THIS MORNING: What’s it going to take to unlock Gulf investments in Egypt?
Good morning, friends, and welcome to what is shaping up to be a very busy week for news.
The question of the week: Will we see Riyadh, Abu Dhabi and Doha start to pull the trigger on their long-awaited investments in Egypt? That’s the “top of mind” question on Egypt this morning in the global business press. The three Gulf countries pledged bns worth of investments in Egypt last year — but we’ve seen comparatively little in the way of fresh capital since Gulf sovereign funds snapped up stakes in publicly traded stocks including CIB and e-Finance, among others. With a USD 3 bn IMF program signed and a credible reboot of the privatization program now in the wild, what is it going to take for the GCC countries to sign on the dotted line?
Media reports suggest talks have slowed on stake sizes and valuation. Qatar’s sovereign wealth fund wants reportedly larger stakes in Vodafone Egypt and two container operators than are on offer. And two stories out last week suggested that the sale of state-owned United Bank to Saudi’s Public Investment Fund has slowed on differences over valuation. Bloomberg and Reuters have both reported the issue is whether the valuation will be fixed in USD pre-execution, or done in EGP and paid for in USD when the cash is due.
But some private investors are growing growing comfortable with the value of the EGP:
- Saudi Arabia’s Almarai last week bought out PepsiCo’s stake in dairy and juice producer Beyti and reportedly plans to use its base here to export;
- Italy’s Intesa Sanpaolo is said to be about to snap up the 20% of Alexbank that it doesn’t already own;
- EK Holding will invest USD 170 mn in Egypt this year, as we note below in this morning’s news well. EKH’s investment will take the form of both capex spending and the buying out of minority shareholders in some of its subsidiaries;
- USD 145 mn in auto investments from global majors: Stellantis and Nissan, alongside local GM partner Almansour, have said they will separately invest a total of up to USD 145 mn here over the next three years to expand their domestic assembly operations.
And then there’s Chimera, which is plowing hundreds of mns of USD into Egypt: Sheikh Tahnoon’s Royal Group — run by former EFG Hermes veteran Seif Fikry— has since last fall acquired a controlling stake in Beltone alongside big blocks of MNT Halan and GB Lease. More recently, it acquired nearly 3% of EFG Hermes from Tim Collins’ Ripplewood.
Is the speed of reform also slowing the pace of talks? Bloomberg thinks so, saying the three Gulf states are keeping “a close eye on the EGP” and want to see evidence that we’re delivering on our commitments to roll back state involvement in the economy and improve transparency of state-owned enterprises. The business information service’s piece this weekend quotes anonymous sources it says have knowledge of the matter.
The issue: “The ‘wait-and-see’ mode from international investors could put additional pressure on the EGP. The situation could spill over to Egypt’s debt, as a shortage of funds and a weaker currency increase the burden of servicing external borrowings,” said Bloomberg economist Ziad Daoud.
EGP WATCH- Bloomberg picked up a report by Societe Generale on Friday that forecasts another 10% drop in the EGP’s value by the end of March. The currency could end up trading at 34.00 by the end of the quarter — from 30.68 on Thursday — strategists at the bank said, suggesting they want to see “decisively hawkish action by the Central Bank of Egypt.”
REMEMBER- The Central Bank of Egypt (CBE) left interest rates unchanged in its first meeting of 2023, surprising analysts and investors who had expected policymakers to deliver another sizable rate hike to try to curb inflation and bring foreign investors back into the market.
WATCH THIS SPACE #1- Against that backdrop, the PM is in Doha: Cairo 24 reports that Prime Minister Moustafa Madbouly is heading to Qatar today in a bid to push forward talks for fresh Qatari investment. Citing diplomatic sources, the newspaper claims that the PM is taking a large number of ministers and business figures with him to the Qatari capital to talk investments with the country’s political leaders.
A breakthrough? One Qatari diplomatic source said the two sides will sign agreements that will unlock new Qatari investment in Egypt, without disclosing further information.
This is the second high-level trip to Qatar this month, coming less than three weeks since Planning Minister Hala El Said and Sovereign Fund of Egypt head Ayman Soliman visited the country to discuss investment.
WATCH THIS SPACE #2- Panda issuance next FY? Egypt is set to take its inaugural panda bond issuance to the market in early FY 2023/2024, Nevine Mansour, Advisor to the Vice Finance Minister for Fiscal Policies told CNBC Arabia in an interview (watch, runtime: 7:34). Mansour did not provide details on the size of the issuance but early plans put the issuance at USD 500 mn in CNY-denominated bonds. Plans to issue the panda bonds have been in the works since 2019, but were put on hold due to the pandemic. Mansour’s statements came as Egypt successfully wrapped up its maiden sukuk issuance under a three-year, USD 5 bn sukuk program that saw the state net USD 1.5 bn in an offering that was 4x oversubscribed.
ALSO HAPPENING TODAY-
INVESTMENT WATCH- Expect news of progress on our regional industrial partnership with Jordan, the UAE and Bahrain: Agreements will be signed at a meeting in Amman today related to the industrial partnership we entered into with the three countries last year, according to a Trade and Industry Ministry statement. Trade and Industry Minister Ahmed Samir is heading a delegation to Amman for the meeting, the statement read, without giving more details.
ICYMI- The four countries last year set up a USD 10 bn partnership to support industrial projects. They identified USD 3.4 bn-worth of joint investment projects in the first phase of the program, which is being bankrolled by UAE sovereign wealth fund ADQ.
Also in Jordan: Key talks between Palestinian and Israeli officials are happening today: Egyptian and US officials will be in Jordan to attend a “political-security” meeting between Palestinian and Israeli representatives called amid a surge in violence in the occupied Palestinian territories, AFP reported, citing statements by an unnamed Jordanian government official. An Israeli raid in Nablus last week killed 11 Palestinians in what was the latest in a series of violent episodes since Israel’s ultranationalist government entered office last month.
The US’ top Middle East advisor is in Egypt and the region this week: The meeting comes during the visit by US President Joe Biden’s top adviser on the Middle East Brett McGurk. His trip will include stops in Egypt, Jordan, Oman and the UAE, White House Press Secretary Karine Jean-Pierre said in a press briefing Thursday.
CLOSER TO HOME- AmCham Egypt is hosting its annual MENA Regional Council Conference from 8:30am-5:30pm today at the Nile Ritz Carlton, according to an emailed statement. The event will focus on accelerating green investment in the MENA region.
Expect heavy hitters: Keynote speakers include Prime Minister Moustafa Madbouly, US climate envoy John Kerry, COP27 climate czar Mahmoud Mohieldin, and COP28 Director General Majid Al Suwaidi.
AUC + Electrified Egypt are organizing a one-day e-mobility expo today at the AUC New Cairo campus from 12pm to 5pm. Electric Mobility: The Power of Possibilities Expo will bring together researchers, students, industry professionals, startups, environmentalists, developers, investors, and government officials. Industry leaders speaking at the event include our friend Mohamed Ismail Mansour, chairman and CEO of Infinity; Sharon Nishi, managing director of General Motors Egypt and North Africa; and Ankush Arora, CEO of Al Mansour Automotive.
HAPPENING THIS WEEK-
Egypt-UN Partnership week kicked off yesterday ahead of the signing of the UN Sustainable Development Cooperation Framework (UNSDCF) 2023-2027, the International Cooperation Ministry said.
The House is back in session tomorrow:
- MONDAY- The House will discuss and vote on bills that will extend the government’s expat car import scheme and exempt phone components from being charged development fees. It will also discuss and vote on three foreign agreements on human rights, economic governance and the Montreal Protocol.
- TUESDAY– Social Solidarity Minister Nevine El Qabbaj will be in the hot seat to answer questions from MPs on pensions, social protection programs, and services offered to disabled people.
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DATA POINT- Fuel subsidy bill reportedly quadruples following devaluation, energy shock: The government spent EGP 66 bn on fuel subsidies in 1H FY 2022-2023 — nearly 4x its spend a year before — due to the EGP’s devaluation against the greenback and higher oil prices, an unnamed government official was quoted as telling Asharq Business.
We’re still waiting to hear what the government intends to do with fuel prices in 1Q: Its fuel pricing committee was scheduled to convene at the beginning of January to set prices for the first quarter.
Expect prices to rise: The government has committed to changing local fuel prices in line with movements in the global markets under the USD 3 bn loan agreement with the IMF.
COME TO OUR NEXT ENTERPRISE FORUM-
We’re excited to unveil our next C-level event: The Enterprise Exports & FDI Forum, where we will take a deep dive into two of the most critical topics affecting our community.
Exports and foreign direct investment (FDI) have never been more important to our economy — or our businesses — than in the wake of the float of the EGP. We think we have a once-in-a-lifetime chance to build an export-led economy that makes us a magnet for FDI and all the benefits that will come with it for our nation.
THE BIG STORY ABROAD-
The war in Ukraine is continuing to dominate the global conversation this morning, two days after the one-year anniversary of Russia’s invasion. Most of the focus is on yesterday’s meetings of G-20 finance ministers in India, which ended without an agreement on a final communique after Moscow and Beijing refused to condemn the war. (AP | Reuters | Financial Times | Washington Post | WSJ | BBC | CNBC)
Warren Buffett’s annual letter dropped over the weekend and as usual is the big story in global business press this morning: Buffett kept an optimistic tone in his annual shareholder letter (pdf), calling a 2022 a “good” year for Berkshire Hathaway which saw the company report (pdf) a record USD 30.8 bn in operating earnings despite ending up with a net loss of USD 22.8 bn loss. “Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America,” he wrote. (Reuters | Bloomberg | Financial Times | CNBC)
CIRCLE YOUR CALENDAR-
The National Dialogue could begin after Ramadan, people in the know reportedly told the National. The dialogue was expected to kick off on 14 January, but was postponed after political parties failed to name their representatives to the sessions on time.
TE earnings delayed: State-owned telecoms firm Telecom Egypt will now report its 4Q 2022 financial results on 6 March, instead of 23 February (pdf) as expected.
National higher education strategy coming next month: The Higher Education Ministry will launch a national strategy for higher education and scientific research on 7 March, Minister Ayman Ashour said yesterday. The launch will be the start of a “serious societal dialogue to upgrade higher education and scientific research” in the country in accordance with Egypt’s sustainable development strategy and industrial revolutions globally.
This story was corrected on 26 February, 2023 to reflect that the regional industrial partnership meets in Amman on 25 and 26 February, not 26 and 27 February as we previously wrote.
Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.