, noting that adaptation attracts only about 10% of climate finance globally. “We think of the short term, but we need to be thinking of the longer term,” she said. “The returns on investment are around USD 10 per USD 1. If you pay USD 1 today to avoid a future problem, you save USD 10 potentially on the backend, so I think there’s an economic imperative,” she added.

That’s why USAID now has a mandate to bring in the private sector. “This is where I think development partners need to get involved to help de-risk,” Reed said, pointing to the work of the US International Development Finance Corporation (DFC). Where USAID incentivizes the private sector to participate in adaptation projects, the DFC responds and pulls them in with loans, assurances and de-risking opportunities, she explained. “We want to attract the private sector because we know they’re part of the solution,” she added.

USAID is also starting to shift to a more blended approach to financing: The development agency is working to catalyze more private finance to support its own lending activity. Initiatives like Catalyze aim to raise some USD 2 bn in financing over the next eight years. The USD 15 mn Red Sea initiative also includes plans to use blended financing as a mechanism to help support businesses in Red Sea cities in Egypt.

Reed is hopeful about the trajectory we’re on — but wants Egypt to leverage what it achieved during COP27: “There are some basic fundamentals like ease of doing business that are needed, and also the green particulars… but the COP presidency presents such an important opportunity for all of us,” Reed said. The agreements and initiatives launched during the summit — including NWFE — were important for Egypt — and gives us an obligation to follow through in time for the next COP summit, she said. “Nobody wants to go into the next COP not having made progress on that, so this is the window of opportunity to remove impediments,” she added.

Al Baraka Capital has a new MD: Sarah Hosni (LinkedIn) was appointed managing director of Al Baraka Bank’s Islamic financial services arm, Al Baraka Capital, she wrote in a LinkedIn post. Hosni was formerly managing director and executive board member at Contact Financial’s underwriting arm Sarwa.

And a new line of business: Al Baraka Capital also this week launched a real estate investment and urban development arm, dubbed Tanfeez, according to a statement.

It was another mixed bag on talk shows yesterday, with the talking heads focusing on a warning to shop owners from the cabinet and the ongoing debate over the new Building Reconciliation Law (we have more on the latter in this morning’s news well, above).

All retailers are going to need to start clearly displaying the prices of all their goods under new rules designed to tamp down on food price inflation announced by Prime Minister Moustafa Madbouly yesterday. Shop owners will need to either price-tag everything or attach labels to the shelves, Assistant Supply Minister Ibrahim Ashmawy told Kelma Akhira’s Lamees El Hadidi yesterday (watch, runtime: 18:09). “Madbouly stressed that the state has an iron first to interfere against those who hoard commodities or overprice them,” he said.

A taste of the fist: Regulatory bodies are set to agree on a deadline for retailers and shop owners to abide by the rules, Madbouly said. Anyone who doesn’t comply is at risk of having their shops shut down and their stock confiscated and sold to citizens.

The move is designed to deter traders from hoarding goods and artificially raising prices. The government recently designated rice as a “strategic commodity” for at least three months under efforts to control prices amid a rising cost of living. Ashmawy said that yesterday’s decision does not amount to price caps though he did not rule out the possibility further down the line. “It is possible,” he said.

The strongly-worded warning also received coverage from Masaa DMC (watch, runtime: 5:05) and Al Hayah Al Youm (watch, runtime: 4:07).

The search for greenbacks: Kelma Akhira (watch, runtime: 5:13) and Al Hayah Al Youm (watch, runtime: 4:25) both covered a meeting led by Madbouly yesterday to discuss efforts to replenish the nation’s foreign reserves. El Hadidi noted that Madbouly once again did not specify what the plan entails, yet said took note of Friday’s meeting by the IMF and previous statements by Finance Minister Mohamed Maait on a plan to attract USD 5 bn from developmental partners, an intention to sell USD 1.5-2.5 bn of sukuk, the planned debut CNY-denominated Panda bond issuance and others.

The arrest of fashion blogger Hadeer Atef on charges of fraud also got a mention from Masaa DMC (watch, runtime: 10:04) and Kelma Akhira (watch, runtime: 5:48). Atef and her husband, sister-in-law and husband were charged with fraud through collecting over EGP 1 mn in funds from 16 people who were scammed to believe they own companies operating in auto, real estate and the stock exchange. Atef was accused of promoting such scams to followers on her Instagram.

EDUCATION

Thirteen-hour school days: That’s the solution being proposed by the Senate Education Committee to tackle the problem of private tutoring. A committee report up for discussion in the Senate wants public school students to be at school from 8am to 9pm, and suggests breaking up the school day into three periods: 8am to 12pm, 12:30pm to 4:30pm and 5pm to 8pm. This “will recover the role of public schools as the main teaching venue for students, overcome the problem of overcrowded classes, and dissuade students from resorting to the costly private tutoring lessons,” committee chair Nabil Dibis said.

ENERGY-

Vortex Energy invests another EUR 46 mn in Spain’s Ignis Energia: EFG Hermes’ clean energy investment platform Vortex Energy has made a EUR 46 mn equity investment in Spain’s integrated renewables group Ignis Energia, Al Borsa reported yesterday. The investment was made through the Vortex Energy IV Fund — which reached its first close of USD 200 mn in July 2021. A representative from EFG Hermes declined to comment when Enterprise Climate reached out.

HEALTH-

Egypt records a fourth case of monkeypox: A 34-year-old man is receiving treatment at a Health Ministry-affiliated hospital after contracting the disease, the ministry said yesterday. He had been in close contact with a third patient, a European resident who was visiting Egypt, according to the statement.

POLICY-

The Public Enterprises Ministry has completed several studies on establishing new factories to localize production and reduce reliance on imports, and presented them to representatives of the Ebda initiative, Minister Mahmoud Esmat said yesterday. The statement did not provide further details on the industries.

TELECOMS-

Orange CEO + El Sisi talk investment: Orange CEO Christel Heydemann discussed increasing investments in Egypt during talks with President Abdel Fattah El Sisi yesterday, according to a statement from Ittihadiya.

TRANSPORT-

Mwsalat Misr + Superjet to operate buses and electric taxes in new capital: A public-private joint venture was awarded a 15-year contract to operate buses and EV taxis in the new administrative capital, Al Mal reports, citing sources it says are in the know. ACTA is a JV between the Transport Ministry’s SuperJet and privately-owned Mwasalat Misr, which signed an EGP 200 mn contract to set up smart transport routes in the new administrative capital late last year. Operations are set to start next year with 145 EVs, as well as 80 buses that were used to transport delegates at COP27. ACTA could make an initial investment of EGP 1 bn in the routes, according to Al Mal.

Egypt and the EU are in talks to set up a joint business forum that would bring together business leaders from the two countries and increase investment, the Trade and Industry Ministry said Sunday. The proposal was discussed during a meeting between Minister Ahmed Samir and EU’s envoy to Cairo Christian Berger.

Egypt and South Korea agreed to exchange knowledge, tech and technical support to improve Egypt’s public procurement system. The move is part of the Finance Ministry’s push to digitize its operations and localize tech to boost the efficiency of its governance and administration, the Finance Ministry said Friday.