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Tuesday, 16 November 2021

THIS MORNING: New private sector strategy; No three-digit oil any time soon -El Erian; Biden signs USD 1.2 tn infrastructure bill into law.

Happy hump day, wonderful people. We have a huge issue this morning, and no story has piqued our interest as much as a statement from the Cabinet economic group last night that suggests the state is looking to back out of select sectors of the economy in an orderly way.

Sensitive to the notion of “crowding out”? The ministers are mulling the results of a recent study that will guide cabinet as it decides (a) which “priority areas for structural reform” will open the door for “more private sector involvement” in the economy, (b) identify industries from which the state will exit and hand the reins to private business, and (c) which industries are sufficiently strategic for the state to need at least a foothold.

THE KEY QUOTE is right up top: “Our goal is to make it possible for the private sector to participate more in the implementation of many [national] development and service projects.” The study, it says, “confirms the government's full awareness of the importance of a real partnership with the private sector” and the need for the state to “create an enabling and stimulating environment for the private sector.”

THE KICKER- Cabinet is committing to a review every two years of which state-owned enterprises it needs to keep in the government’s portfolio as well as to an annual “dialogue” with private business on the state of play. Ministers are also looking into the possible setup of a body that will “supervise and manage” the companies of which the state retains ownership.

What’s the economic group? Members include the PM — who heads the committee — as well as the ministers of planning, finance and public enterprises and a number of key direct reports, among them our friends Vice Minister of Finance Ahmed Kouchouk and top Planning Minister advisor Nada Massoud as well as and GAFI boss Mohamed Abdelwahab.

The statement should be good news for capital markets, as ministers nodded to the privatization of state assets through both sale to strategics and via offerings on the EGX. Sales through IPO have proven compelling for investors this year in Egypt (e-Finance) as well as in Saudi and UAE. There’s sufficient hunger for new paper on the EGX that we see little room for state offerings to “crowd out” private-sector companies looking to offer shares. Abu Auf, Macro Group and Ebtikar are all on deck right now eyeing sales as early as 2022, and others have suggested recently they’re keeping an eye on market conditions.

IN THE SAME VEIN- Lawmakers in the House gave approval yesterday to a bill that would make it easier for the private sector to bid for public infrastructure projects in a range of industries. We have the full rundown in the news well, below.

HAPPENING TODAY-

The two-day Africa Fintech summit kicks off today. The summit looks at innovation in the fintech ecosystem, venture capital and other forms of investing, and will also discuss the rise of healthtech.

THE BIG STORY ABROAD- Biden’s bumper infrastructure bill is everywhere in the foreign press this morning. The US president signed into law yesterday the USD 1.2 tn bill, which will enable the biggest upgrade to America’s roads, bridges, railways and internet infrastructure in more than a decade. The story is everywhere from AP and Reuters to the FT and CNN.

MARKET WATCH-

El Erian’s crystal ball doesn’t see oil hitting USD 100 / bbl: Forecasts that rallying oil prices will break the USD 100 mark are overlooking key demand factors, markets guru Mohamed El Erian told CNBC’s Dan Murphy on the sidelines of the Adipec conference in Abu Dhabi. His comments come as Brent and US crude surged past USD 80 per barrel in recent weeks, thanks to post-pandemic demand outstrippng supply. “If you look at what is happening on the demand side, there you get some questions. Demand is robust today but will it be robust in six months’ time?” El Erian says.

Abu Dhabi’s Adipec will keep energy in the headlines this week, bringing together CEOs for in-person events with ministers from countries that form the OPEC+ oil alliance, according to Bloomberg. The event kicked off yesterday and runs through to Friday.

CIRCLE YOUR CALENDAR-

We’re getting a royal visit this week: British royal family members Prince Charles and the Duchess of Cornwall will be in Cairo on Thursday and Friday (18-19 November).

enterprise

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: Green finance has been gaining speed in Egypt and a main contributor to this movement is programs implemented by the European Bank for Reconstruction and Development that provide both funding and technical knowledge. We went down the food chain to talk to all the parties involved, from the EBRD’s independent consultants and the local banks which are doing the on-lending, to the private-sector firms which are receiving the finance.

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