AM — Investors pour EGP 100 bn into high-yield 25% CDs within days of launch

Good morning, wonderful people, and welcome back to work. We hope you (and the kids trudging back to school) had a fantastic long weekend — and that everyone celebrating had a beautiful Christmas with family and friends.

Where did we leave things off last week before the Vacation Neuralizer reset our brains?

• The EGP had slid to 27.20 against the greenback;
• The National Bank of Egypt and Banque Misr had introduced 12-month, 25% certificates of deposit;
• Italy said it wants to build a USD 2.8 bn link that would allow it to import electricity from Egypt;
• Our friends at Compass Capital became the latest to declare themselves interested in acquiring a majority stake in Pachin, the EGX-listed paint-maker.

THE BIG STORY HERE AT HOME- Are we starting to find our way out of the tunnel? There are signs the 25% certificates are attracting record demand and the central bank says it is letting supply-and-demand forces set the value of the EGP.

The next two big checkpoints:

#1- Where does the EGP go today against the greenback today and tomorrow?

#2- The IMF will hold a virtual press conference on its USD 3 bn financial assistance program with Egypt tomorrow at 4pm CLT, the institution said in an emailed statement out over the weekend. The presser, held by IMF Mission Chief for Egypt Ivanna Vladkova Hollar, will coincide with the release of the IMF’s staff report on Egypt and other documents related to the extended fund facility.

WHAT’S HAPPENING TODAY-

The Senate is back in session today with a busy agenda: The upper house of parliament will kick off a two-day debate today on how to integrate the informal economy. The catalyst is a a study prepared by senator and business leader Ahmed Abu Hashima. Also:

• The Senate’s Financial and Economic Affairs Committee is set to hold a series of hearings on a report drafted by the pro-government Mostaqbal Watan party that aims to overhaul how we approach foreign direct investment.
• The Financial and Economic Affairs Committee will also discuss proposals to enforce price controls on key commodities.
• The Senate Housing Committee will resume discussions on amendments to the 2008 Unified Building Law.

PSA #1- Look for a daytime high of just 18°C and largely cloudy skies today in the capital city, our favorite weather app warns. The weather in Alex will be a little warmer at 20°C with mostly sunny skies, while those of you toiling from El Gouna and Somabay can expect a high of 22°C and not a cloud in the sky. (We hope you enjoyed the thunder and lightning show last night as much as we did.)

PSA #2- Your next long weekend kicks off on Thursday, 26 January in observance of Revolution / Police Day. Plan to make the most of it — that will be your last national holiday until April, when we’ll have blocks of time off for Coptic Easter, Sham El Nessim, Sinai Liberation Day, and Eid El Fitr.

PSA #3- There are 73 days until Ramadan. Just sayin’.

HAPPENING TOMORROW-

Inflation figures for December will be released tomorrow.

We may hear a bit more about the Madbouly government’s approach to privatization and state involvement in the economy with Vice Finance Minister Ahmed Kouchouk and Sovereign Fund of Egypt (SFE) CEO Ayman Soliman scheduled to discuss the newly finalized state ownership policy document at an event (pdf) scheduled to take place at the Grand Nile Tower Hotel. The conference is being hosted by Thebes Consultancy and Eventor Event Management.

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THE BIG STORY ABROAD- Bolsonaro supporters storm Brazilian gov’t complex in echo of US 6 January riots: Fans of rightwing former president Jair Bolsonaro stormed Brazil’s Congress, supreme court, and presidential palace last night. The riot broke out in the aftermath of a planned demonstration by Bolsonaro supporters to contest last week’s inauguration of returning president Luiz Inácio Lula da Silva, in scenes reminiscent of the 6 January riots on the US Capitol by Donald Trump supporters in 2021. Brazilian police fought back control of the buildings, which were empty when the attack took place. Everyone from the FT and BBC to CNN, Reuters and NPR has the story.

AND- The World Bank has warned that further crises could tip the global economy into a recession in 2023 ahead of the release of its Global Economic Prospects report next Tuesday, 17 January. Global growth this year “is expected to decelerate sharply, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine,” the international lender warned, adding that “urgent global and national efforts” will be needed to mitigate these risks, as well as the risk of debt distress in emerging markets.

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DATA POINT #1- A record number of doctors left the public health system last year -Medical Syndicate: Some 4.3k doctors — or 12 every day — left the public health system in 2022, up 3.2% y-o-y, according to a Medical Syndicate statement. The Syndicate said the true figure could be much higher than its survey data reflects, adding that doctors were leaving state-run health facilities thanks in part to low pay and an unfavorable work environment.

DATA POINT #2- The volume of our agricultural exports rose 14% to a record 6.4 mn tons in 2022, the Agriculture Ministry said in a statement yesterday. Citrus fruits were once again the most exported product last year by weight at 1.8 mn tons, followed by potatoes at 871k tons and onions at 578k tons.

CIRCLE YOUR CALENDAR-

The national dialogue will kick off on Saturday, 14 January.

Global movers and shakers will descend on Davos for the World Economic Forum’s annual meetings on 16-20 January.

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.

In today’s issue: Price pressures could spell trouble for study abroad programs at local universities.

The newly released 25% certificates of deposit have raked in almost EGP 100 bn in a matter of days — and the two state banks offering them have reportedly secured a major loan to meet local demand for hard currency.

Savers poured nearly EGP 100 bn into newly introduced record-high yield 25% certificates of deposit as of last Friday, National Bank of Egypt Deputy Chairman Yehia Aboul Fotouh said in a phone-in over the weekend with Kelma Akhira’s Lamees El Hadidi (watch, runtime: 11:55). Savers invested some EGP 66 bn in CDs at the National Bank of Egypt (NBE) and EGP 31 bn at Banque Misr, he added. The two state-owned banks are the only banks so far offering the CDs.

The Big Two are working overtime to capture appetite for the instruments: Bank clerks at some 126 branches of Banque Misr (pdf) and 146 branches of the NBE (pdf) worked to process requests for CDs on Friday and Sunday, which was a national holiday to mark Coptic Christmas, Aboul Fotouh said.

Nearly half of the money poured into the CDs is fresh money, not money taken out of other CDs, Aboul Fotouh said, adding that many depositors have de-dollarized to buy into the certificates

Aboul Fotouh doesn’t see the EGP falling much more against the greenback: High demand for the CDs is a good sign for the EGP moving forward, he says, saying the instruments will help curb demand for the greenback and allow the EGP to stabilize at its current rate. The current exchange rate — which stands at around USD 27 / EGP — is appropriate, Aboul Fotouh said, adding that he does not expect the EGP to fall much further.

REMEMBER- The CDs were introduced to convince folks with hard currency deposits in the banking system to de-dollarize — and, at the same time, to tamp down inflation by reducing liquidity in the market.

NBE, BANQUE MISR SAID TO SECURE MAJOR USD FACILITY

The National Bank of Egypt NBE and Banque Misr have reportedly secured loans worth a combined USD 705 mn from global lenders to meet the local demand for hard currency as the government looks to clear a backlog of imports at our ports, Al Arabyia reports, citing what it says are unnamed sources in the banking industry.

The details: Banque Misr reportedly secured a seven-year, USD 300 mn loan from the African Development Bank (AfDB). NBE secured a three-year, USD 405 mn loan from a consortium of Gulf lenders including our friends at Mashreq Bank as well as Doha Bank, Emirates NBD, and First Abu Dhabi Bank, as well as Standard Chartered and Japan’s Sumitomo Mitsui Banking Corporation, the sources told Al Arabiya.

GASC puts out a fresh international wheat tender: State grain buyer GASC has launched an international tender to purchase 30k-60k tons of wheat on a cost and freight basis for February delivery, according to a GASC statement. Traders need to submit their bids directly to GASC by midday tomorrow.

Thanks, World Bank: The purchase will be funded with a portion of the USD 500 mn loan the World Bank agreed to extend the country last summer. The loan is geared towards boosting our food security.

Wheat tenders have been few and far between lately: The state buyer has largely shifted from international tenders to direct purchases of wheat since the outbreak of war in Ukraine sent the grain markets into turmoil last year. High prices and a lack of offers saw GASC cancel some of the few international tenders that were scheduled. The authority has in recent months made several large direct purchases of Russian wheat.

REMEMBER- Suppliers to GASC are now obliged to register to the newly-launched Egyptian Mercantile Exchange (EMX), the statement reads. GASC has been selling wheat on the exchange since its November launch, last Wednesday reportedly selling 20k tons of Russian wheat at EGP 10.3k per ton to 73 mills in what was the EMX’s 11th trading session.

Australia’s accelerated climate ambitions under its new federal government are likely to trigger a demand for funding that will provide MENAT companies and investors with the chance to capitalize on the nation’s vast natural resources and increasing appetite for renewable energy.

Australia’s land mass, abundant sunlight and wind, and regulatory stability had already lured foreign investment prior to the election of the climate-focused Labor government in May last year, with European and British energy companies playing a leading role.

The Dubai Investment Fund has since announced an investment in two solar power plant start-ups that will initially generate 300 MW of solar energy for local communities.

The potential of this type of investment is significant. Wind and solar farms being developed by offshore investors in the northeastern state of Queensland, for example, are already among the largest of their kind in Australia. Other projects funded with foreign capital aim to boost the nation’s burgeoning green hydrogen industry, facilitate sustainable building construction, and enable the export of clean energy to offshore markets, among other things.

Australia’s newly legislated target of reducing carbon emissions by 43% by 2030 may well transform the steady stream of offshore capital into a flood, as a greater number of foreign investors seek to diversify their energy interests and, equally, to capitalize on ever-expanding business opportunities arising as a direct result of the nation’s climate policies.

MENAT’s existing trade connections with Australia should provide a springboard for other investors eager to explore new ventures. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE are already-established markets for a range of Australian exports, accounting for AUD 11.1 bn in bilateral goods trade last year. Services are also an increasingly important part of the economic relationship and two-way investment between UAE and Australia, for example, which totalled AUD 14.5 bn in 2021.

The Abu Dhabi Investment Authority is also among MENAT entities that have held Australian interests, including as part of a consortium which owns Sydney’s WestConnex Motorway.

The numbers behind the Australian federal government’s headline climate commitments provide a compelling picture of the green opportunities at hand. Prior to its election, for example, it promised to increase the share of renewables in Australia’s national electricity market to 82% by 2030 versus 68% if it maintained the previous settings that underpinned the nation’s energy transition plans.

It also calculated that its overall climate commitments would generate AUD 76 bn in investment by 2030 — an amount that is equivalent to a hefty 3% of the anticipated national GDP in that year.

Significantly, less than one third of that AUD 76 bn was expected to come from public investment.

For a less populous nation like Australia, a significant proportion of that private investment will inevitably be sourced from foreign direct investment.

Major companies from Germany, Spain, and France have publically signaled their intentions to explore a broader range of Australian projects, and Australia recently signed a Green Economy Agreement with Singapore to facilitate trade and investment in environmental goods and services, and to generally support each other’s climate transition.

There is still much for Australia to do if it is to realize the climate change mitigation vision of the federal government elected by its population earlier this year. But any remaining reticence among foreign investors to commit to green projects in the market is switching to a “fear of missing out” as a nation traditionally recognized as a fossil fuel superpower takes real steps to transform itself into a renewable energy superpower of the future.

This op-ed was written by Antony Shaw, CEO, HSBC Australia (LinkedIn). HSBC’s column in Enterprise appears every second Monday.

Prime Holding appointed Hassan Samir (LinkedIn) as vice-chairman, managing director, and CEO of the company in a board meeting last week, according to an EGX disclosure (pdf). Samir was previously Prime Holding’s managing director for capital markets and has been with the brokerage firm for the best part of two decades, including a seven-and-a-half-year stint as managing director for Prime Securities from 2012 until the end of January 2020.

Former Prime CEO and vice-chairman Mohamed Maher (LinkedIn) will now act as non-executive chairman of the company’s board. Former chairman Sherine El Kady offered his resignation at the meeting.

President Abdel Fattah El Sisi has tapped Major General Walid Youssef Morsy as vice president of the General Authority for the Suez Canal Economic Zone’s (SCZone) southern region for a year as of 2 January, according to a cabinet statement. El Sisi also renewed Major General Mohamed Abdel Aziz Brayeh’s appointment as vice president for the SCZone’s northern region, the statement said, and tapped Ibrahim Mostafa Abdel Khalek as vice president of the authority’s investment and promotion division.

The economy once again took center stage on the talk shows over the long weekend: The pundits spent plenty of airtime last night totting up the inflows to the high-yield 25% CDs introduced last week. Reassurances from President Abdel Fattah El Sisi on the state of the economy and moves to clear the logjam at ports also got top billing.

President Abdel Fattah El Sisi asked Egyptians in a Christmas address to “not worry” about the economic situation. “I can see that people are worried and afraid. I won’t say that this isn’t justified … we [the government] don’t hide anything from you,” El Sisi said during an address to the Christmas mass held at the new administrative capital’s Cathedral of the Nativity of Christ (watch, runtime: 9:36). “Don’t be afraid. God is with us. Do you think he will abandon us?” he added, stressing that the government is working to protect citizens from the global economic fallout of the war in Ukraine.

Have poultry prices peaked? The price of chicken and eggs should decline from mid-January after the government worked to release feed stuck at ports that had led to supply constraints and stoked inflation, head of the poultry producers’ union Mahmoud El Enany told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 8:47). The government has worked to release 1.75 mn tons of livestock feed in the past 2.5 months, Agriculture Ministry official Tarek Soliman told El Hekaya’s Amr Adeeb, according to Shorouk News.

A facelift — but no ownership changes — for Giza Zoo: The Giza Zoo and adjacent Orman botanical garden will undergo major renovations worth EGP 1 bn, Agriculture Ministry Spokesperson Mohamed El Kersh told Al Hayah Al Youm (watchtime, runtime: 11:30) and Ala Mas’ouleety (watch, runtime, 6:08). The National Authority for Military Production will renovate, operate, and maintain the zoo and garden in partnership with unnamed private firms, while the ministry will retain ownership of both sites, he added.

The renovated Giza Zoo will follow an “open-range” system with no cages, potentially paving the way for it to regain membership in the World Association of Zoos and Aquariums, which the zoo lost in 2004, ministry official Mohamed Raga’eegy told Lamees El Hadidi (watch, runtime: 8:58).

More on the challenges facing our economy in the int’l press: The government’s push to tackle dollarization and inflation through 25% CDs amid a hard currency shortage that has stymied imports was the focus of a story in the Irish Times, while the Wall Street Journal reports on Egyptians struggling to make ends meet as prices rise.

Also making headlines:

• More than 6k CCTV cameras form part of the high-tech security infrastructure installed at the new administrative capital by US firm Honeywell. (Reuters)
• Arbitration specialist Karim Youssef has called for a “COP27 moment” in global arbitration to counter what he called a “huge backlash” by state governments against settling investor disputes according to international standards.(Global Arbitration Review)
• At least two people were killed and a third injured after the roof of a three-storey apartment building collapsed in Alexandria. (AP)
• A man was arrested on charges of impersonating a religious officiant (maazoun) and spreading false news after claiming that newlyweds will have to pay fees under the draft Personal Status Act. (The National)

CAPITAL MARKETS-

EGX looks to forge closer ties with Gulf counterparts: EGX officials are reportedly mulling onboarding the EGX to the Gulf’s Tabadul regional exchange hub, Shorouk News reports citing EGX head Ramy El Dokany. The move would allow Egyptian and Gulf investors direct access to trading on the EGX and regional bourses through authorized brokers.

SOUND SMART- Launched last summer, Tabadul grants investors in the Abu Dhabi Securities Exchange (ADX) and the Bahrain Bourse (BHB) access to both markets through local authorized brokers. Muscat’s stock exchange in October signed an MoU to join the platform and more Gulf exchanges will follow suit, El Dokany is quoted as saying.

REMEMBER- EGX officials are booked for visits to Saudi Arabia and the UAE in the coming months as part of a roadshow geared towards attracting foreign investors to the EGX, Al Dokany was quoted as saying last week.The EGX has been working to up foreign inflows, particularly from the Gulf. 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.

TECH AND TELECOMS-

The CIT sector grew at a 16.7% clip in 2022 — faster than any other sector in the country, according to a CIT Ministry statement. The sector made up 5% of the country’s GDP last year, the statement reads, while digital exports registered USD 4.9 bn.

DEBT-

State-owned consumer finance outfit One Finance is in the final stages of securing an EGP 150 mn loan from Banque du Caire and Suez Canal Bank, Shorouk News reports, citing CEO Hazem Madany. One Finance is working in parallel to secure credit lines from CIB and Banque Misr as part of plans to secure EGP 1.5 bn in finance from nine separate lenders during 2023, Madany reportedly said. Launched in October, One Finance is 40% owned by the state’s Ayady Investments, while the remaining 60% is split equally between microfinance player Tamweely and Post for Investment, Egypt Post’s investment arm.