Good morning, folks. Now that was a weekend, wasn’t it? The Prime Minister’s Office telegraphed late on Thursday that a big announcement was in the pipeline, but the size of the transaction and the speed with which officials have suggested the funding could hit our coffers were both (positive) surprises.

We have full coverage of ADQ’s blockbuster investment in Ras El Hekma in this morning’s news well, below.

BUT FIRST- Questions we’ll be asking — and signs for which we’ll be watching in the days ahead:

#1- Expect a period of (relative) stasis until we see the central bank take action. Disaster has been averted in the short-to-medium term, that much is clear. Nobody yet knows where the EGP will settle, but with a lot of the pressure off policymakers, you can expect demand for other stores of wealth (gold, real estate, cars) to cool alongside the parallel market rate. Be ready to adopt a “wait and see” approach for a week or two.

#2- There’s been lots of talk in the past 36 hours about what the EGP is now worth — but little in the way of substance. Look for the picture to get a bit clearer today and tomorrow:

  • Research units at investment banks and beyond have yet to speculate on what a fair rate for the EGP would be. A lot of what they say will hinge on whether they expect a float or a managed deval;
  • The USD has weakened on the parallel market to something in the EGP 49.50 to EGP 52.00 range, but we’ve all seen in the past month or so how volatile that (thin, opaque) market can be;
  • Twelve-month non-deliverable forwards, or NDFs, suggest traders see the EGP in the high 50s a year from now.

#3- When will the Central Bank of Egypt act? Conventional wisdom was that Hassan Abdalla wouldn’t want to act without a war chest with which to fight an overshoot. He has that now — or will in the coming couple of weeks at most, Madbouly suggested. Speculation now is that we could see a snap meeting of the CBE’s Monetary Policy Committee this week, with the smart money on Thursday. But the smart money has often been wrong.

We have yet to hear about bankers being called in for a chat, as would typically happen before a devaluation of a float.

#4- Are we talking devaluation or a float? While many in our community want to see a full float, we’re not sure it’s in the cards and think, right now, that a managed devaluation is more likely. (Not preferable. But the more likely of the two scenarios.) Still, if ever there was a time to go for a full float, it’s when you have hard currency in your coffers.

#5- Will we still see a huge rate hike when the CBE acts? A rate hike? Yes. Huge? Maybe not. The central bank may see that it has the space to go for something less drastic than many had been calling for — provided the parallel market remains subdued between now and when the bank acts.

#6- The IMF is going to welcome the improvement in our cash position, but it’s still going to demand action on a laundry list of reforms as the price of an expanded facility — and we’re still going to need that cash. There’s still no word on when we might reach a staff-level agreement, though talks are said to be moving forward. Togo, Andorra, and Tajikistan are all on the IMF Executive Board’s public agenda right now — we’re not, at least through 4 March.

#7- The stock market has had a great year-and-a-bit as folks have looked for places to stash excess EGP liquidity. We don’t see that changing in the coming week — look for a relief rally (even if only for a couple of days), for starters. If there’s devaluation or a float, stocks will be very well-priced in USD terms and could signal the return of foreign investors to the market — if they buy our story. The longer we wait for deval or a float, the more likely the market is to begin trading sideways on thinner volumes.

#8- We still need to keep an eye on our sources of FX. If the market believes the new currency regime, we should see a return of remittances through official channels. FX should be pulled out from under mattresses and start flowing into the banking system. And we still need to see an end to the situation in the Red Sea, which has slashed by half our (hard currency) receipts from the Suez Canal.

#9- It’s too early to worry about what FX figure you use in your budget. Give it a week, folks. But if you have to try something this morning, we’d suggest playing with scenarios at 38.50, 42.50, and 45.00.

#10- But perhaps the biggest question remaining: Have we learned our lesson?

HAVE WE LEARNED OUR LESSON #1- Our community has spent more than a year trying to diversify their businesses’ revenue streams — whether by learning how to export or by directly establishing offices or factories abroad. We can’t take our foot off the gas.

HAVE WE LEARNED OUR LESSON #2- The IMF is asking that we embrace meaningful policy reforms, ranging from an enduringly flexible currency regime to a more measured pace of state spending. Failure to do so risks bringing us full circle, leaving the business community to live its own personal version of Groundhog Day.

A PROGRAMMING NOTE before we get underway:

We’re very happy this morning to welcome our friends at Visa as our latest advertiser.Visa is a world leader in digital payments, facilitating transactions between consumers, merchants, financial institutions, and government entities across more than 200 countries and territories.

Visa is a natural fit with Enterprise — the company and its leaders value innovation and entrepreneurship as much as we do, helping businesses of all sizes thrive, create meaningful jobs, and build inclusive economies.

We were honored to have Leila Serhan, Visa’s general manager for North Africa, Levant and Pakistan, on stage at our Enterprise Finance Forum last fall and recently interviewed Jeni Mundy on stage at an event hosted by our friends at AmCham. We’ll have our interview with Jeni for you to read next month — she’s Visa’s global senior vice president for merchant sales and acquiring and was a member of the first all-women’s crew to sail 53k km around the world in the Whitbread Round the World Race.

A Message from Visa will appear in Enterprise every few weeks to speak with our community about ideas and issues that matter, from inclusion and access to trends in SMEs, payments, innovation, fintech, trust, and security, among others.

Please join us in thanking: EnterpriseAM Egypt remains available to our community without charge thanks to the generous support of our advertisers.

PSA #1- Ramadan will be a brighter month: The government will be pausing rolling blackoutsduring the holy month of Ramadan — expected to start 11 March — according to a cabinet decision issued on Thursday evening.

Cabinet again stopped short of specifying when the blackouts will permanently end. Three industry sources told us back in January that power cuts could last until at least 2Q 2024. The government introduced rolling blackouts last summer to ration the consumption of natural gas as it looked to curb a seasonal spike in demand and a steep decline in output.

IN THE HOUSE-

On the agenda today: After a two-week break, the House will reconvene to discuss and vote on a number of bills and agreements that include:

  • A draft law, which if passed will increase the price tag of issuing a passport to EGP 1k from the current EGP 250. The proposed increase aims to reflect the rise in the price of imported materials needed to manufacture passports, according to a report by the Defense and National Security Committee;
  • A EUR 500 million grant from the European Investment Bank that will go towards the Environment Ministry's Sustainable Green Industry project;
  • An agreement to do away with double taxation and tackle tax evasion between Egypt and Croatia;
  • A EUR 80 mn grant from Germany to fund the Environment Ministry's solid waste management program, help create 25 technological schools and centers, and support the Central Bank of Egypt’s financial risk management program.

RED SEA WATCH-

Yemen’s Houthis will step up their attacks on ships traversing the Red Sea, Bab El Mandeb Strait, and Gulf of Aden in retaliation to Israel’s ongoing military operations in Gaza, the group’s leader Abdul Malik Al Houthi said in a televised speech. US and UK strikes in Yemen also show little sign of easing, as the two countries launched its largest attack in weeks last night on Houthi targets.

The Houthis have issued a formal notice to the shipping industry banning US, UK, and Israel-linked vessels operating in the region, as they seek to force cargo companies to collaborate with the group to guarantee their safety.

Shipping giant CMA CGM incurred its first loss in four years, with earnings for 4Q 2023 showing a USD 93 mn loss due to gradually “deteriorating conditions in maritime shipping markets” over the year, the company said.

But Italy’s Messina Line seems undeterred by the Red Sea disruptions, and has plans to ramp up the capacity and number of vessels transiting the Suez Canal in the near future, according to a statement by the Suez Canal Authority.

CIRCLE YOUR CALENDAR-

Scholarships down under: You can now apply to the Australian government’s master’s scholarship program Australia Awards, which grants funding for Egyptian, Sudanese, and Eritrean citizens to study climate change, agriculture and food security, mining and energy, foreign policy and international security, and gender, disability, and social inclusion, according to a statement (pdf). Applications are open until 30 April, 2024, and women, people with disabilities, and marginalized groups are encouraged to apply. You can find out more about the program here and apply here.

Calling all green startups, you have until Saturday, 2 March to apply to NGO accelerator Nahdet El Mahrousa’s Khaleeha wa Gadedha — a program designed to “cater to impact-driven startups in the growth stage, with particular focus on those operating in clean and green sectors.” The program will offer startups financial and non-financial services, consultation, guidance, and up to EGP 300k in funding. Read the eligibility criteria here and apply here.

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

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