AM — Our burgeoning smartphone industry just got a big boost as MPs slash duties on imported components

Good morning, friends, and welcome to the first day of March, where we have a ton of news for you on everything from FDI to a big boost for our burgeoning domestic smartphone assembly industry. (Yes, smartphone assembly — the industry is mushrooming, and the House of Representatives just slashed duties in a move that should make the export-focused industry even more competitive.)

Madbouly’s trip to Qatar ends with no sign of breakthrough in investment talks: One of the big stories of the week has been Prime Minister Moustafa Madbouly’s trip to Qatar, which the business community has closely watched for signs that we could unlock as much as USD 5 bn in fresh investment from the Gulf country. The two days passed with no indication of where things stand with the Qatar Investment Authority, which has been said to be pursuing stakes in Vodafone Egypt and several port operators, among others.

We’ve seen a flurry of announcements from the private sector in recent weeks, but no blockbuster announcements out of the Gulf. Almarai bought out PepsiCo’s stake in dairy and juice producer Beyti, EK Holding will invest USD 170 mn in Egypt this year, and Stellantis, Nissan and Almansour have said they will separately invest a total of USD 145 mn in auto assembly here in the coming years. And, of course, there’s Chimera, which is pushing heavily into our financial services industry, acquiring substantial stakes in everything from Beltone and EFG Hermes to MNT Halan and GB Lease.

But our Gulf neighbors have pledged bns in the past year — and little of that has materialized. As we noted earlier this week, disagreements over stake sizes, uncertainty over the EGP, and GCC states’ increasing emphasis on the need for reform are all said to be holding back investment from the sovereign wealth funds (and others) in Abu Dhabi, Riyadh and Doha.

Lamees El Hadidi openly discussed pressure on the EGP last night: The Kelma Akhira host highlighted the discrepancy between the official EGP rate of 30.68 and what she said is the rate of 32:50 in the parallel market. She also noted last week’s reports that talks with Saudi Arabia on the sale of state-owned United Bank have stalled over how to value the lender following the EGP’s devaluation. “They don’t see the current exchange rate at banks resembling a fair rate with a necessity of another depreciation,” she said, noting picking up on Societe General’s recent suggestion that the currency may shed another 10% (watch, runtime: 4:36).

Societe Generale now expects the EGP to fall to 37.00 by the end of the year, emerging-market strategist Gergely Ürmössy told Asharq Business yesterday (watch, runtime: 1:40). A 37.00 rate implies that the currency will lose another 20% of its value against the greenback over the next 10 months, having already lost almost half of its value over the past year in a series of large devaluations. The French lender is currently predicting the currency to fall another 10% by the end of this month to 34.00, and sees a “heightened probability of another sharp devaluation in the near term.”

Will cabinet accept lower valuations? In an interview on Kelma Akhira, former Blom Bank Egypt deputy managing director Tarek Metwally called on government negotiators to balance the need to lock in a good price with the imperative of simply getting new investment into the country (watch, runtime: 8:12). “What we really want more than a high price is getting investors to pour into the country,” Metwally said.

MEANWHILE- Egyptian bonds were the worst performers among emerging markets yesterday as foreign investors reacted to the prospect of higher interest rates in the US and an apparent stall in talks with GCC investors, according to Asharq Business.

It’s the beginning of a new month:

• PMI: S&P Global will release Egypt’s February purchasing managers’ index on Sunday, 5 March.
• Foreign reserves: Expect the central bank to release February’s foreign reserves figures sometime next week.
• Inflation: Inflation data for February will land at the end of next week.
• Interest rates: The Central Bank of Egypt will hold its second policy meeting of the year at the end of the month on 30 March.
• Fuel prices: We’re a third of the way through the quarter and we still haven’t heard anything about what the government plans to do with fuel prices in 1Q. If we don’t get an announcement soon, we can assume the fuel pricing committee is taking the quarter off.

WHAT’S HAPPENING TODAY-

Shoukry is in New Delhi for the G-20 meetings: Foreign Minister Sameh Shoukry is in India today and tomorrow to attend the meeting of G-20 foreign ministers, the ministry said yesterday. Though India wants to focus on issues related to the developing world — including debt relief, food and energy security, and climate change — expect the West’s preoccupation with Ukraine and its schism with Russia to dominate the discourse around the summit.

But Egypt isn’t a member of the G-20? As this year’s G-20 president, India has invited Egypt to attend the summits as a guest nation.

PSA #1- Want to go to the London School of Economics? Attend a briefing on the LSE-Sawiris Scholarship: Newton Education Services and the Sawiris Foundation for Social Development will host an online info session today at 6pm CLT about applying to the LSE-Sawiris Scholarship Program. The scholarship offers funding to Egyptians applying to study an executive MSc in cities at the London School of Economics. You can register to attend the event here.

Interested? You should have a minimum of 10 years of professional experience in an urban-related field, and you need to be currently working for a public- or third-sector organization in Egypt.

PSA #2- The last official day of winter is 20 March, but it looks like we’ve already put our favourite season of the year in the rearview mirror and are jumping straight over spring to summer. You can expect daytime highs north of 30°C through Monday, after which they’ll hover in the 26°C to more than 30°C band as far as the eye can see.

PSA #3- Next stop, Ramadan: The holy month starts in a little over a month’s time on Thursday, 23 March (tbc, of course). So, what time do we eat? Maghreb prayers are at 6:08am on the first day; you’ll have until 4:28am the following morning for sohour.

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THE BIG STORY ABROAD-

There’s no single story dominating the global conversation this morning, with the Wall Street Journal leading with new US subsidies for chipmakers, the Financial Times highlighting a potential sale of parts of Goldman Sach’s retail business, and the Associated Press reporting that 29 people have died in Greece in a train collision.

AND- Like it or not, AI Bing (and perhaps Sydney and Venom?) is a step closer to you: Microsoft plans to roll its AI-powered Bing search engine to its Windows operating system, it said in a statement, shrugging off safety and security concerns over its new technology. The new Bing will be accessible via the search box in Windows 11, which the tech giant introduced yesterday. The search box is one of the most used features of the operating system with half a bn users monthly, product chief Panos Panay said in a slightly breathless statement.

There’s still no word on how soon you’ll get off the waitlist to use AI Bing on your phone or in the browser: The search engine has been unrolled into preview for over 1 mn people in 169 countries in the last three weeks, the statement added.

How do I upgrade to Windows 11? If you’re on a personal machine or your IT department has given you the right permissions: Start > Settings > Update & Security > Windows Update and select “Check for updates.” Tap or click here for more.

CIRCLE YOUR CALENDAR-

MPs have 10 days off: The House will reconvene on Sunday, 19 March.

Thanaweya Amma exam schedules are out: Thanaweya Amma exams are scheduled to take place between 12 June and 15 July, the Education Ministry said yesterday.

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

CORRECTION-

This story was corrected on 1 March, 2023 to reflect that the House will reconvene on 19 March, not 12 March as we previously wrote.

Check out our full calendar on the web for a comprehensive listing of upcoming news

*** 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: Supply chains, transportation and logistics in focus at cabinet-led brainstorming session: Reducing red tape, improving access to finance and lowering customs clearance times were some of the suggestions to strengthen Egypt’s logistics industry against external shocks made at a cabinet roundtable held earlier this month.

Egyptian officials yesterday sought to reassure Qatari business leaders on the state of the Egyptian economy in a bid to unlock fresh Qatari investment. Prime Minister Moustafa Madbouly said during talks in Doha that Egypt is on its way out of its economic crisis and that the currency of the past year is almost at an end, Egyptian cabinet and the Qatar News Agency said.

Reassurance for all investors: The prime minister also said that Qatari investors will be allowed to repatriate profits and pledged not to introduce capital controls on FDI.

ICYMI- Madbouly led a delegation of cabinet ministers and and other officials on a two-day visit to Qatar this week to discuss the country’s plans to invest in Egypt. Doha last year pledged to invest USD 5 bn to help Egypt shore up its external position following Russia’s invasion of Ukraine, but is yet to pull the trigger on any major investments. Talks with the Qatar Investment Authority (QIA) to sell a stake in Vodafone Egypt and two container terminal operators have stalled in recent weeks, reportedly on the sizes of the stakes on offer.

No news of a breakthrough with QIA — but a joint investment fund is in the works: Work is underway to establish a joint Egyptian-Qatari investment fund “with large paid-in capital,” Planning Minister Hala El Said said during the talks yesterday, cabinet said in a statement. Neither side provided any further information on the size of the fund, what it could invest in, or when it could be established.

Qatari businesses could have appetite: The heads of the Qatar Businessmen’s Association (QBA) and the Qatar Chamber of Commerce reiterated Qatari businesses’ willingness to deepen their involvement in the Egyptian economy, and pledged to continue studying potential investment opportunities.

Health is one sector the Qataris are interested in: The Health Ministry signed three MoUs with three Qatari conglomerates — Investment Holding Group, Al Qamra Holding Group, and Aamal Company — that could eventually see them invest in our healthcare sector, according to a cabinet statement. Under the agreements, the three companies will explore opportunities to operate or develop healthcare facilities here, the statement said.

Food, hospitality and tech are also on the menu, according to the statements. One unnamed business owner mentioned plans to launch a group of hotels as soon as possible, according to the Egyptian cabinet statement. Watch this space? Qatar’s Al Kuwari Group submitted in January an offer to acquire the Ramses Hilton hotel for USD 320 mn.

A customs agreement could also be coming: Finance Minister Mohamed Maait said that he is in negotiations with Qatar to sign a customs agreement.

Qatari investors gave a thumbs up to the dual taxation agreement signed by Finance Minister Maait and his Qatari counterpart, Ali bin Ahmed Al Kuwari, in Doha on Monday. The treaty will scrap double taxation and crack down on tax evasion, covering capital gains, income, corporate profits, interest and dividends. QBA members said the treaty will help boost and encourage Qatari investments in Egypt.

What it takes to boost investment in Egypt, according to business leaders: Establishing a higher investment council, ramping up investment incentives, and delivering a stable regulatory environment were among the recommendations suggested by industry players and outside experts at a roundtable discussion organized by the Cabinet Information and Decision Support Center (IDSC) yesterday, according to a cabinet statement.

We love to hear it: Nothing could have put a bigger smile on our faces today more than news that industry players are taking note of our five-step recipe to build an export-led economy that could turn Egypt into an export hub and magnet for FDI.

REFRESHER- Prime Minister Moustafa Madbouly tasked the IDSC last month to work on strategies that could reduce our exposure to external risks in the coming years. The folks at IDSC will work with experts on regular reports to cabinet on how policymakers can strengthen the country’s food and energy security, bolster supply chains and prevent a repeat of the 2022-2023 FX liquidity crisis.

A stable regulatory environment is key: Our friend BTECH CEO Mahmoud Khattab stressed the need for consistency in regulations governing commercial and investment activities — and to streamline licensing and other regulation processes.

So is coming up with a list of priority industries: Creating a detailed plan with a long-term goal for a list of promising sectors like food and automotive, which includes clearly defined roles between different government agencies and authorities, is also necessary, Marwa Mahgoub, a private sector development expert at the International Finance Corporation (IFC), said.

Policymakers + business owners need to be on the same page: Our friend Moustafa Moharram, CEO of Moharram & Partners, called for a investment policy council to be set up involving private-sector representatives.

Tax was another hot topic: Moharram and Khattab both noted the importance of a streamlined, consistent tax regime to help create a more welcoming environment for foreign investors.

MPs yesterday voted to slash customs duties and eliminate development fees on imported mobile phone components in a bid to boost manufacturing and localize the industry. Under the amendments, the 5% state development fee will no longer be applied to components, while customs tariffs will be cut to as low as 0% for some items.

Components are currently subject to duties as high as 30%: The government currently has a 30% customs duty in place on earphones, while a 5% duty is applied to batteries, chargers and mobile cameras, and 2% is levied on screens, Asharq Business reported yesterday.

2% is now the norm: The tariffs applied to batteries, speakers, and cameras imported for smartphone assembly will be cut to 2% under the amendments. Phone screens, which were already charged 2%, will be made exempt from customs.

The beneficiaries: Players in Egypt’s burgeoning smartphone assembly industry.

Uh, wait, Enterprise? We assemble smartphones in Egypt? Heck yes, we do. Samsung started assembling TVs in Egypt and is now our top non-oil exporter. It assembles two models here. Homegrown Sisco Egypt is another pioneer of the industry, while Xiaomi is planning to establish a EGP 1 bn phone factory in Egypt which could open in the second half of this year. Chinese manufacturers Oppo and Vivo have also said they are interested in the market.

What they said: This “serves the government’s policy of localizing industries and reflects the current hard global economic conditions which pushed the state to reduce costs burdened by local industrial projects,” deputy chairman of the House’s Budget Committee Mostafa Salem said.

NOKIA TO EXPORT EGYPT-MADE PHONES THIS YEAR-

Locally-assembled Nokia are heading overseas: Nokia phone manufacturer HMD Global plans to export phones assembled in Egypt to North Africa this year, Tamer El Gamal (LinkedIn), general manager at HMD Global, told Asharq Business (watch, runtime: 2:24). Target markets could include Tunisia, Morocco and Algeria, he said on the sidelines of an industry conference in Barcelona.

REMEMBER– Nokia phone manufacturer HMD Global signed an agreement with Etisal for Advanced Industries (EAI) last year to assemble 1 mn mobile phones in Egypt, and its factory has been up and running since September.

It could double its production capacity before the end of 1H 2023: The company currently produces 4k phones every day, and could raise this to 8k by June, El Gamal said.

Climbing the value chain: HMD Global has until now concentrated on producing 2G and 3G phones in Egypt. That change next quarter: The company will begin assembling 4G phones in April, El Gamal said. 5G phones could be introduced in 2024, he added.

Customs decision to help offset currency problems: El Gamal believes the move would help “make up the difference” in USD exchange rates following the devaluation of the EGP, which has lost almost half its value over the past year. “We’ll be able to provide our products to consumers at appropriate prices,” he said of the decision.

Hotels, tourist companies, restaurants and bazaars will have to pay additional fees into the government’s tourism support fund under a Tourism Ministry decision published in the Official Gazette yesterday.

Hotels will be charged a percentage of their room rates: Hotels will have to pay 1% of revenues made from room bookings to the ministry. The regulations set a minimum EGP 5 and a maximum EGP 50 per-night charge.

Other businesses will pay a fixed amount every year: Cafes and restaurants will pay EGP 4k to EGP 5k a year, respectively. Fees will increase by EGP 3-5k if they sell alcohol or shisha. Tourist bazaar will be charged EGP 5-10k per year depending on the area, while tourist companies will pay EGP 3-10k depending on their activity.

Not quite money for nothing: Companies will receive training services and assistance with automation and digitization, the directive says, without elaborating.

About the fund: The Tourism and Antiquities Support Fund (pdf) was created last year from the merger of three funds affiliated with the ministry. It aims to “revitalize tourism, develop services and tourist areas and conserve and restore antiquities projects.”

The private sector is apparently on board: The fees were given the blessing of the Federation of Tourist Chambers, according to the gazette.

REMEMBER– The government has ambitious targets for the sector: Tourism Minister Ahmed Issa wants to pull some USD 30 bn into the sector under plans to attract as many as 30 mn tourists to the country a year by 2028. The government also wants to more than triple annual tourism revenues over the next three years to USD 30 bn a year.

MPs give final nod to expat car import scheme changes: The House of Representatives yesterday gave its final approval to a raft of changes to the expat car import initiative designed to boost demand for the flagging scheme. Under the amendments, the scheme will be extended for another two months to finish on 14 May (rather than 14 March), while expats living in countries not subject to mutual customs agreements will receive a 70% discount on customs duty.

Refresher: The Madbouly government introduced the scheme late last year with the aim of drawing much-needed hard currency to help pull the country out of its FX crisis. The deadline has already been pushed once. As of last week the scheme had brought in just USD 202 mn since its launch in November, a fraction of the Finance Ministry’s USD 2.5 bn target.

Want a refund? You won’t be getting that in FX: People are able to request refunds within three months of paying the deposit but they won’t receive it in the hard-currency which they paid with. Under a last minute amendment submitted yesterday, all refunds will be paid out in EGP based on the current exchange rate, rather than the rate when deposit was paid.

Other changes: Expats now have five years to bring their vehicles into the country instead of one year. The age of vehicles imported under the scheme should not exceed three years by the time of customs clearance under the changes.

Fast-tracked exec regs: The executive regulations for the legislation will be released within two weeks of the bill being signed into law under an amendment tabled by Rep. Ashraf Rashad, the parliamentary head of the pro-government majority party Mostaqbal Watan.

NOW IN THE HOUSE-

The House received three draft bills to be discussed by committees:

• Political parties: A bill that would hand EGP 2 mn in public money to each political party and open the door to political donations;
• Bad cheques: A bill toughening penalties on writing worthless cheques.
• Education overhaul: A bill focused on overhauling the Thanaweya Amma system.

Snack food maker Edita Food Industries reported record net income and revenues in 2022 on the back of stronger sales and higher prices, according to its earnings release (pdf). The company’s net income more than doubled during the year to EGP 959.4 mn, while revenues rose almost 50% to EGP 7.7 bn. The snack maker reported EGP 329.3 mn in net income in the final quarter of the year, up 69% y-o-y. Revenues in the October-December period were up 64% y-o-y to EGP 2.5 bn.

Higher prices didn’t dent demand: Sales volumes rose 22% during 2022 despite the company hiking average per-pack prices by almost 20% in response to surging input costs, which increased by almost 50%. The cakes segment continued to be the company’s biggest moneymaker, accounting for almost 50% of revenues and finishing the year as the largest contributor to volume growth.

What they said: “Edita’s FY2022 revenue exceeded the initial forecasted budget and crossed the EGP 7.6 bn mark despite a challenging operating environment,” it said.

It was a packed night on talk shows yesterday, with PM Madbouly’s sitdown with Qatari investors in Doha leading the conversation (for more, see this morning’s What We’re Tracking Today and Investment Watch sections, above). Kelma Akhira (watch, runtime: 4:36), Ala Mas’ouleety (watch, runtime: 11:13) and Al Hayah Al Youm (watch, runtime: 6:30) all had coverage.

Also getting attention on the airwaves:

• Egypt-Hungary talks: Yesterday’s meeting between President El Sisi and Hungarian PM Viktor Orbán got coverage from Ala Mas’ouleety (watch, runtime: 15:46), Kelma Akhira (watch, runtime: 3:31) and Al Hayah Al Youm (watch, runtime: 2:58). For more information, head to this morning’s Diplomacy section, below.
• New fees on tourism companies: The Tourism Ministry’s decision to impose new fees on the industry (more details in the news well, above) was also picked up by Kelma Akhira, with Sunrise Resorts Chairman Hossam El Shaer calling the move “very important” for promoting Egypt’s tourism industry (watch, runtime: 8:34).
• Good news for smartphone assemblers: The House giving final sign off to slashing customs duties and scrapping development fees on imported mobile components got a mention from Ala Mas’ouleety, with House Planning Committee Chair Fakhri El Fiqi phoning the show on the decision (watch, runtime: 6:28). “This will stimulate FDI through assemblers setting up shop in the country,” he said. There’s more in the news well, above,
• Steel prices surge: A steel supply crunch has pushed prices up by EGP 2k to reach EGP 29-30k, head of the Cairo Chamber of Commerce’s Building Materials Division Ahmed El Zeiny told Yahduth Fi Masr (watch, runtime: 4:16). The shortage came due to some manufacturers lowering supply in the market to focus on exporting steel, he said.

ATM Misr inaugurating a EGP 1 bn bus factory in New Suez City also got the spotlight, with the company’s Managing Director Amr Al Kouatli telling Kelma Akhira that the plan has been in the works for some 7-8 years now (watch, runtime: 5:26). He said work on the factory lagged due to recent economic conditions, including the pandemic. The Saudi-owned player will deliver 51 King Long Chinese busses to KSA’s National Trading Company Al Koutali said, serving the pilgrimage, education and public transport markets. He said local production input in the vehicles will be as high as 60%.

Expect the first batch of finished buses to be exported to Saudi Arabia within the next 1.5 months, he said. The new factory also got coverage from Al Hayah Al Youm (watch, runtime: 15:38) and Masa’a DMC (watch, runtime: 1:00)

It’s a blissfully quiet morning in the international press: The sole piece of note comes to us from Reuters, which reports that the historic mosque of al-Hakim bi-Amr Allah in old Cairo has been reopened following a EGP 85 mn renovation. The mosque, named after the sixth Fatimid caliph, is the second-largest and fourth-largest in the country. The refurb began in 2017 through a collaboration between the Bohra Shia sect and Egypt's antiquities authority.

COMMODITIES-

The Supply Ministry is stocking up on imported poultry + rice ahead of Ramadan: The Supply Ministry is planning to import fresh quantities of frozen poultry over the coming few days, and rice over the next few weeks, as it prepares for spike in demand during Ramadan, Al Mal quotes Supply Minister Ali El Moselhy as saying. The news come as Chicken and rice prices have soared in recent weeks due to the impact of the EGP devaluation and last year’s import restrictions, which triggered shortages of feed. Local poultry production dipped 40% over the “recent period,” the minister said, pointing the finger at more expensive feed and climate change.

INFRASTRUCTURE-

Japanese banks provide more finance for Egypt-Saudi interconnector: A Japanese banking syndicate will provide a USD 207 mn loan to the Saudi Electricity Company for its side of the 3-GW Egypt-Saudi electricity interconnection project, Asia-focused news outlet the Asset reported yesterday. The Japan Bank for International Cooperation (JBIC) is guaranteeing the loan and will contribute USD 103 mn, while MUFG Bank, Bank of Yokohama and Nishi-Nippon City Bank will co-finance the remainder. The signing of the new loan comes several months after Standard Chartered Bank and Sumitomo Mitsui Banking Corporation announced the provision of USD 566.4 mn to the Saudi electric company for the project.

What about the Egyptian side? That’s a little less clear. The head of the Egyptian Electricity Transmission Company said in October that it has secured USD 600 mn for the project from Arab funds and agencies, though declined to disclose the lenders.

Remember: Trial operations for the USD 1.8 bn project are set to begin in May 2025 with an official operational launch set for later in the same year.

AVIATION-

EgyptAir has become the first African operator of the Airbus A321neo. Aircraft lessor Aercap delivered the plane to EgyptAir earlier this week in Cairo. The national flag carrier will use the airliner, which has 16 business class seats and 166 in economy, on routes to Europe, the Middle East and Africa, according to Simple Flying.

BANKING-

CIB is now offering CDs in Gulf currencies: Leading private sector lender CIB is now offering monthly 5.25% certificates of deposit in SAR, QAR and AED (in addition to USD and EUR), it said (pdf) yesterday. The minimum purchase amount for SAR-, AED-, or QAR-denominated CDs is 5k. CDs can only be bought in multiples of 1k, it added.

Hungary PM in Egypt for talks with El Sisi: Talks between President Abdel Fattah El Sisi and Hungarian Prime Minister Viktor Orbán focused on boosting economic ties between the two countries, El Sisi said in a joint press conference yesterday (watch, runtime: 1:50). They agreed on the “significant benefit” for Hungarian investors from investing in the country, especially in the SCZone, and discussed ways to cooperate in the face of global food and energy insecurity, he said. The two witnessed the signing of several MoUs in areas including the peaceful use of nuclear energy, youth and sports, academic scholarships, higher education, and scientific research (watch, runtime: 8:24).

Illegal migration, Ukrainian war tops the conversation: El Sisi and Orbán also discussed the Russian invasion of Ukraine and illegal migration, according to a statement by the Hungarian PM’s office. He said that Egypt agrees on the necessity of peace to resolve the Russian-Ukrainian crisis rather than escalating fighting. “Hungary is interested in peace, we will do everything to reduce the risk of war escalation. We also undertake disputes with the Western world, as we want a diplomatic solution, a ceasefire, and peace negotiations,” Orbán said. He thanked Egypt for being a “line of defense against illegal migration” to Europe.