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Monday, 1 August 2022

THIS MORNING: Ukrainian wheat exports could start today; “No backsliding” on global climate targets, says Shoukry

Good morning, nice people, and welcome to the month of August. It feels a bit as if the volume of news is slowing (as is traditionalf or the first two weeks of August), but we nonetheless have a meaty issue for you this morning with plenty of FX, M&A, capital markets and investment news.

EGP WATCH- The EGP has broken the 19.00 barrier against the greenback for the first time since December 2016, when the currency hit an all-time low after the Central Bank of Egypt allowed the currency to move freely against the USD. The currency settled at 19.0084 against the USD during trading yesterday, leaving it down more than 20% since March when the central bank devalued the currency.

Also yesterday: Remittances from Egyptians working abroad declined 8% y-o-y in May to USD 2.4 bn. Flows were down 23% from USD 3.1 bn in April, according to Central Bank of Egypt figures (pdf).

FROM THE RUMOR MILL-

#1- Is EFG planning to IPO valU? Rumor has it that our friends at EFG Hermes are cooking up an IPO on the EGX for its consumer finance subsidiary, valU, within the next two years. That’s according to Al Shorouk, which published a piece Saturday citing an “informed source” as saying that the offering will likely go ahead during 2023 and that EFG has already started preparing.

#2- Has cabinet just finalized the automotive strategy? That’s what Al Mal is reporting, citing a source at the Trade and Industry Ministry. The strategy — which has been on the government’s to-do list since 2016 — should go up for debate at the House next October. We’re looking into this and will bring you more as soon as we have it.

HAPPENING TODAY-

The first wheat shipment could leave Ukraine today, Turkey’s presidential spokesperson said yesterday. “If all (details) are completed by [Monday], it seems like there is a high possibility that the first ship will leave the port [Monday] … We will see ships leaving the ports the next day at the latest,” Ibrahim Kalin told a Turkish broadcaster yesterday. This would be the first grain shipment to leave one of Ukraine’s Black Sea ports since Russia invaded the country on 24 February, and comes less than two weeks after the UN and Turkey brokered a landmark pact between Kyiv and Moscow to allow Ukraine to resume wheat exports via sea. (Reuters | Bloomberg)

How much is ready to go? Sixteen ships carrying 580k tons of grain are currently docked in the country’s Black Sea ports, according to Reuters.

Ukraine is leading the international front pages this morning:

  • Donetsk region is being evacuated: Ukrainian President Volodymyr Zelenskiy has ordered the evacuation of civilians in Donetsk region as Russian troops close in around the remaining population centers in the Donbas.
  • Russian strikes kill Ukrainian wheat tycoon: Oleksiy Vadatursky, one of Ukraine’s richest people and owner of the grain exporter Nibulon, died in Russian airstrikes in the southern city of Mykolaiv yesterday.
  • Europe is easing off its energy sanctions on Moscow: The EU will delay plans to ban ships carrying Russian crude from the Lloyd’s of London ins. market in an effort to prevent the global energy market from destabilizing further. It has also backtracked on one of its sanctions against Russian oil, and will now allow European companies to pay Russian state-owned entities, such as Rosneft, for the purpose of transporting oil to countries outside the bloc under “strictly necessary” circumstances.

Read more: Reuters | AP | NYT | Bloomberg | FT | WSJ | BBC.

HAPPENING THIS WEEK-

We’ll find out how much of Beltone Financial will be acquired by Chimera this week: Shareholders have until Wednesday, 3 August, to subscribe to Chimera Investment’s mandatory tender offer for the financial services firm. The Abu Dhabi-based investment firm has already acquired a 56% stake in Beltone after Orascom Financial last week agreed to sell its shares. Chimera is offering to pay EGP 1.485 per share for up to 90% of Beltone, valuing it at around EGP 690 mn.

PMI out on Wednesday: We’ll get an idea of how the private sector fared in July when S&P Global releases its latest purchasing managers’ index (PMI) on Wednesday. The index fell to its lowest level in two years in June as surging inflation hit demand and output.

The National Dialogue board will talk about the economy this week: The board of trustees overseeing preparations for the National Dialogue will meet Wednesday to discuss the economic agenda.

LATER THIS MONTH-

  • Foreign reserves figures for July will likely be released at the end of this week or the beginning of the next;
  • Inflation data for July will land on Wednesday, 10 August.
  • Interest rates: The Central Bank of Egypt will meet to discuss interest rates on 18 August.

PSA- Kids have another few days to apply to STEM schools for the coming school year: The Education Ministry will continue to accept applications to STEM schools via its website until Wednesday, 3 August, after receiving many requests from students who were not able to register in time, it announced in a statement yesterday.

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

COP27 WATCH-

You know global climate goals are under threat when the German Green party starts firing up the coal plants: It’s backtracking like this that Foreign Minister and COP27 President Sameh Shoukry tells Bloomberg that Egypt wants to prevent. The country’s central focus for the summit — being held in Sharm El Sheikh in November — is to ensure there is “no backsliding or backtracking on commitments and pledges” made at previous gatherings, he says. “We hope that COP27 will first confirm the political commitment to climate change and the agreed transition at the highest level.”

CBE, BoE to talk climate finance in run-up to COP27: The Bank of England (BoE) is sharing its experience of managing climate risks in the world of finance in a three-day workshop with the Central Bank of Egypt (CBE), according to a statement (pdf). The workshop will also cover the work of the Network for Greening the Financial System, a network of central banks — CBE included — and financial regulators that aims to mobilize green finance and manage climate risks in the banking sector.

ICYMI-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we looked at what pharma players want to see from the state’s privatization program to give the sector a boost.

MARKET WATCH-

Wall Street is taking bullish positions on the greenback, as the Federal Reserve’s fastest tightening cycle in years and rising fears of recession cause investors to pile into the currency. The USD has been on a tear this year, reaching a record high according to some measures and prompting bullish positions to hit their highest level in seven years, according to a survey of fund managers picked up by Bloomberg.

Should we be preparing for a “doom loop”? As demand for the USD grows stronger, it is hitting economies worldwide that rely on the currency for imports and are desperate to keep foreign investors in their markets. This creates a cycle of interest rate hikes that has knock-on effects on investment and fuel inflation. “There is simply no alternative to the USD no matter where you look and it’s pummeling everything else as a result — economies, other currencies, corporate earnings,” a senior banking executive tells Bloomberg.

In Asia, the strengthening USD is posing a bigger problem than inflation: “We’re not particularly worried about inflation driving policy, but exchange rate weakness, USD liquidity drying up, those things [are] a bigger issue, [and issues such as] the balance of payments angle,” Taimur Baig, managing director at DBS Bank, told CNBC.

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WHO YOU ARE- Our Head of People is responsible for aligning HR practices with business objectives and works alongside some very smart people, including our C-level and leadership teams, to design and develop HR strategies and monitor their effectiveness. Candidates should have at least 10 years of experience in human resources, with extensive knowledge of key HR disciplines including performance and talent. We are looking for someone who isn’t afraid to challenge, innovate, experiment, and move at a fast pace — not to mention creating some very cool new things to drive people engagement and improve a high-performance culture.

INTERESTED IN APPLYING? To apply for the Head of People, drop us a line at jobs@enterprisemea.com and mention “Noha” in your subject line — she’s our outgoing Head of People and the first person who’s going to be reading your application. Please send a solid cover letter telling us a bit about who you are and why you’re a good fit for our team. We want to see your CV, but the most important thing is a cover letter that makes us want to pick up the phone and give you a call.

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*** 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. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Why future flow securitization could be the debt instrument of choice for education players moving forward: Last year, the Financial Regulatory Authority (FRA) approved amendments to the Capital Markets Act that would allow service providers to raise capital by selling securitized bonds to investors after pooling together so-called “future flows” — promising to pay back using money they can reasonably expect to make at a future date. Months later, EGX-listed private sector education outfit CIRA became the first company to get approval to take a future flow program to market, putting the spotlight on the possibilities this debt instrument could offer for the education sector. We spoke with industry stakeholders to learn why this debt instrument is suitable for private-sector education providers and what it will take for more players to consider it.

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.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.