AM — Private investors are starting to pull the trigger on Egypt investments. Will GCC sovereign funds follow suit?

Good morning, friends, and welcome to what is shaping up to be a very busy week for news.

The question of the week: Will we see Riyadh, Abu Dhabi and Doha start to pull the trigger on their long-awaited investments in Egypt? That’s the “top of mind” question on Egypt this morning in the global business press. The three Gulf countries pledged bns worth of investments in Egypt last year — but we’ve seen comparatively little in the way of fresh capital since Gulf sovereign funds snapped up stakes in publicly traded stocks including CIB and e-Finance, among others. With a USD 3 bn IMF program signed and a credible reboot of the privatization program now in the wild, what is it going to take for the GCC countries to sign on the dotted line?

Media reports suggest talks have slowed on stake sizes and valuation. Qatar’s sovereign wealth fund wants reportedly larger stakes in Vodafone Egypt and two container operators than are on offer. And two stories out last week suggested that the sale of state-owned United Bank to Saudi’s Public Investment Fund has slowed on differences over valuation. Bloomberg and Reuters have both reported the issue is whether the valuation will be fixed in USD pre-execution, or done in EGP and paid for in USD when the cash is due.

But some private investors are growing growing comfortable with the value of the EGP:

• Saudi Arabia’s Almarai last week bought out PepsiCo’s stake in dairy and juice producer Beyti and reportedly plans to use its base here to export;
• Italy’s Intesa Sanpaolo is said to be about to snap up the 20% of Alexbank that it doesn’t already own;
• EK Holding will invest USD 170 mn in Egypt this year, as we note below in this morning’s news well. EKH’s investment will take the form of both capex spending and the buying out of minority shareholders in some of its subsidiaries;
• USD 145 mn in auto investments from global majors: Stellantis and Nissan, alongside local GM partner Almansour, have said they will separately invest a total of up to USD 145 mn here over the next three years to expand their domestic assembly operations.

And then there’s Chimera, which is plowing hundreds of mns of USD into Egypt: Sheikh Tahnoon’s Royal Group — run by former EFG Hermes veteran Seif Fikry— has since last fall acquired a controlling stake in Beltone alongside big blocks of MNT Halan and GB Lease. More recently, it acquired nearly 3% of EFG Hermes from Tim Collins’ Ripplewood.

Is the speed of reform also slowing the pace of talks? Bloomberg thinks so, saying the three Gulf states are keeping “a close eye on the EGP” and want to see evidence that we’re delivering on our commitments to roll back state involvement in the economy and improve transparency of state-owned enterprises. The business information service’s piece this weekend quotes anonymous sources it says have knowledge of the matter.

The issue: “The ‘wait-and-see’ mode from international investors could put additional pressure on the EGP. The situation could spill over to Egypt’s debt, as a shortage of funds and a weaker currency increase the burden of servicing external borrowings,” said Bloomberg economist Ziad Daoud.

EGP WATCH- Bloomberg picked up a report by Societe Generale on Friday that forecasts another 10% drop in the EGP’s value by the end of March. The currency could end up trading at 34.00 by the end of the quarter — from 30.68 on Thursday — strategists at the bank said, suggesting they want to see “decisively hawkish action by the Central Bank of Egypt.”

REMEMBER- The Central Bank of Egypt (CBE) left interest rates unchanged in its first meeting of 2023, surprising analysts and investors who had expected policymakers to deliver another sizable rate hike to try to curb inflation and bring foreign investors back into the market.

WATCH THIS SPACE #1- Against that backdrop, the PM is in Doha: Cairo 24 reports that Prime Minister Moustafa Madbouly is heading to Qatar today in a bid to push forward talks for fresh Qatari investment. Citing diplomatic sources, the newspaper claims that the PM is taking a large number of ministers and business figures with him to the Qatari capital to talk investments with the country’s political leaders.

A breakthrough? One Qatari diplomatic source said the two sides will sign agreements that will unlock new Qatari investment in Egypt, without disclosing further information.

This is the second high-level trip to Qatar this month, coming less than three weeks since Planning Minister Hala El Said and Sovereign Fund of Egypt head Ayman Soliman visited the country to discuss investment.

WATCH THIS SPACE #2- Panda issuance next FY? Egypt is set to take its inaugural panda bond issuance to the market in early FY 2023/2024, Nevine Mansour, Advisor to the Vice Finance Minister for Fiscal Policies told CNBC Arabia in an interview (watch, runtime: 7:34). Mansour did not provide details on the size of the issuance but early plans put the issuance at USD 500 mn in CNY-denominated bonds. Plans to issue the panda bonds have been in the works since 2019, but were put on hold due to the pandemic. Mansour’s statements came as Egypt successfully wrapped up its maiden sukuk issuance under a three-year, USD 5 bn sukuk program that saw the state net USD 1.5 bn in an offering that was 4x oversubscribed.

ALSO HAPPENING TODAY-

INVESTMENT WATCH- Expect news of progress on our regional industrial partnership with Jordan, the UAE and Bahrain: Agreements will be signed at a meeting in Amman today related to the industrial partnership we entered into with the three countries last year, according to a Trade and Industry Ministry statement. Trade and Industry Minister Ahmed Samir is heading a delegation to Amman for the meeting, the statement read, without giving more details.

ICYMI- The four countries last year set up a USD 10 bn partnership to support industrial projects. They identified USD 3.4 bn-worth of joint investment projects in the first phase of the program, which is being bankrolled by UAE sovereign wealth fund ADQ.

Also in Jordan: Key talks between Palestinian and Israeli officials are happening today: Egyptian and US officials will be in Jordan to attend a “political-security” meeting between Palestinian and Israeli representatives called amid a surge in violence in the occupied Palestinian territories, AFP reported, citing statements by an unnamed Jordanian government official. An Israeli raid in Nablus last week killed 11 Palestinians in what was the latest in a series of violent episodes since Israel’s ultranationalist government entered office last month.

The US’ top Middle East advisor is in Egypt and the region this week: The meeting comes during the visit by US President Joe Biden’s top adviser on the Middle East Brett McGurk. His trip will include stops in Egypt, Jordan, Oman and the UAE, White House Press Secretary Karine Jean-Pierre said in a press briefing Thursday.

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CLOSER TO HOME- AmCham Egypt is hosting its annual MENA Regional Council Conference from 8:30am-5:30pm today at the Nile Ritz Carlton, according to an emailed statement. The event will focus on accelerating green investment in the MENA region.

Expect heavy hitters: Keynote speakers include Prime Minister Moustafa Madbouly, US climate envoy John Kerry, COP27 climate czar Mahmoud Mohieldin, and COP28 Director General Majid Al Suwaidi.

AUC + Electrified Egypt are organizing a one-day e-mobility expo today at the AUC New Cairo campus from 12pm to 5pm. Electric Mobility: The Power of Possibilities Expo will bring together researchers, students, industry professionals, startups, environmentalists, developers, investors, and government officials. Industry leaders speaking at the event include our friend Mohamed Ismail Mansour, chairman and CEO of Infinity; Sharon Nishi, managing director of General Motors Egypt and North Africa; and Ankush Arora, CEO of Al Mansour Automotive.

HAPPENING THIS WEEK-

Egypt-UN Partnership week kicked off yesterday ahead of the signing of the UN Sustainable Development Cooperation Framework (UNSDCF) 2023-2027, the International Cooperation Ministry said.

The House is back in session tomorrow:

• MONDAY- The House will discuss and vote on bills that will extend the government’s expat car import scheme and exempt phone components from being charged development fees. It will also discuss and vote on three foreign agreements on human rights, economic governance and the Montreal Protocol.
• TUESDAY– Social Solidarity Minister Nevine El Qabbaj will be in the hot seat to answer questions from MPs on pensions, social protection programs, and services offered to disabled people.

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DATA POINT- Fuel subsidy bill reportedly quadruples following devaluation, energy shock: The government spent EGP 66 bn on fuel subsidies in 1H FY 2022-2023 — nearly 4x its spend a year before — due to the EGP’s devaluation against the greenback and higher oil prices, an unnamed government official was quoted as telling Asharq Business.

We’re still waiting to hear what the government intends to do with fuel prices in 1Q: Its fuel pricing committee was scheduled to convene at the beginning of January to set prices for the first quarter.

Expect prices to rise: The government has committed to changing local fuel prices in line with movements in the global markets under the USD 3 bn loan agreement with the IMF.

COME TO OUR NEXT ENTERPRISE FORUM-

We’re excited to unveil our next C-level event: The Enterprise Exports & FDI Forum, where we will take a deep dive into two of the most critical topics affecting our community.

Exports and foreign direct investment (FDI) have never been more important to our economy — or our businesses — than in the wake of the float of the EGP. We think we have a once-in-a-lifetime chance to build an export-led economy that makes us a magnet for FDI and all the benefits that will come with it for our nation.

THE BIG STORY ABROAD-

The war in Ukraine is continuing to dominate the global conversation this morning, two days after the one-year anniversary of Russia’s invasion. Most of the focus is on yesterday’s meetings of G-20 finance ministers in India, which ended without an agreement on a final communique after Moscow and Beijing refused to condemn the war. (AP | Reuters | Financial Times | Washington Post | WSJ | BBC | CNBC)

Warren Buffett’s annual letter dropped over the weekend and as usual is the big story in global business press this morning: Buffett kept an optimistic tone in his annual shareholder letter (pdf), calling a 2022 a “good” year for Berkshire Hathaway which saw the company report (pdf) a record USD 30.8 bn in operating earnings despite ending up with a net loss of USD 22.8 bn loss. “Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America,” he wrote. (Reuters | Bloomberg | Financial Times | CNBC)

CIRCLE YOUR CALENDAR-

The National Dialogue could begin after Ramadan, people in the know reportedly told the National. The dialogue was expected to kick off on 14 January, but was postponed after political parties failed to name their representatives to the sessions on time.

Techne Summit is back: The two-day Tech and Innovation summit takes place on 11-12 March at the National Museum of Egyptian Civilization. See the statement here (pdf).

TE earnings delayed: State-owned telecoms firm Telecom Egypt will now report its 4Q 2022 financial results on 6 March, instead of 23 February (pdf) as expected.

National higher education strategy coming next month: The Higher Education Ministry will launch a national strategy for higher education and scientific research on 7 March, Minister Ayman Ashour said yesterday. The launch will be the start of a “serious societal dialogue to upgrade higher education and scientific research” in the country in accordance with Egypt’s sustainable development strategy and industrial revolutions globally.

CORRECTION-

This story was corrected on 26 February, 2023 to reflect that the regional industrial partnership meets in Amman on 25 and 26 February, not 26 and 27 February as we previously wrote. 

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

We can expect big spending from EKH this year: Egypt Kuwait Holding will invest some USD 170 mn in the Egyptian market in 2023, the company said in a statement (pdf) on Thursday. More than half of the amount will be allocated to capital expenditure and the remainder will be used to increase the company’s holdings in its subsidiaries by buying out minority shareholders, it said. The spending will be 60-70% financed by the company’s cashflows, with the rest to come through bank loans, CEO Sherif El Zayat told Asharq Business.

EKH plans to spend some USD 79 mn to up its stake in subsidiaries, the company said, without disclosing the targeted companies. EKH holds a wide portfolio with a focus on fertilizers, petrochemicals, gas production and distribution, electricity, and nonbank financial services.

It’s already started: EKH upped its stake in Alexandria Fertilizers Company (AlexFert) to 61.6% from 60.4% in 1Q 2023, according to the company’s latest earnings release (pdf).

Capex spending: EKH plans to spend the remaining USD 91 mn to invest in existing projects:

• USD 50 mn to drill two new gas wells in the offshore North Sinai concession field;
• USD 30 mn for the company’s Nile Wood MDF factory, a joint venture with German fiberboard producer Homann Holzwerkstoffe. The factory’s products are expected to hit the market by 3Q 2023, according to EKH’s earnings release;
• USD 11 mn to add 20 MW of electricity generation capacity.

REMEMBER- EKH is on an investment drive. The company in 2021 said it planned to invest USD 100 mn each year for five years starting in 2022, across at least six Egyptian verticals.

EARNINGS WATCH-

EKH had a bumper 2022: The company achieved record revenues of USD 1.1 bn in 2022, up by a third from 2021, its earnings release showed. Attributable net income rose 41% to USD 241.1 mn during the 12-month period.

Growth in 2022 was driven by higher global fertilizer prices, which began to normalize towards the end of the year. Revenues from the company’s fertilizer and petrochemicals segment rose 54% to USD 688.4 mn, almost doubling the segment’s net profit to USD 255.8 mn.

What they said: “Our operations have demonstrated a tremendous level of resilience, delivering record results despite the prevailing global and domestic challenges,” said Chairman Loay Jassim Al Kharafi.

Dongfeng EVs land in Egypt: Chinese auto firm Dongfeng’s E70 500 Pro electric vehicles are now being sold in the Egyptian market, courtesy of distributor Misr Helwan Automotive. The car was presented (pdf) to the local market at a presser over the weekend (watch, runtime: 28:08).

The details: Only one model of Dongfeng’s E70 EVs — the E70 500 Pro — is currently available. It will set buyers back some EGP 897k, according to Al Mal. The car can cover a maximum 420 km on a full charge with some 160 horsepower. The car saves owners some EGP 200k-250k per 100k km on lower fuel and maintenance costs, according to Dongfeng.

Charging stations in the works: Misr Helwan Automotive will construct EV charging stations, starting off with Greater Cairo and then focusing on highways and other governorates.

We were expecting Dongfeng EVs to hit the market a bit differently: State-owned El Nasr Automotive had signed an agreement with Dongfeng in 2021 to locally assemble electric vehicles in El Nasr’s factory through one of the Chinese group’s subsidiaries. The plans fell through a few months later due to an import pricing dispute with the automaker.

AVV will handle all maintenance needs: Misr Helwan Automotive inked an initial agreement with the Arab American Vehicle Company (AAV) to handle service, maintenance, and spare part provision for E70 owners, Dongfeng Egypt said last month.

The second new EV to hit the market this month: Our friends at Abou Ghaly Motors introduced Chinese automaker Geely’s Geometry C electric car to the local market a couple weeks back.

REMEMBER- The government is still working on its long-awaited automotive strategy, AKA the Automotive Industry Development Program (AIDP). The strategy is expected to offer incentives to carmakers to increase local assembly and component manufacturing, increase the sector’s competitiveness, and raise exports. Stellantis, Nissan and Almansour Automotive told cabinet last week that they would separately invest a total of USD 145 mn to expand their local assembly capacity here.

France’s NGE to build Sokhna-Alexandria section of high-speed rail: French construction firm NGE and its subsidiary TSO have signed a contract to construct half of the first phase of Egypt’s high-speed rail line, the company said in a statement Thursday. TSO will be responsible for laying the track for a 330-km section linking Ain Sokhna to Borg El Arab via Sixth of October, it said.

ICYMI- Siemens Mobility, Orascom Construction and Arab Contractors have signed contracts with the government to build a 2k-km national high-speed rail line. A 660-km first phase will link Ain Sokhna to Marsa Matrouh, while additional lines will join Cairo to Abu Simbel and Luxor and Hurghada. Deutsche Bahn and El Sewedy Electric are on board to manage and operate the first line under a EUR 1 bn+ contract signed last year.

The company didn’t disclose the value of the contract in the statement, saying only it was awarded by Orascom Construction and Arab Contractors. The Siemens-OC-Arab Contractors consortium signed a USD 4.5 bn contract for the first phase in 2021

Work to start imminently: TSO will begin construction work in “early 2023,” according to the statement.

About the project: This will be the sixth-longest rail network in the world. The project will connect 60 cities nationwide, with trains running at up to 230 km/h. “

The news got attention overseas: Reuters | Euronews.

Eni gas production in Egypt down in 4Q 2022: Eni’s natural gas production in Egypt fell 6% y-o-y in 4Q 2022, contributing to a fall in the company’s overall gas output, the Italian energy giant said in its earnings release (pdf) Thursday. The company produced 1,331 mn cubic feet per day in the October-December period, down from 1,414 mn cf/d in the same period in 2021 and 1,418 mn cf/d in 3Q 2022, the company said.

Eni is a key partner for Egypt, producing 60% of its gas and owning a 50% stake in its Damietta LNG plant, one of the country’s two export terminals. Egypt is a major market for Eni, contributing a third of its total gas production during the quarter.

Egypt’s gas production was said to be on the slide last year: National output had fallen to 6.5 bn cf/d by 3Q 2022 from a peak of 7.2 bn cf/d, according to figures picked up by MEES.

An exploration success: Eni and Chevron announced a significant discovery in the eastern Mediterranean in January. The gas deposit has been said to hold 3.5 tn cubic feet of natural gas though we’re still waiting on the companies and the Oil Ministry to confirm its size.

Last night’s talk shows: Chicken prices, marriage health tests, and the sentencing of Mortada Mansour were all given prominent coverage by the nation’s talking heads last night.

Poultry takes center stage amid soaring prices + Brazilian chicken controversy: Most of the nation’s talk shows gave special attention to the price of chicken as the government ups poultry imports from Brazil to calm soaring prices ahead of Ramadan. Official inflation data out earlier this month showed that the price of chicken has almost doubled over the past year and surged almost 33% in January alone following the devaluation of the EGP.

The main message from the talk shows: Things are getting better. The price of chicken has fallen by around EGP 10 in the past three days due to increased imports, Kelma Akhira’s Lamis El Hadidi said (watch, runtime: 5:55). El Hadidi said she became a “trend” on social media after users criticized her for encouraging citizens to opt for the cheaper imported poultry (watch, runtime: 3:37). Meanwhile, Egyptian Poultry Association (EPA) vice chairman Tharwat El Zeiny told Amr Adib that the imports will bring in some “balance to the market” and said that the price of chicks had fallen by 30% in recent days. In an interview on Al Hayah Al Youm, Abdel Aziz Al Sayed, head of the Poultry Division at the Cairo Chamber of Commerce, said that imported frozen chickens pushed prices down to EGP 69 per chicken yesterday from EGP 78 earlier. Ala Mas’ouleety also featured an interview with El Zeiny (watch, runtime: 4:52).

Gov’t denies importing expired chicken: The cabinet yesterday denied rumors on social media that Brazilian chicken imported by the government was spoiled and expired. The National Food Safety Authority (NFSA) has confirmed that all food imports, including frozen poultry, comply with food safety standards, it said.

Don’t like Brazilian chicken? That’s racist, says Amr Adib: The El Hekaya host sought to defend imports from the accusations by criticizing the detractors as engaging in “poultry racism” (watch, runtime: 2:19).

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Mandatory pre-marriage examinations for future spouses are in effect as of today: The Health Ministry will introduce starting today new mandatory pre-marriage examinations under a presidential initiative to screen future spouses, according to a statement by the ministry.

The new tests got special attention on the airwaves, with Health Ministry spokesman Hossam Abdel Ghaffar telling Masa’a DMC that spouses to-be will have to go through new tests to obtain the necessary health certificate (watch, runtime: 10:38). Those include tests for hepatitis C, hepatitis B, hereditary diseases, and non-communicable diseases including diabetes and hypertension. Newly-weds will now have to pay EGP 220 each for the tests and examination, with the certificate set to be obtained within 14 days. El Hekaya’s Adib stressed the importance of the new examinations, saying that they ensure that the newly-weds are medically fit for marriage and do not suffer genetic diseases (watch, runtime: 3:04 | 1:38).

You won’t tie the knot without it: Religious officiants (maazoun) will not be allowed to document the marriage contracts without the new health certificate, Ibrahim Ali Sleem, who heads the Maazoun Association, told Kelma Akhira (watch, runtime: 7:40).

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Also getting coverage last night:

Mortada Mansour behind bars: Amr Adib covered yesterday’s jailing of Zamalek FC president Mortada Mansour, telling his audience that the sentence demonstrates that no one is untouchable, and highlighting Mansour’s alleged insults aimed at various officials, public figures and footballers (watch, runtime: 12:55).

Mortada’s reaction? “Finally, the president of Al Ahly imprisoned the president of Zamalek club … Do not worry about me, lions are not afraid of death, and they are not afraid of prison,” a typically bullish Mansour wrote in a Facebook post following the decision.

AND- Cancer vaccine breakthrough? Masa’a DMC noted Moderna’s success last week in getting its experimental skin cancer vaccine designated a breakthrough therapy from US regulators (watch, runtime: 12:20).

This morning in the foreign press: EGP devaluation draws bargain-hunting Brits. A UK Post Office index (pdf) ranking GBP exchange rates for currencies used in destinations frequented by British tourists has the international press touting Egypt as an increasingly affordable choice. “The collapse of the EGP in the past year means visitors to Egypt will get 72.7% more for their pounds — the equivalent of over GBP 210 extra on a GBP 500 currency transaction,” boosting the affordability of destinations like Sharm El Sheikh, the Post Office wrote. The Financial Times and Sky News both have coverage.

Also making headlines:

• Washington DC’s Freer Gallery is displaying ancient Egyptian artifacts collected in the early 20th century by the museum’s namesake, Detroit industrialist Charles Lang Freer. (Washington Post)
• More fossil discoveries to come: The Egyptian paleontologists who uncovered the remains of turtles dating back over 70 mn years are working to unveil more discoveries in El Wadi El Gedid governorate. (The National)
• Keeping mum: A linguist's take on efforts to rebrand Egyptian mummies in global museums as “mummified people.” (Wall Street Journal)

COMMODITIES-

More Russian wheat incoming: GASC purchased 240k tons of Russian wheat in last week’s international World Bank-backed tender, the Supply Ministry said Thursday.The state grains buyer said it paid USD 317.50 per ton on a cost and freight basis in a statement picked by Reuters. The wheat is scheduled to arrive between April 1-15 in five shipments and will be paid for at sight.

REMEMBER- This is GASC’s third international grain tender so far this year and the third to be funded with a portion of the USD 500 mn loan that the World Bank agreed to extend the country last summer. All three tenders appear to have been awarded to Russian suppliers.

SUEZ CANAL-

EBRD kicks off second phase of SCZone digital transformation project: The European Bank for Reconstruction and Development (EBRD) launched the second phase of its program to help digitize operations at the Suez Canal Economic Zone, the bank said in a statement over the weekend. The second phase of the program will overhaul the application process for more than 60 kinds of approvals, registrations, and permits investors may need to operate in the SCZone, as well as fully automating and digitizing the zone’s new one-stop shop for investors.

CABINET-

More USAID governance money: The cabinet approved a draft presidential resolution adding an additional USD 19 mn to a USAID grant to the government to improve economic governance, according to a statement. USAID’s five-year economic governance activity (EGA) program began in 2020 and was initially expected to cost around USD 40 mn.

NBFS-

Nice Deer x Misr Finance: Insurtech startup Nice Deer will offer short-term finance to medical service providers under an agreement with Misr Finance for Financial Services, according to a press release (pdf). “This will help eliminate delays in medical expense reimbursement, encouraging collaboration with insurance companies and accelerating the growth of the health ins. industry in Egypt,” it said.

Egypt votes with Ukraine at UN General Assembly: Egypt joined calls for Russia to pull its troops out of Ukraine in a UN vote on Thursday. The country was one of 141 to vote in favor of a resolution (pdf) that called for a “just and lasting peace” and for Moscow to “completely and unconditionally withdraw” from Ukrainian territory. Thirty-two abstained from the vote — including China and India — while seven voted against the resolution. Egypt backed a similar resolution last year voted on at the General Assembly the week after Russia invaded.

El Sisi, Zelensky talk ahead of the vote: Egypt supports all efforts aimed at bringing the war in Ukraine to end, President Abdel Fattah El Sisi told Ukrainian leader Volodymr Zelensky during a phone call on Thursday, according to an Ittihadiya statement. El Sisi also emphasized the need to keep the UN-backed Black Sea grain pact in place to protect global food security.

ALSO- Madbouly + EBRD talk privatization, climate policy: The government’s privatization plans and the Nexus on Water, Food and Energy (NWFE) program were the main topics of discussion between Prime Minister Moustafa Madbouly and a delegation from the European Bank for Reconstruction and Development (EBRD) who were in Cairo on Thursday, according to a cabinet statement.