AM — Qatari firm eyes the Ramses Hilton hotel

Good morning folks, and happy almost-THURSDAY. We know we just had a long weekend, but this one still can’t come soon enough.

THE BIG STORIES OF THE DAY here at home include news that Qatar’s Al Kuwari Group could be looking to snap up the Ramses Hilton hotel in Cairo for a reported USD 320 mn. Meanwhile, the EGX is drumming up interest in IPOs of state-owned companies it hopes could come this year.

AND- Supply Minister Aly El Moselhy spent seven hours in the hot seat yesterday, telling MPs we’re not going back to the days of Nasser as they criticized his ministry for not doing enough to tamp down rising consumer prices.

^^ We have more on all three stories below.

THE BIG STORY ABROAD is the political drama still unfolding in the US House of Representatives yesterday, as Republican leader Kevin McCarthy failed in three rounds of votes to be elected as speaker of the GOP-controlled chamber. Divisions in the Republican party, which won a slim majority in the lower chamber in November’s midterm elections, saw McCarthy become the first majority party leader in a century to lose a first ballot for the post.

What’s next? The House will have to keep on voting until it can elect a speaker — whether McCarthy or another candidate — in the latest display of dysfunction on Capitol Hill in a polarized political climate. (Washington Post | Financial Times | BBC | AP | WSJ)

AND- FTX’s Sam Bankman-Fried pleaded not guilty to all eight criminal charges he is facing after the collapse of his cryptocurrency exchange and affiliated hedge fund Alameda in a Manhattan federal court. His trial has been set for October, the Wall Street Journal reports.

WHAT’S HAPPENING TODAY-

It’s PMI day: We’ll find out how Egypt’s private sector performed in December this morning when S&P Global publishes the first purchasing managers’ index of 2023. We’re expecting business activity in the private sector to have contracted for the 25th consecutive month amid surging inflation caused in part by the weakening of the EGP. The release is due to land at 6.15 am CLT, shortly after we hit ‘send’ on this morning’s issue — you’ll find it here. The index for the UAE is due out at the same time.

Saudi’s economy continues to grow: Saudi employment numbers jumped to near five-year highs in December on the back of a “sharp expansion” in non-oil business activity, according to the PMI (pdf). The index came in at 56.9, well above the 50.0 mark that separates expansion from contraction, but below the 58.5 recorded in November.

The EGX will be trialing an update (pdf) to its trading platform today and tomorrow from 3pm to 4:30pm. The update includes changes to the way stocks’ daily closing price is calculated and approved.

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DATA POINT- Egypt’s foreign reserves rose by more than USD 500 mn to register just over USD 34 bn at the end of December 2022, up from USD 33.5 bn in November, according to central bank data released yesterday. Reserves have been on the rise for four consecutive months and have now risen by more than USD 850 mn since the end of August, a reversal after falling 20% earlier in the year on the back of the war in Ukraine and tightening financial conditions globally.

Foreign residents won’t have to cough up FX to board a train: Foreigners residing in the country will not be charged in USD to book train tickets in the country, a source at the Transport Ministry told Enterprise yesterday. The decision to charge foreigners for train tickets in USD, announced last week, will only apply to tourists, the person said.

Here’s how much they’ll be charged: A price list published this week by the Egyptian National Railways Authority shows that tourists will be charged between USD 15 and USD 65 depending on the route and travel class. The move comes as officials continue to hunt for foreign exchange as Egypt looks to start emptying ports of backed-up goods.

WATCH THIS SPACE- Movement on our COP green hydrogen agreements: The New and Renewable Energy Authority (NREA) is reportedly set to allocate land for the green hydrogen and green ammonia projects signed on the sidelines of COP27 during 1H 2023, Al Borsa reports, citing unnamed NREA officials. The authority is set to meet with the companies that signed MoUs within two months to agree on next steps, the news outlet reports.

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CIRCLE YOUR CALENDAR-

The key news triggers as we start a new month:

• Foreign reserves figures for December should be out later this week.
• Inflation figures for December will be released on Tuesday, 10 January.
• The national dialogue will kick off on Saturday, 14 January.
• The government’s fuel pricing committee will meet this month to decide quarterly fuel prices.
• Global movers and shakers will descend on Davos for the World Economic Forum’s annual meetings on 16-20 January.
• The IMF will publish an updated World Economic Outlook towards the end of the month.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: What does 2023 have in store for infrastructure players?

Qatar has its eye on the Ramses Hilton: Qatar’s Al Kuwari Group has submitted an offer to acquire the Ramses Hilton hotel for USD 320 mn, Bloomberg Asharq reported yesterday, citing what it says are two sources close to the matter. The Arab International Company for Hotels and Tourism, which owns the hotel, is still negotiating with the Qatari group, one of the sources said.

REMEMBER- Qatar announced in March its plans to invest USD 5 bn in Egypt to shore up its finances, which have been rocked by the fallout from Russia’s invasion of Ukraine. Neither side has given much away about acquisition targets or time frames, but a report in October indicated that Qatar’s sovereign wealth fund, the Qatar Investment Authority, is in ongoing talks with Egyptian authorities to purchase as much as USD 2.5 bn worth of state-held stakes in companies including Vodafone Egypt. The fund reportedly also has its eye on a number of investments in Egypt’s ports, including at Safaga and Damietta.

Did Al Safy just take a majority stake in the owner? A report in the local press in November claimed that Egyptian conglomerate Al Safy Group purchased a 53% stake in the Arab International Company for Hotels and Tourism from several sovereign wealth funds in the Gulf. Enterprise was unable to reach a representative of the company for comment yesterday.

BACKGROUND- Our Gulf neighbors have pledged over USD 22 bn in total to support the economy amid the fallout from the crisis in Ukraine. Saudi sovereign wealth fund PIF and Abu Dhabi’s ADQ together invested USD 3.1 bn in government-owned shares in EGX-listed companies last year, and both countries have deposited USD 5 bn at the Central Bank of Egypt. Qatar has provided USD 4 bn in central bank deposits.

Gov’t is ready to pull the trigger on listings of shares in four firms: The Madbouly government is ready to offer shares in four state-owned firms on the EGX and has eight more listings in the pipeline as it looks to reboot its privatization program, a media report suggests writes, citing the bourse’s annual report. EGX head Ramy El Dokany held a presser yesterday to mark the release of the 2022 report, which is not yet available on the bourse website.

The companies ready to be listed reportedly include Banque du Caire, Misr Life Ins, Egyptian Drilling Company, and Egyptian Linear Alkylbenzene Company (ELAB), according to the report, which doesn’t disclose an expected timeline for the offerings. Egyptian Drilling Co. and ELAB have been in the lineup for the state IPO program since 2018, while Banque du Caire is a perennial IPO prospect.

Eight other state-owned companies will also offer shares on the EGX as part of the privatization program, the report reads. They apparently include:

• Oil Ministry-affiliated contractor Enppi, which has been on the privatization block since 2017, when CI Capital was tapped to quarterback its sale;
• Two refineries: Midor and Assiut Oil Refining Company, both of which have been discussed as potential sale prospects in recent years;
• Petrochem firms eMethanex, Ethydco and WAPHCO;
• Misr Life Ins. parent company Misr Ins (Misr Life itself has long been talked about as an IPO prospect)
• and Alexbank.

Wait — Alexbank and eMethanex? Aren’t they already private-sector companies? Alexbank is 80% owned by Italy’s Intesa Sanpaolo Bank, but the state holds a 20% share and appoints two board members. eMethanex, which the media report refers to as simply “Methanex” is a joint venture between Canadian methanol giant Methanex Corp, which holds a 50% stake and Egyptian state institutions that hold 33%. Saudi-based APICORP owns the remaining 17%.

REFRESHER- Gov’t is hoping this will be the year its privatization strategy springs into action. The state is looking to reduce its involvement in certain sectors of the economy as part of its newly finalized state ownership policy, which aims to more than double the private sector’s role in the economy to 65% and attract USD 40 bn in private investment by 2026. Public share offerings and stake sales to strategic investors will be a key part of seeing that policy through. The government had envisaged selling shares in as many as 10 state-owned companies on the bourse in 2022, either via IPOs or secondary stake sales — but market turmoil amid the fallout from Russia’s invasion of Ukraine saw those plans pushed back.

Other companies could take the plunge: The bourse is in talks with firms in the tourism, tech, and renewable energy sectors over potential listings in 2023, El Dokany reportedly said at the presser.

If the last few months are any indication, conditions on the EGX look promising: El Dokany used the presser to highlight the bourse’s stellar turnaround in the final months of 2022. The EGX outperformed all of its Middle-East peers in 2022 thanks to a bull run in 4Q sparked by October’s currency devaluation and the loan agreement with the IMF. The EGX30 ended 2022 up 22%, a major reversal in fortunes for Egypt’s benchmark index, which by the middle of the year had been deep in bear territory.

Some of the key stats in the EGX 2022 report highlighted by Dokany:

• Turnover on the EGX rose 7.6% y-o-y in 2022 to EGP 1.08 tn;
• Some 175k new investors began trading on the EGX, triple the number of new investors in 2021. Some 43k new investors began trading in October and November alone. The total number of investors now stands at 526k;
• Retail investors accounted for some 53% of overall trading, down from 68% in 2021, Youm7 cites the report as saying;
• Cash-dividend distributions to shareholders by listed companies more than doubled y-o-y in 2022 to reaach EGP 36.3 bn.

EGX ROADSHOW UPDATE-

Bourse officials met with 16 separate investors and investment funds and four “international institutions” as part of its foreign roadshow in recent months, the report is cited as saying. Chief among the obstacles to entering the EGX raised by the investors they spoke to were fluctuations in EGP exchange rates and a lack of fresh offerings. The roadshow, which is being managed with the help of Al Ahly Pharos, was set to visit Dubai and the UAE first when it kicked off in October, with EGX boss Rami El Dokany expected to meet with as many as 100 regional and international financial institutions, a bourse source told us at the time.

WATCH THIS SPACE- The roadshow will visit Saudi Arabia in February, followed by a return to the UAE, Al Dokany is quoted as saying.

GlobalCorp closed an EGP 1.1 bn issuance of securitized bonds on 29 December, CEO and Managing Director Hatem Samir reportedly told Hapi Journal.

In detail: The issuance included three tranches, each with an A+ credit rating.

This is part of a larger, EGP 5 bn program: This is the third issuance in the non-bank lender’s EGP 5 bn securitization program. The group has so far issued nearly EGP 3.4 bn of securities of its EGP 5 bn securitized bond program, which had been set to wrap by 2023.

A record-breaking year for securitization in Egypt: The GlobalCorp issuance takes the total value of securitized bonds sold in 2022 to EGP 47.5 bn, three times the EGP 15.8 bn sold the year before, according to data tracked by Enterprise.

Advisors: Al Ahly Pharos acted as financial advisor for the subscription. The subscription was covered by the National Bank of Egypt, Attijariwafa Bank, Arab African Bank, and Abu Dhabi Commercial Bank. Dreny & Partners acted as legal advisors and KPMG were auditors.

The Finance Ministry has officially launched its new framework for issuing sustainable sovereign debt, according to a ministry statement (pdf). The framework will allow the state to raise money for a wider range of social and environmental projects — including the Decent Life initiative — through the issuance of sustainable development bonds.

Details: The Sovereign Sustainable Financing Framework (pdf) broadens the ministry’s green financing framework, allowing the government to issue new kinds of debt instruments that foster social and sustainable development. These include blue bonds (which finance sustainable ocean economies) and gender bonds, which help bridge the economic gender gap. Citibank and Standard Chartered Bank were responsible for structuring the framework, the FinMin statement reads. Moody’s ESG Solutions verified the framework’s sustainability credentials, describing it as “robust” and “coherent.”

REMEMBER- The ministry is hoping to issue USD 500 mn of sustainable development bonds before the end of this fiscal year, part of a longstanding strategy to diversify Egypt’s sources of financing and switch to longer-term debt.

Dubai-based global workspace firm Hotdesk has appointed Ahmad Kamal (LinkedIn) as head of tax and legal. Kamal previously served as head of tax at Swvl and has held several positions at PwC.

Supply Minister Ali El Moselhy’s showdown with MPs dominated the talk shows yesterday. Pundits allocated considerable airtime to a heated, seven-hour long exchange in the House of Representatives yesterday in which majority and opposition MPs teamed up to grill El Moselhy for what they cast as his failure to get a grip on commodities prices amid soaring inflation.

MPs bombarded El Moselhy with accusations of failing to maintain oversight over retail-market prices and falling short of clamping down on price inflation of strategic commodities. Some MPs branded the Supply Ministry “a black-market ministry” and “the ministry of greedy retailers,” as covered by Ala Mas’ouleety (watch, runtime: 13:34.)

El Moselhy stood his ground: “We will never go back to the socialist policies of the 1960s,” the minister said in response to calls by MPs for the ministry to enforce price controls on all basic commodities and goods. “We are a free economy,” El Moselhy said, adding that the government is focusing on making sure goods are readily available. He blamed rising prices on global volatility thanks to the effects of war in Ukraine, predicting that imported inflation will linger for the next 2-3 years.

There’s a shortage of ministry inspectors to oversee retail outlets across the country, Rep. Mohamed Salah told DMC in an interview (watch, runtime: 2:30.) Rep. Jihan Bioumy complained about discrepancies in prices of subsidized goods between different retailers and the soaring prices of strategic commodities, while Reps. Yasser Mounir and Mahmoud Badr criticized what they called the “random” withdrawal of ration cards from citizens.

REFRESHER- The Supply Ministry has moved to force retailers to clearly display the price of goods and is drawing up a list of some 10-15 strategic commodities for which it will publish suggested prices, but has stopped short of imposing obligatory price controls.

AND- President Abdel Fattah El Sisi urged the Madbouly government to speed up the release of all backlogged imports, especially production inputs, in a meeting with Prime Minister Moustafa Madbouly and Finance Minister Mohamed Maait yesterday, according to an Ittihadiya statement. Around 1.7 mn tons of animal feed is still stranded at our ports, while around 1.9 mn tons of feed production inputs have been released, Regional Center for Food and Feed Director Ahmed El Akazy told Ala Mas’ouleety (watch, runtime: 4:09.) Masaa DMC’s Ramy Radwan also covered the story (watch, runtime: 0:50.)

LEGISLATION-

The gov’t is taking another look at the draft labor bill: The Madbouly government requested the House Manpower Committee delay until further notice its scheduled debate of the controversial new draft labor law this week, while it redrafts some articles. The committee last week gave an initial nod to the draft bill, which has come under fire from some segments of the business community, who have said it is skewed in favor of workers. In its current form, the bill would introduce new labor rights including legislating mandatory annual raises, caps on working hours, and longer maternity leave and notice periods, among other things.

BUDGET WATCH-

Primary surplus above target in 1H FY 2022-23: The primary surplus stood at 2.3% of GDP in the first half of the current 2022-2023 fiscal year, above the government’s full-year target of 1.6%, according to an Ittihadiya statement. The figure is also up from the first quarter of the 2022-2023 fiscal year, when the primary surplus hit 0.11% of GDP. State revenues were up 14% and spending grew at a 19% clip in the July-December period compared with the first six months of last fiscal year.

CAPITAL MARKETS–

Shuaa Capital’s former securities brokerage arm in Egypt, Shuaa Brokerage Securities Egypt, has rebranded to become Target Securities Brokerage, according to an EGX disclosure. Dubai’s Shuaa Capital sold the Egyptian brokerage unit via a capital reduction transaction worth AED 3.6 mn (USD 980k) back in June, as part of the company’s wider strategy to exit its non-core businesses.

REAL ESTATE-

The Housing Ministry is drumming up traffic to its online land allocation scheme: Individuals can apply until 8 February to buy land plots in new cities through the Housing Ministry’s “Maskan” scheme, according to a ministry statement. The ministry yesterday released a video (watch, runtime: 1:47) explaining how to reserve one of 305 plots across 10 new cities on its dedicated website under the scheme. Plots have been separated into three categories according to quality.

Another line of FX income: Preference in the allocation of land will be given to those who offer to pay in foreign currency.

SUEZ CANAL-

Shipping-in green know-how from Amreeka: The Suez Canal Authority (SCA) inked an MoU yesterday with the American Bureau of Shipping to benefit from its expertise in environmental sustainability and decarbonization, according to an SCA statement. The move comes as part of the authority’s efforts to turn the shipping corridor into a “green canal" by 2030, the statement reads.

DEFENSE-

Egypt buys 12 military helicopters for USD 426 mn from the US: The Egyptian Air Force is buying the Boeing-manufactured US CH-47F Chinooks to replace its existing fleet of older CH-47D aircraft, according to a Boeing statement. The helicopters will be delivered starting in 2026. The US in May approved the sale of up to 23 Chinook helicopters to Egypt, part of a USD 2.6 bn arms sale.

Fuel on the fire: Israel’s new far-right security minister, Itamar Ben-Gvir, sparked controversy with a visit to the al-Aqsa Mosque flanked by security forces yesterday, triggering condemnation from the Palestinians and several Arab countries, according to the BBC. Ben-Gvir’s visit to the site, his first public act after only five days in the government, was denounced by the Palestinian Foreign Ministry as an “unprecedented provocation and a dangerous escalation of the conflict.”

The Egyptian Foreign Ministry expressed “regret” that “extremist elements” entered the holy site and called on all sides not to escalate tensions in a statement. The UAE, Saudi Arabia, Jordan, and Qatar also criticized the act.

History lesson: The second Intifada in 2000 kicked off after former Israeli leader Ariel Sharon visited the compound.