AM — Today’s forecast: Cold with a high chance of a rate hike

Good morning, dear readers, and congratulations on making it to the end of another week. Like many of you, we’re going to be turning on our OoO responders on Sunday and having ourselves an extended weekend for the Christmas break. We’ll be back in your inboxes on Monday at the appointed hour.

It’s interest rate day: The Central Bank of Egypt’s Monetary Policy Committee will meet later today for its final meeting of the year. Most analysts in a Reuters poll are expecting policymakers to close out 2022 with another king-size 200-bps rate hike to support the currency and tackle rising inflation — chiming with the majority of those we surveyed last week. Seven of the nine analysts and economists we spoke to are forecasting the central bank to raise rates, with five of those surveyed expecting a 200-bps hike. This would take the policy rate to 15.25%, its highest level since early 2019.

ALSO HAPPENING TODAY-

Ministers are heading to Tanzania: Foreign Minister Sameh Shoukry and Housing Minister Assem Al Gazzar are in Tanzania today to witness the first filling of the Julius Nyerere Dam, which was built by Elsewedy Electric and Arab Contractors under a USD 2.9 bn contract.

PSA- Brace for a cold Thursday: Expect temperatures to drop to lows of 15°C across the capital today, with a chance of light rains, according to the latest forecast.

Alexandria is taking the day off: Alexandria governor declared today off for schools in anticipation of poor weather conditions.

NEXT WEEK-

The Senate will be back in session next Sunday, 25 December, while the House of Representatives is in recess until Monday, 2 January.

Ten days until the e-invoicing registration deadline: Companies have until 31 December to register with the Tax Authority’s e-invoicing system after the Finance Ministry earlier this month gave companies another two weeks. Only 150k companies had signed up to the new system as of the end of November, 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.

THE BIG STORIES ABROAD-

Ukrainian president Volodymyr Zelenskiy’s visit to Washington is dominating the front pages of the Western press this morning: In his first overseas trip since Russia invaded the country in February, Zelenskiy addressed lawmakers in Congress and urged them to provide more aid. The president also held talks with Joe Biden, who pledged a further USD 1.9 bn in military assistance. (AP | Reuters | NYT | Washington Post | Bloomberg | WSJ | FT)

Israel is about to get its most extreme government in its history: Following weeks of talks, Israeli Prime Minister Benjamin Netanyahu yesterday announced that he had agreed to form a coalition with smaller, once-fringe right-wing parties, among which are the far-right Jewish Power and Religious Zionism parties. The government will be sworn in on 2 January, bringing to power fiercely anti-Arab political figures at a time when the West Bank is experiencing its worst unrest in years. (AP | Reuters | Washington Post | New York Times | The Guardian)

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DATA POINT- Egypt’s fertilizer industry is a major export success story right now: Egypt has taken Russia’s place as one of Europe’s key fertilizer suppliers due the spillover effects of Russia’s invasion of Ukraine, Bloomberg Asharq reported yesterday. Egypt exported EUR 1.5 bn worth of fertilizers across the Mediterranean during the first ten months of 2022, almost triple that of 2021, according to the news outlet, which cites data from the Chemical and Fertilizers Export Council. Europe’s fertilizer industry has been forced to cut production due to surging natural gas prices, while an import ban on Russian fertilizers has sent countries in search for new suppliers.

Speaking of fertilizer exports: Fertilizers are among eight products chemical companies want to become eligible for export subsidies, according to Al Shorouk. The export council will submit the list, which also includes paints, biodiesel and batteries, to the Trade Ministry’s Export Development Fund, council chairman Khaled Abul Makarem said at a presser yesterday, the newspaper reports.

Getting imported goods into the country: That was the subject of a meeting yesterday between Prime Minister Moustafa Madbouly, Central Bank of Egypt chief Hassan Abdalla, the finance and trade ministers, and the head of the Customs Authority, according to a statement released by the cabinet following the discussion.

Why this matters: The government’s import controls could be coming to an end before the end of the month. Authorities have pledged to scrap the requirement for businesses to use letters of credit to finance imports by the end of this month as part of its agreement with the IMF to transition to a flexible exchange rate.

The IMF sent a public reminder about this commitment earlier this week: In an interview with Reuters, the IMF mission chief for Egypt said that the Fund will be watching closely in the new year to assess whether the country has transitioned to a fully floating exchange rate. Egypt agreed to “permanently” adopt a flexible exchange rate in return for obtaining a USD 3 bn loan from the IMF.

Authorities are readying assistance from the beginning of next month: State-owned companies will start selling discounted goods to the public from the beginning of January under a directive issued by the prime minister yesterday. This came during a meeting with the supply and local development ministers, who will work with the Interior Ministry and military-owned companies to provide discounted goods until the end of Ramadan in April.

Why this matters: Inflation is set to accelerate in the new year. Adopting a flexible exchange rate is going to mean a more intense spell of inflation, heaping pressure on people on lower incomes. Some analysts are expecting inflation to accelerate into the high 20s during the first quarter of next year

Energy companies can bid for 12 new oil and gas exploration blocks in the Mediterranean and Nile Delta starting next week in an international tender set to be launched by state-owned Egyptian Natural Gas Holding Company (EGAS), Bloomberg Asharq reports, citing an Oil Ministry source. The door for bidding will close five months from the tender’s launch, the source added.

We knew this was coming: Oil Minister Tarek El Molla had told the news service earlier this month that Egypt plans to hold a fresh international tender for oil and gas exploration before the end of the year, adding that it will cover concessions in the Mediterranean and the Western Desert. He also suggested in November that the tender would cover concessions in the Eastern Desert, where the ministry had also been planning to launch a second international tender for minerals other than gold before the end of the year.

Our last tender saw seven international energy companies bag eight of the 24 oil and gas exploration blocks that were up for grabs in the tender, and saw BP get awarded another one of the blocks later in June. BP, Eni, Apex International, Energean Egypt, United Energy, Ukraine’s INA Naftaplin, and Chile’s Enap Sipetrol all received blocks in the tender.

All for that sweet FX: Egypt is doubling down on its oil and gas industry, as well as rationing domestic gas consumption, as part of its efforts to bring to an end a shortage of foreign currency. Ministers will be hoping that the new tender, together with the new oil exploration agreements recently approved by MPs, will provide a significant boost to output. Natural gas production reportedly fell from a peak of 7.2 bn cf per day to 6.5 bn cf/d in the year to 3Q 2022, according to the Middle East Economic Survey.

Chevron strikes gas: El Molla last week confirmed recent reports of a large gas find in the Eastern Mediterranean, though declined to provide reserve estimates. This followed a MEES report that claimed that Chevron had discovered a field estimated to contain 3.5 tn cubic feet of gas in the Narges block.

To sell or not to sell? Paint and Chemical Industries (Pachin) could respond to the takeover offer from Dubai-based National Paints Holdings (NPH) as soon as early January, unnamed sources reportedly told Al Borsa. The Emirati firm is close to completing due diligence

and financial consultancy firm Elite is still working on the fair value study with the hopes of finalizing it before year end, the sources said.

REMEMBER- NPH launched a takeover bid for Pachin in November, offering to pay EGP 29 per share and valuing the EGX-listed company at EGP 696 mn. PH’s offer was the third offer Pachin received this year, following offers from Universal Building Materials and Chemicals (Sipes) and Saybad Industrial Investment that have since been withdrawn after being outbid by NPH.

Advisors: Al Ahly Pharos is providing financial advice to Pachin while Shalakany Law Office is counsel.

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

CORRECTION- 25 December, 2022
An earlier version of this story missed that Shalakany Law Office is Pachin’s counsel in the proposed transaction.

MORE CAPRICORN SHAREHOLDERS REVOLT AGAINST NEWMED TIE-UP-

More Capricorn Energy shareholders have joined calls to oust its board, putting the company’s proposed tie-up with Israel’s NewMed at risk. Palliser Capital, the company’s third-largest shareholder, said yesterday that three other shareholders will back its call to force seven of the nine directors to resign — including the long-serving CEO Simon Thomson — at an upcoming board meeting due to the terms of the proposed merger.

Who’s in? Shareholders who collectively hold 39% of the company’s issued share capital are now in revolt against the board, the activist investor said. This includes the UK’s largest asset manager, Legal & General, and Irenic Capital Management, VR Global Partners and a fourth undisclosed shareholder. Legal & General Investment Management, which owns 4% of the energy company, told the Times yesterday that it thinks “a change of directors is now warranted.”

What’s the issue? Shareholders have previously voiced their opposition to the planned merger on the basis that it undervalues Capricorn and that it is “unnecessarily biased towards NewMed.”

What’s next: Palliser plans to convene a shareholder meeting at the end of January for a vote on whether to overthrow the board.

This is the second revolt this year: NewMed had proposed an all-share merger with Capricorn in October after shareholders blocked a previous merger plan with Tullow Oil on grounds that it undervalued the company.

Why do we care? Capricorn has a sizable portfolio of upstream assets in Egypt. The merger would hand the Israeli company (FKA Delek Drilling) control of Capricorn’s Egypt assets, paving the way for closer energy ties between Israel and Egypt.

ASPIRE SUBSIDIARY UPS STAKE IN ELECTRO CABLE-

A subsidiary of Aspire Capital Holding subsidiary (FKA Pioneers Holding) acquired an additional 6.61% stake in EGX-listed electric cables manufacturer Electro Cable for EGP 111.7 mn, bringing its total ownership to 20.09%, according to a disclosure to the bourse (pdf).

Three consortiums qualify for bidding on Alexandria metro project: An alliance of our friends at Hassan Allam and France’s Alstom is among three consortiums of local and international companies that have qualified to bid for the EUR 1.6 bn project to convert Alexandria’s Abu Qir railway into an underground metro, a senior executive at Hassan Allam told Enterprise. The other qualified bidders include a consortium of our friends at Orascom Construction and UK rail infrastructure firm Colas Rail, and a group of unnamed Chinese companies, according to a report in Amwal Al Ghad. The Transport Ministry will look into the financial and technical bids in March. The European Investment Bank and the European Bank for Reconstruction and Development are investing a combined EUR 1 bn in the project, while Amwal Al Ghad’s sources say the government will finance 15% of the cost.

And another six companies are bidding to supply the rolling stock: Korean Hyundai Rotem, Spain’s CAF, China’s Norinco, Italy’s Hitachi Rail, and Russia’s Metrowagonmash, the news outlet reports.

CORRECTION- This story was amended on 22 December 2022 to correct the name of the Hassan Allam and Alstom consortium, which had been incorrectly reported by the domestic press.

AMOC + Pachin delist from LSE: EGX-listed Alexandria Mineral Oils Company (AMOC) and Paint and Chemical Industries (Pachin) have each decided to delist their global depository receipts (GDRs) from the London Stock Exchange, citing poor performance, according to individual disclosures to the EGX (here and here — pdfs). AMOC says that delisting will save the company GBP 18k in annual fees, while Pachin says it will save GBP 85k in annual fees to the London bourse.

Background: AMOC made its LSE debut in 2018, listing 50k GDRs representing 500k shares, while Pachin made its debut in 1997, listing 27% of the company.

Pachin blamed the falling value of the EGP for the delisting. When the company first started listing the USD was trading at EGP 3.4, while the GBP was at EGP 5.5, it said.

A special edition of kudos for The Enterprise Company: As 2022 draws to close, we want to extend a heartfelt thank you to some of the people at the company who have gone above and beyond, all of whom were recognized at our annual Christmas / End of Year party last week:

• Mohamed Gehad, Senior Art Director (Founding Partners’ Award)
• Omran Rekaby, Office Support (Outstanding Service Award)
• Ahmed Hamid, Accounting Manager (Spirit Award)
• Nada Aboelfetouh, Facility Advisor (Rookie of the Year)
• Nadine Fahmy, Staff Reporter (Enterprise News Spirit Award)
• Zainab AbdulAziz, Editor (Rookie of the Year)

It was an econ-heavy evening on the talk shows last night ahead of the central bank’s policy meeting today and following several statements from the cabinet about the import backlog at the nation’s ports and soaring food prices.

What would a rate hike from the CBE mean? If the central bank decides to raise rates when it meets later today it will help prices stabilize in the long term but it will have a negative effect on the state budget, veteran banker Sahar El Damaty told Ala Mas’ouleety (watch, runtime: 13:18), El Damaty is predicting a 100-200 bps rate hike, in the same range as most of the analysts and economists we surveyed for our latest poll.

A rate hike doesn’t always mean new high-interest certificates: It is unlikely that we’ll see banks introduce new high-interest certificates of deposit, she said. “These certificates are very costly to the banks.”

Also getting coverage last night:

• Madbouly’s meetings with senior officials to discuss imports and subsidized goods yesterday received attention on Masaa DMC (watch, runtime: 14:14) and Al Hayah Al Youm (watch, runtime: 2:23). We have the story in this morning’s news well, above.
• Help save children’s cancer hospital 57357: The hospital, which treats thousands of children every year, is at risk of closure as donations dry up due to the soaring cost of living. Ala Mas’ouleety had coverage (watch, runtime: 8:44).
• It’s coats and scarves from now on as we ring in the winter season: Yesterday marked the first day of the winter season and we should expect a gradual decrease in temperatures over the coming days, especially during the nighttime, head of the Egyptian Meteorological Authority’s analysis and forecast center Mahmoud Shahin said in a phone-in with Masaa DMC (watch, runtime: 5:26).

This morning in the foreign press:

• The well-known children’s cancer hospital 57357 will likely be forced to close down in the next six months as the economic crisis causes donations to plunge. (The National)
• The Grand Egyptian Museum is one of National Geographic magazine’s top sites for 2023, calling it “the perfect museum in the perfect setting” set to encourage tourism with a collection of close to 100k artifacts.
• Zewail’s possessions to be put on display: The possessions of the late Nobel laureate chemist Ahmed Zewail will be donated to a planned museum in Zewail City. (The National)
• The UAE will deport Egyptian-American activist Sherif Osman, who has been detained in Dubai after he called for protests during COP27. It is unclear whether he will be sent to Egypt or the US. (The Guardian)

Whatever happened to that Tiran + Sanafir breakthrough the Biden administration was hoping for earlier this year? Egypt has apparently thrown a spanner into the works and has recently begun objecting to a number of aspects of the agreement, US and Israeli sources tell Axios.

Rewind: Diplomats have been working to seal an agreement that would see Egypt transfer sovereignty over the Tiran and Sanafir islands to Saudi Arabia. Earlier this year the two sides were said to be close to a deal that would also involve Saudi Arabia and Israel establishing diplomatic ties under a plan put forward by the Biden administration.

But Egypt is reportedly now dragging its heels, and is contesting several aspects of the accord including the installation of cameras on the islands, Israeli officials tell the news outlet. They think Egypt is holding things up because of the Biden administration’s decision to freeze some of its military aid on human rights grounds. Washington has withheld 10% of Egypt’s USD 1.3 bn in annual military aid for the past two years, and Senator Patrick Leahy blocked another USD 75 mn in October.

Youssef Abouseif, general manager, Uber Egypt: 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 Youssef Abouseif (LinkedIn), general manager at Uber Egypt.

My name is Youssef Abouseif, a husband, a proud father of two kids, a boy and a girl, and the general manager (GM) of Uber Egypt. Over my career I have worked with Samsung's global strategy group in South Korea, where I advised CEOs on some of Samsung’s most complex issues and strategic topics. Afterwards, I relocated to Luxembourg and joined Amazon. Now, I am finally back in Egypt as Uber’s country GM.

My role necessitates that I move at very high speed and rally my team about key strategic areas. I have to consider the tactical operational and mid-to-long term strategy on a daily basis, and given my broad scope of responsibilities, I have to always prioritize and work in a structured manner.

The concept of Uber originated when the founders found themselves stuck in Paris on a very rainy evening, unable to find a taxi or vehicle to take them back. So they asked themselves: How much easier would it be to order a ride through our phones? The idea struck many as revolutionary at the time. It meant that people no longer had to wait to find a ride, and the value proposition pleased a lot of people. Uber first started in San Francisco and Paris, and rapidly expanded to other countries.

Right now, the industry is mostly focused on sustainability. It is also one of the key priorities for Uber at the moment. We aim to reach zero emissions by 2040 in the MENA region, and in the UAE we target 25% emission-free trips by 2030. We’ve also launched Uber Green in the UAE and Jordan, which grants riders the right to select a fully electric vehicle with a dedicated, sustainable vehicle view on the app. We are also expanding our Uber shuttle buses, which were first launched in Egypt — emphasizing the car pooling concept, which lowers emissions and traffic congestion.

I moved to Egypt from Luxembourg three months ago, so I am still trying to figure out a morning routine. So far, I have been waking up at 7am in time for my son’s school. I make sure to spend time with my children ahead of the work day. After that, I usually surf the internet for 15 to 20 minutes, and that’s when I usually read Enterprise. I also look at some global news outlets and catch up on football news. After that, I check my email for anything urgent that I need to prioritize. I try to squeeze in a workout 3-4 times a week, and I usually have one cup of black coffee and a light breakfast before I head to the office. My commute time is the time I call my parents and then listen to a podcast, audio book, or some music.

My regular work day is usually filled with back-to-back meetings. I like to prepare for all my meetings ahead of time by deciding what needs to be discussed. Apart from that, Sunday of every week is my day of planning. I dedicate 30 minutes at the beginning of each week to fully focus and lay out my priorities for the coming days. This helps me to stay organized and label my tasks depending on their level of importance — P0 being the most urgent, followed by P1 and P2. My team’s effort is also absolutely critical to running the business successfully.

My family is the one constant in my life. I always do my best to finish work around 6-7pm, and head home in time for dinner. It’s very important for me to spend that last hour of the day with my kids. My wife and I enjoy reading them books, helping them color and teaching them new skills. It’s the most precious time of my day.

I believe having a work-life balance is a key enabler to success. As a leader, I’m very vocal about the importance of a work-life balance, and I personally make it a point to try not to leave too late unless there’s a crisis that requires us to work longer hours. Moreover, at Uber, we work two days a week from the office, which helps facilitate the work-life balance. I also almost never work on weekends, but it’s never easy, given that I just started a new role — but my family remains my constant, and therefore I make sure to dedicate weekend time to them as much as I can.

I believe that it’s very important to try and diversify the material we expose ourselves to. One podcast I really enjoy listening to is Radiolab. It does investigative journalism on a variety of topics. I find it very enriching as it exposes you to several different concepts, and keeps you informed.

The best piece of advice I received was actually from a book my father gave me when I was a teenager. It’s called Only the Paranoid Survive by Andrew S. Grove, a former CEO of Intel. The quote that resonated with me the most was: “Success breeds complacency and complacency breeds failure. Only the paranoid survive.” I believe this is great advice because it means that you need to continuously evolve and learn new things — even if you are very successful at what you do — because otherwise you will become less relevant the moment you stop learning.