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Sunday, 4 September 2022

THIS MORNING: New details on state privatization program this week + Green hydrogen regs are in the works

Good morning, friends, and welcome to the first full week of September. With just a month left in 3Q, the themes this morning are pretty typical of the year to date: The foreign exchange crunch, investment in green energy ahead of COP 27, and the fate of the privatization program. It’s the trifecta of 2022.

Before we get started: Happy labor (labour) day to all of our readers in the United States and Canada. We hope you’re enjoying the last weekend of summer.

And an apology: We’re sorry to have missed our customary 6am CLT deadline this morning. We’ve resolved the technical glitch for email and are working to fix it on web. We expect to be on time tomorrow. Sorry, folks…

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Tell us how you’re feeling about your business and the wider economy and we’ll be back with the results just in time to give you a sense of what everyone else is thinking heading into budget season.

How has 2022 been for your business? And how do you feel about what’s left of the year? Are you investing? Do you plan to hire new staff (or make cuts to your existing staff) now or in 2023? What’s the USD / EGP rate you expect to use for your 2023 budget? Where do you see your industry as a whole heading?

Make your voice heard in our Fall Reader Survey. It won’t take more than a few minutes to complete.

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WATCH THIS SPACE #1- The privatization programme is still a “priority”: That was the key messaging coming from the government following a meeting between Prime Minister Moustafa Madbouly and the heads of the EGX and Financial Regulatory Authority on Thursday to discuss the government’s plans to divest stakes in companies it owns. In an interview with Bloomberg Asharq on Thursday, Finance Minister Mohamed Maait said that the government would announce more details about its privatization plans this week but offered no further details.

The privatization programme has been hit by yet more delays this year due to the market turbulence at home and abroad, which has caused state-owned Banque du Caire and privately held Aman to postpone their plans to debut on the EGX. The privatization program also includes plans to divest assets through direct sales to strategic partners, while other companies (such as military-owned filling station chain Wataniya and bottled water maker Safi) could see stakes sold to strategics ahead of offerings of equity on the EGX.

Clarity on plans to sell state assets will likely be important to the IMF: With talks now in the crunch phase after Sri Lanka and Pakistan lined up facilities last week, Fund officials will likely want to see clarity on privatization as one of the conditions to granting another loan to Egypt. Since launching back in 2018, the current iteration of the state’s stake sale program has seen only the IPO of payments giant e-Finance and the sale of secondary stakes in Eastern Company and Abu Qir Fertilizers.


WATCH THIS SPACE #2- Some of Egypt’s biggest climate projects could be in line for financing from the US, the EU + international lenders: Climate projects in Egypt’s energy, food and water sectors — some of which were recently shortlisted during climate finance roundtables — will receive backing from the US, the European UNion and other international lenders, according to an Environment Ministry statement. The projects were shortlisted as part of our Nexus of Water, Food and Energy (NWFE) program, which aims to connect national projects with climate financing. International Cooperation Minister Rania Al Mashat and Electricity Minister Mohamed Shaker discussed in a meeting yesterday energy projects listed under NWFE, according to a statement by the ministry.

The climate finance agreements with our American and European friends will be announced during COP27 in November, Environment Minister Yasmine Fouad said on Thursday during a sit-down with US climate envoy John Kerry on the sidelines of the G20’s climate-focused meeting in Indonesia. The European Bank of Reconstruction and Development (EBRD) and other unnamed donors could pitch in to a USD 10 bn project to replace 17 fossil-fuel fired power plants with solar and wind power, Fouad said. We’ll have to wait until COP for the full details.


WATCH THIS SPACE #3- Green hydrogen regs are coming: The Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egyptera) plans to announce a regulatory framework governing investments in green hydrogen projects next month, Al Borsa reported yesterday, citing unnamed sources. Officials have held talks with an unnamed foreign advisory firm to help draft regs and model contracts that would be signed with prospective investors.

REMEMBER- Dozens of firms have pledged USD bns of investment for green hydrogen and green fuel projects here. The latest round of MoUs came last week when seven regional and European firms signed up to explore building facilities with a combined annual capacity of more than 5.5 mn tons.

The big question: How many of these MoUs get turned into contracts. Egypt is positioning itself as the region’s premier energy hub, and Europe is more energy-hungry than ever. But with the United States about to offer producer subsidies and rising interest rates set to drive up investment costs…

** CORRECTION- We incorrectly reported last week that the Financial Regulatory Authority was holding consultations to introduce a carbon offset tax. The statement released by the regulator actually refers to the long-standing plans to set up a local carbon market, allowing companies to buy and sell carbon credits. We have since corrected the story on our website.

HAPPENING TODAY-

Some companies are about to get a three-year real holiday from real estate taxes: Small and micro-sized businesses as well as companies in some 19 strategic industries involved in national projects will pay zero real estate taxes for the next three years, after cabinet ratified the measure, according to the Official Gazette last week. The tax break is retroactive to the start of this year. The measure was first announced as part of the EGP 130 bn economic support package unveiled by the Madbouly government in the spring and is expected to cost the government some EGP 3.75 bn.

HAPPENING TOMORROW-

PMI data: S&P Global will publish August’s data measuring activity in Egypt’s non-oil private sector. The contraction in the private sector continued apace in July as high inflation weighed on output and demand.

The board overseeing the National Dialogue will hold its next meeting, choosing rapporteurs for all of the committees and subcommittees of the social, political and economic tracks. It will also work on topics of discussion for the dialogue.

Palestinian President Mahmoud Abbas will be in Cairo ahead of an Egyptian-Palestinian summit on Tuesday, the country’s foreign ministry said in a statement. The two sides will discuss the situation in Palestine and the possibility of releasing Palestinian prisoners in Israeli custody. Egypt played a key role in brokering last month’s ceasefire following clashes between Israel and Gaza militants.

OPEC+ meets to set output policy amid a wave of uncertainty in the markets that has resulted in the longest streak of monthly drops in crude prices since the pandemic, Bloomberg reports. Most analysts and traders surveyed by the business newswire expect the oil cartel to keep output steady. Brent crude futures are currently trading at around USD 93 a barrel — down nearly a quarter on their June peak.

THE BIG STORY ABROAD-

Energy war between Russia and Western countries escalates: Russia’s state-owned firm Gazprom has indefinitely suspended gas flows through the key Nord Stream 1 pipeline to Europe, hours after G7 nations said they would proceed with plans to impose a price cap on Russian oil exports. The pipeline was under maintenance for a “technical failure” and was set to become operational yesterday before Gazprom said it would not turn the taps back on because of an oil leak. The energy crisis in Europe has been hitting headlines since Gazprom cut capacity on Nord Stream 1 to just 20% of its normal capacity, triggering an unprecedented surge in gas prices on the continent. The story is everywhere — on both sides of the pond and in both the business and the mainstream press: Reuters | FT | DW | BBC | CNN | AP.

Also getting attention:

  • Farewell, Gorby: Thousands of Russians said farewell to the last Soviet president, Mikhail Gorbachev, whose funeral was held in Moscow yesterday following his death last week at the age of 91. Unsurprisingly, the event is being framed in the global media by the current war in Ukraine, with much of the Western press disapprovingly noting that President Vladimir Putin didn’t show up to the funeral. (Reuters | AP | NYT)
  • Houston, we had another problem: NASA was forced to call off the launch of its Artemis I rocket for a second time in a week due to technical issues. (Reuters | AP | CNN | Bloomberg | WSJ)

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THE ROAD TO COP27-

US climate envoy John Kerry will be in town later this week for the Egypt-International Cooperation Forum (Egypt-ICF), which runs 7-9 September at Almasa Convention Center in the new administrative capital. The three-day event will bring together global policymakers, ministers, development partners and other participants ahead of COP27 to discuss climate action and green transition, food security, and others with a focus on Africa. Check the full agenda here (pdf).

Kerry will “continue ongoing discussions with government and private sector counterparts on accelerating global climate cooperation ahead of the COP27,” according to a statement from the State Department. He will then head to Glasgow to “engage business and NGO leaders on efforts to enhance global climate action and accelerate the clean energy transition.”

Watch this- As the clock ticks down towards the all-important COP27 climate conference, Narrative PR is hosting a series of web talks with the organizers, leaders and policymakers shaping the agenda in Sharm El Sheikh this November. In its latest talk (watch, runtime: 9:28), Econsult CEO and UNFCCC climate champion Sarah El Battouty and International Fine Arts Foundation for Development head Randa Fouad talk about the intersection between art and sustainability.

We’ve already heard from Environment Minister Yasmine Fouad on the themes and the physical setup of the summit and how COP27 gives Egypt a chance to move forward on partnerships in critical industries. UN climate envoy and IMF executive director Mahmoud Mohieldin also spoke about climate financing and Egypt’s massive renewable energy potential.

CIRCLE YOUR CALENDAR-

The German-Arab Chamber of Industry and Commerce will commemorate 70 years of German-Egyptian business and economic ties with a gala celebration on 15 September.

Our monthly list of data points to keep your eye on over the next few days and weeks:

  • Foreign reserves figures for August should be out during the first week of the month.
  • Inflation figures: Inflation data for August from Capmas will land on Saturday, 10 September. Expect the Central Bank of Egypt to follow up on Sunday, 11 September with its inflation report.
  • Interest rates: The Central Bank of Egypt’s Monetary Policy Committee meets on Thursday, 22 September to review interest rates.

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

** What’s Next, our weekly deep dive into the trends and companies that are shaping the future of the business community, is on hiatus this week. Look for it to return next Sunday.

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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