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Thursday, 11 October 2018

What we’re tracking on 11 October 2018

We’re nearly ready for the weekend. We just need to begin discharging our email debt to all those of you who wrote us in response to our announcement of Enterprise One, our forthcoming professional-grade business intelligence service focusing on actionable insights into our market. Beta partners will start hearing from us on Sunday.

Do you know what would make it easier for us to email the 100 of you we’re inviting to become beta partners? Internet. We have now been more than 36 hours without internet in the office. On a leased line. For which we pay a small fortune. It’s the sixth outage in two weeks. We can only imagine that our ISP’s Customer Service Baboon is genuinely pleased with him / herself.

You may now breathe. Market chatter earlier this week about the slump in the EGX sapping appetite among retail investors for IPOs appears to have been overblown: The retail component of consumer and structured finance player Sarwa Capital’s IPO was just over 30x oversubscribed at the close of the offer period yesterday, the company said in a statement (pdf). Sarwa’s shares start trading on 15 October. Reuters also has the story.

** #2 <rant>Egypt is about to lose once-in-a-generation opportunity. Car makers are turning North Africa into a global hub for the automotive industry, exporting parts and manufacturing cars that are sold across the region, in Africa and into Europe, the Wall Street Journal reports. The problem? By “North Africa” the Journal means Morocco and Algeria, because legislative foot-dragging means Egypt has no auto manufacturing industry to speak of. (Sorry, superfans: The 128 may be eternal, but the zombie car company known El Nasr does not count as manufacturing.)

Bns in investment have poured in to build the “world’s newest car-manufacturing cluster,” with Volkswagen, Renault, Peugeot, Hyundai and Toyota joining the party.

Why? The size of the opportunity. “The Middle East and Africa are expected to have 90 million vehicles on the road by 2040, up from 59 million today, according to OPEC forecasts.”

Egypt’s share of all of this investment? Zero.

The facts speak for themselves:

  • Morocco will soon make more cars every year than Italy and has overtaken South Africa as Africa’s manufacturing hub thanks to pro-manufacturing policies enacted Morocco;
  • Moroccan part manufacturers are major suppliers to the European factories of global car companies such as Ford;
  • Volkswagen is building an assembly plant in Relizane, Algeria, that’s making the Caddy delivery van and Polo compact — and has also opened factories in Kenya and Rwanda, with plans to build assembly facilities in Nigeria and Ghana;
  • SEAT is producing its Ibiza and Arona models in Algeria, and Skoda is doing its Octavia sedan;
  • Renault has built two assembly plants in Morocco over the past five years that produce more than 200k cars a year;
  • A new Peugeot plant in Morocco will come online later this year;

How did this happen? Governments took the lead. “Local governments eager to attract foreign investment…are adopting business-friendly policies such as relaxing currency controls, creating free-trade zones and providing financial incentives. Some are also building or expanding roads, rail links and deep sea ports,” the Journal writes.

We had a measure on the drawing board that could have attracted global investment — the so-called Automotive Directive that would have given tax and other incentives to assemblers of global brands if they went further up the value chain into manufacturing. Doing so would have given them a measure of protection against European Union imports on which customs duties will fall to zero at the start of 2019, and Trade Minister Amr Nassar has made clear that Egypt will not seek a delay in the customs cut. That initiative is stalled, and no one seems to understand why. We’ve spoken with industry and government insiders about the topic for more than a year now. The auto directive, which we reported this summer could be watered down, was due before the House of Representatives at the legislative session that began this month. As of this week, none of our sources know where the automotive directive stands

Our inaction may not be Angela Merkel’s fault. We had previously reported that opposition to the automotive directive from EU partners including Germany may have been part of the reason the bill — which is as unpopular with importers as it is popular with assemblers — has been stalled. Not so, says one of our sources with first-hand knowledge of the matter. The source claims a draft has been shopped around to various constituencies in the EU and has not run into serious opposition. </rant>

It could be a tough day for the EGX, and the Emerging Markets Zombie Apocalypse isn’t at fault (for once). A sell-off in US markets yesterday spread this morning to Asia, auguring poorly for European and regional markets when they open later today. Tokyo, Shanghai and Hong Kong were all down 2% or more at dispatch time this morning after the “deepest one-day selloff” in Wall Street stocks in eight months left some analysts musing about a potential correction. “With traders spooked by rising U.S. Treasury yields and fears of a deepening U.S.-China trade conflict, the benchmark S&P 500 index on Wednesday dropped 3.29%, its worst one-day decline since February, bringing its loss to almost 5.0% since closing at a record high on Sept 20,” Reuters reported.

Correction vs. bear market: A 10% dip from a high is generally seen as a correction; 20% down and you’re in bear territory. CNBC and Bloomberg have the story, which was the lead piece on the Financial Times’ web edition at dispatch time.

Factoid of the morning: Nearly USD 2 bn. That’s the value of outflows on Tuesday from BlackRock’s flagship debt ETF, a record one-day withdrawal for “the biggest exchange-traded bond fund…after the global fixed-income market saw more than USD 900 bn evaporate in last week’s Treasury-led bond rout, the FT reports.

In miscellany to see you into the weekend:

Reid Hoffman just made us want to puke. The LinkedIn founder’s advice on how to build a business: “If your start-up’s running smoothly, you’re not growing fast enough. In my new book #Blitzscaling, you will learn how embracing chaos and being the first to scale is the best way to achieve long-term positive impact,” he tweets. You can visit his book’s website here if your inner scenester feels neglected. Or save yourself the click and invest it in the hard work of building a real business. They’re just as dogmatic as Hoffman, but we’re solidly team Basecamp on this one. Go read It doesn’t have to be crazy at work by Jason Fried and David Heinemeier Hansson instead.

Cum what? Your (alleged) white-collar crime caper of the week: How two guys, one of them now parked in Dubai, reportedly used cum-ex trades to make off with USD 2 bn from Denmark’s version of the Tax Authority. It may even have been legal. (New York Times)

Google fan? Business Insider has a six-minute rundown of everything that took place at Google’s Pixel 3 event this week, while the New York Times writes that “new Pixel phones and other gadgets keep Google in the hardware hunt.”

PSA- Work in Smart Village, but live in Tagamoa? You may want to leave work a bit early today, and your Sunday commute could…be sub-optimal: Parts of the Ring Road between New Cairo and the Moneeb Bridge will be closed from noon today through 5pm Sunday for construction work on a footbridge near the Autostrad, Youm7 reports.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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