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Tuesday, 4 Apr 2023

What We're Tracking Today
M&a Watch
Privatization
Economy
Energy
Legislation Watch
Dispute Watch
Debt Watch
Egypt In The News
Also On Our Radar
Planet Finance
Diplomacy
Going Green
Calendar

MPs vote to bring back daylight saving time

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Today at a glance

1

M&A WATCH

 PE firms DPI and Amethis have acquired a “significant minority stake” in local pharma player Marcyrl.
2

Privatization

 Does Kuwait’s sovereign fund want to take a majority stake in AAIB?
3

Economy

 External debt hit a record high in 2Q FY 2022-2023.
4

Energy

 Full finance is now in place for the OC-Engie-Toyota Tsusho consortium’s 500-MW Suez wind farm.
5

LEGISLATION WATCH

 MPs greenlight the return of daylight saving time.
6

DISPUTE WATCH

 Gov’t settles 12-year dispute over Nile Cotton Ginning privatization.
7

Also on our Radar

 The SCZone investor roadshow is headed to New Delhi.
8

PLANET FINANCE

 OPEC’s shock production cut sends waves through the markets.

Tuesday, 4 Apr 2023

What We're Tracking Today
M&a Watch
Privatization
Economy
Energy
Legislation Watch
Dispute Watch
Debt Watch
Egypt In The News
Also On Our Radar
Planet Finance
Diplomacy
Going Green
Calendar
1

What We're Tracking Today

THIS MORNING:CIB launches 22% CDs for big savers. PLUS: March PMI data out today

Good morning, wonderful people, and happy Tuesday. It’s another busy news day — and we’re just about ready to call time on the notion that there will be any form of Ramadan slowdown this year. Hope springs eternal, but…

THE BIG STORY here at homeis a major foreign direct investment in our pharma sector. Our friends at Development Partners International (DPI) together with French private equity outfit Amethis have acquired a “significant minority stake” in Marcyrl, a top 10 player in the domestic industry. In an exclusive interview, we spoke with Marcyrl's George Messiha, DPI’s Ziad Abaza, and Amethis partner Toufic Khoueiry on the thinking behind the transaction.

More of this, please: The transaction comes despite the ongoing FX crunch, signaling that two very well-regarded private equity investors have confidence not just in Marcyrl, but that they see the investment’s potential returns will handily outweigh the FX exposure they’re taking on. DPI and Amethis moving ahead with the transaction underscores the simple fact that Egyptian assets are very well priced if you’re a private equity player or strategic with USD to deploy.

Less of this, please: Daylight saving time is back, friends. ?MPs approved the move in a vote yesterday.

^^ We have the rundown on both stories and more in this morning’s news well, below.

HAPPENING TODAY-

It’s PMI day: S&P Global will release Egypt PMI figures for March here at about6:15am CLT, just after we hit “send” on this morning’s issue. Activity in Egypt’s non-oil private sector contracted for the 27th consecutive month in February, albeit at a slower pace than the month before.

** SO, WHEN DO WE EAT? We’ll be breaking our fasts at 6:15pm CLT today. You have until 4:12am tomorrow morning to hydrate and grab a bite to eat.

HAPPENING THIS WEEK-

The World Bank will release its latest MENA Economic Update on Thursday: Ominously titled “Altered Destinies,” the multilateral lender’s latest regional growth report will look “in depth at how even temporary increases in the price of food can have lasting impacts across generations in terms of education, health and future income prospects.” The World Bank downgraded its economic growth forecast for Egypt in the current fiscal year by 0.2 percentage points to 4.8% in its most recent update in October.

CIB followed the Big Two in launching new CDs (for very big deposits):EGX-bellwether CIB has launched new three-year certificates of deposit with a fixed 22% interest rate, according to its website. Interest on the certificates is paid monthly and the minimum deposit is EGP 3 mn.

This came a day after Banque Misr and the National Bank of Egypt brought to market twonew three-year CDs: one with a fixed 19% rate and another with a declining-rate falling from 22% to 16% by the third year. The NBE and Banque Misr CDs have a minimum deposit of EGP 1k.

WATCH THESE SPACES-

#1- A separate USD exchange rate for taxes? The Tax Authority is working on a decision to set its own USD exchange rate — separate from the official exchange rate set by the central bank — to facilitate tax calculations for companies that calculate their earnings in USD, authority head Mokhtar Tawfik said yesterday, according to a statement(pdf). PSA- The filing deadline for corporate tax returns is the end of April.

#2- More Saudi investment in renewables? Three unnamed Saudi companies have reportedly submitted requests to invest up to USD 1.5 bn in renewables and green hydrogen projects here, Al Borsa reports, citing people it says have knowledge of the matter.

#3- We’ll soon know more about the new export subsidyprogram: The details of the new export subsidy program will be announced “within days,” sources reportedly told Al Borsa.

REMEMBER- The Madbouly government is increasing its spending on export subsidies to EGP 28-30 bn in FY 2023-2024, when it will introduce the new program. The fifth phase of the existing program wrapped in December, bringing the total the government has paid out in subsidy arrears to exporters to EGP 42.5 bn.

#4- No offers yet for Elsewedy Electric: Elsewedy Electric is yet to receive any official offers for a stake purchase, it said (pdf)yesterday, in response to local media reports that a Gulf sovereign fund and Chinese firm are eyeing a minority stake in the company. Elsewedy Electric is majority owned by members of the Elsewedy family, with the remainder in freefloat.

A call to new fund managers: GIZ Egypt, AfricaGrow and Dutch development bank FMO have opened applications for their 2023 program to boost VC funds. The VC Grow program will invite 20 new and emerging fund managers in the MEA region to a Cairo bootcamp before choosing five to join its accelerator, according to a statement (pdf). The six-month program offers fundraising support, introductions to potential partners and investors, and workshops, and culminates in a regional summit. To be eligible to apply, funds must have a minimum 25% allocation to Egypt, investing equity or venture debt between the seed to Series A stages. Apply here before the 1 May deadline.

THE BIG STORY ABROAD-

The front pages of the international press are all about the Donald this morning. Former US President Donald Trump landed in New York last night to face charges relating to hush money payments to an adult film star to keep quiet about an alleged affair. Trump will surrender at the Manhattan district attorney today before appearing before a judge to enter his plea. New York authorities are readying for potential protests in the city by Trump supporters. (FT | Reuters| New York Times | AP| CNBC| CNN)

The business press is still leading with the fallout of OPEC’s shock production cuts on Sunday. We have the full rundown in this morning’s Planet Finance.

FINALLY- People are getting their acts together to try and stop an eminently preventable environmental catastrophe from occurring in the Red Sea: The UN Development Programme has bought a ship to unload 1.1 mn barrels of crude from a decaying container ship that has been stranded off the Yemeni coast for the past eight years, Bloomberg reports.

Exxon Valdez x4: The FSO Safer supertanker is holding four times the amount of oil spilled by the Exxon Valdez in 1989, according to the UN. The ship has been gradually deteriorating since 2015, prompting experts to warn that it will only be a matter of time before the hull breaks apart and devastates the Red Sea’s marine life. A spill here would make the FSO Safer the fifth-largest in history.

What’s with the hold-up? The ship’s future has been the subject of negotiations between the Yemeni government and the Houthi rebel group, which seized it in 2015 after the outbreak of the country’s civil war. It was only in 2022 that the Houthis agreed to a UN proposal to unload the ship, enabling the UN to raise money from donors and prepare for the operation.

CIRCLE YOUR CALENDAR-

It’s a brand new month. Here are some economic indicators to look out for:

  • Foreign reserves: Expect the central bank to publish March’s foreign reserves figures before the end of this week;
  • Inflation: The CBE and Capmas will be out with March inflation data on Monday, 10 April.

We are delighted to share with you that the Enterprise Exports & FDI Forum will be taking place on Monday, 15 May at the Four Seasons Hotel at Nile Plaza.

DO YOU WANT TO ATTEND? The first wave of invites is going out soon. If you’re a C-suite exec, exporter, investor, official, banker, or someone who should be part of the conversation, please TAP OR CLICK HEREto request a spot at this exclusive event.

WANT TO SHARE YOUR STORY ON STAGE? Drop a note to Patrick here and let’s talk.

WANT TO BECOME A COMMERCIAL PARTNER? Ping a note to Moustafa, our head of commercial, here.

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

*** 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: We look at the growing number of Egyptian startups collecting, treating and turning plastic waste into new products.

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2

M&A WATCH

Private equity outfits DPI and Amethis acquire minority stake in Egyptian pharma firm Marcyrl

EXCLUSIVE- Private-equity consortium takes significant minority stake in Marcyrl: DevelopmentPartners International (DPI) and Amethis have acquired a “significant minority stake” in local pharma player Marcyrl, according to a joint statement (pdf). The move will allow Marcyrl to invest in talent and upgrade its tech as it looks to expand at home and abroad.

The transaction: The players declined to disclose how much of the company was acquired and the value of the transaction, but told us that the transaction was made via “a combination of primary and secondary capital to fund the company’s growth plans.” DPI committed funds via its USD 900 mn African Development Partners III (ADP III) fund — one of the largest Africa-focused PE funds in the world — and Amethis participated via its Amethis Fund II.

About Marcyrl: Founded in 1998, Marcyrl has become one of the country’s 10 leading pharma companies. It is focused on producing specialty generics and has introduced innovative antiviral products and hormonal therapy treatments to the local market.

ADVISORS- PwC provided financial advice to DPI and Amethis while Freshfields Bruckhaus Deringer and White & Case were buy-side counsel. HC Securities and Investment was the sell-side financial advisor and Zaki Hashem & Partners was counsel.

The company has seen strong growth in recent years: The company has tripled its revenues over the past five years and has acquired a more than 2% share of the local market. The company’s cardiovascular segment is the biggest contributor to growth, accounting for more than 40% of its revenues. Categories targeting women account for 30% of revenues, gastrointestinal is 15%, and diabetic therapies are 7%.

Where the money’s going: Marcyrl will deploy the capital to bring in fresh expertise and production technology, which will help it reach new markets in Africa and expand further in Egypt, George Messiha, Marcyrl’s managing director for sales, told us.

DPI + Amethis are no strangers to Egypt: DPI has experience in Egypt’s pharma sector having been a part of the consortium of investors that acquired almost all of Adwia in 2020. It was also a major investor in local retailer BTECH — a stake it exited last year — and holds a minor stake in GB Auto’s payments firm MNT Investments. Amethis completed its first transaction in Egypt last year after joining a consortium of foreign investors to acquire 90% of non-banking financial services firm GlobalCorp.

Why pharma? It’s a defensive sector. “Pharma has always been a sector that we think is a very investible sector in Egypt due to its defensive nature,” Ziad Abaza, managing director at DPI, told us.

Why Marcyrl? “[Marcyrl] is a platform that has significant runway for growth, both locally, but also outside of Egypt,” Amethis partner Toufic Khoueiry told Enterprise. “The company's one of the largest local players in the market and it has a portfolio of generic med drugs that are very well positioned in their respective therapeutic areas,” he said. “We believe that Marcyrl is uniquely positioned given the therapeutic areas that it focuses on, but also because of its positioning within these areas,” Abaza told us.

Why DPI + Amethis? Marcyrl chose to approach foreign investors to line up more exposure for the business and improve governance, Messiha told us. “We found good people at DPI and Amethis who we felt can help us keep the culture while institutionalizing the business,” he said.

DPI + Amethis are keeping their eyes out for further opportunities: “We are looking at a couple of investments in other sectors through our different funds. Marcyrl is our second investment in Egypt, which I think underscores our increasing focus on the Egyptian market as part of our pan-African strategy,” Khoueiry told us. Meanwhile, DPI is continuing to look for opportunities in defensive sectors, Abaza said. “For us, Egypt remains a key country. We believe the fundamentals of the young growing population will underpin growth in the country,” he told us.

Correction: 4 April, 2023

A previous version of this article incorrectly stated that DPI owns a 33% stake in MNT Investments. The firm's ADP II fund has fully exited its 25% stake in the company, while ADP III has reduced its ownership from 8% to 5%.

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3

Privatization

Kuwait Investment Authority eyes majority stake in AAIB -report

Does Kuwait’s sovereign fund want to up its stake in AAIB? The KuwaitInvestment Authority (KIA) has appointed advisors to look into upping its stake in Arab African International Bank (AAIB) to become the lender’s biggest shareholder, Al Borsa reports, citing sources it says are in the know. The lender is part of the government’s list of 32 state-owned companies geared for privatization. The newspaper does not specify who the advisors are.

Who owns AAIB? The Central Bank of Egypt (CBE) and the KIA each own a 49.4% stake in AAIB, with the remaining 1.2% owned by unnamed “others,” according to the lender’s 2021 annual report (pdf).

What makes AAIB attractive to investors? Growing earnings, a “sizable share of the loan market” (about 4.5% in 9M 2022) and robust capital amid volatility in the global banking sector, Amany Shaaban, equity analyst at Prime Securities, told Enterprise yesterday. The bank captured almost 4.5% of total market lending in 9M 2022, Shaaban said. Its capital adequacy ratio rests comfortably at 20% — far above the CBE’s minimum threshold of 12.5%, she notes. AAIB’s bottomline grew 54% y-o-y to USD 58.7 mn in 3Q 2022, according to the company’s quarterly financial statement (pdf). The bank has 96 branches and units, of which 93 are in Egypt, with two offices in the UAE and one in Lebanon.

There's room for improvement: The bank needs to continue to reduce its percentage of non-performing loans, which stood at 8% in 9M 2022, down from 13% in 2020, Shaaban notes. The average in the banking sector was about 3.2% in 9M 2022, leaving plenty of room for AAIB to tackle legacy issues in its portfolio by tackling NPLs.

That’s where strategics come in: The government wants strategic investors to help strengthen state-owned bank’s fundamentals ahead of potential public share sales. Stakes in AAIB, Banque du Caire (BdC) and United Bank “are better placed with a strategic partner to lay down a clear vision and a clear reading on growth and then go to market afterwards,” Sovereign Fund of Egypt CEO Ayman Soliman told Bloomberg last month.

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4

Economy

Egypt’s external debt hits record high in 2Q FY 2022-2023

Egypt’s external debt hit a record high in 2Q FY 2022-2023 following two quarters of declines, according to data published by the Planning Ministry. External borrowing rose 5.1% q-o-q to USD 162.9 bn during the October-December quarter, up from USD 154.9 bn in 1Q FY 2022-2023, the figures show.

Remember:Egypt’s external position has come under significant pressure on the back of a stronger USD, higher interest rates, and turmoil in the financial markets. The EGP has lost more than half of its value against the USD since last year, making it more difficult to repay our debts.

Debt has soared in recent years: Egypt’s external debt has more than doubled over the past five years as the country has ramped up borrowing from multilateral lenders and turned to the international debt markets to raise funds with increasing frequency. On an annual basis, external debt rose 12% from 2Q FY 2021-2022.

REMEMBER- Our USD 3 bn IMF financing package is helping to alleviate the squeeze on our external position and could help attract more FDI from other quarters. The rebooted privatization program designed to pull the country out of its financial crisis and secure much needed FX. The goal is to attain a primary surplus of 1.7% for FY 2022-2023. It is also aiming to improve the current account deficit to 2% over the medium term.

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5

Energy

Egypt Red Sea wind farm reaches financial close

The 500-MW Gulf of Suez wind farm has reached financial close, the project developers said in a joint statement (pdf) yesterday. The consortium — which includes Orascom Construction, France’s Engie, and Japan’s Toyota Tsusho and Eurus Energy — is developingthe project under a build-own-operate framework and has a 25-year power purchase agreement with the Egyptian Electricity Transmission Company (EETC).

Where the money’s coming from: The Red Sea Wind Energy consortium has obtained aUSD 501 mn syndicated loan from a number of Japanese and European banks. The Japan Bank for International Cooperation (JIBC) is providing up to USD 240 mn of the loan, while the European Bank for Reconstruction and Development (EBRD), Sumitomo Mitsui Banking Corporation, the Norinchukin Bank, and Societe Generale are providing the rest of the funding. Nippon Export and Investment Ins. will provide the guarantee. Our friends at HSBC Egypt are acting as working capital bank and onshore security agent.

Who owns what: Both Toyota and Eurus hold 40%, while Engie owns 35%, and OC holds the remaining 25% stake.

T-minus two years:The project is set to be connected to the electricity grid over two phases with full commercial operation scheduled for 3Q 2025, according to the statement. Situated at Ras Ghareb, the project will be able to supply renewable energy to over 800k homes. The consortium signed the agreement (pdf) for the project in October 2021 and broke ground ahead of COP27 in November.

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6

LEGISLATION WATCH

Egyptian lawmakers approve bringing back daylight saving time

And that’s that: We’re now going to have to change our clocks twice a yearafter MPs yesterday greenlit a government bill that brings back daylight saving time, which it says will help the country save money by reducing power consumption. The law will see Cairo Local Time (CLT) pushed forward by one hour from the last Friday of April through the last Thursday of October — meaning that we’re likely to have our first time jump at the end of this month.

The rationale: The government says it will save us at least USD 25 mn. So said an explanatory note out yesterday to justify the change that broke down the potential savings that come with lowering natural gas consumption. “It will save USD 25 mn worth natural gas needed to operate power generation stations,” it said, also claiming the time shift will reduce power consumption of air conditioners in the summer months by starting the workday when it is cooler outside.

Remember: The government last year began rationing the use of electricity — including restrictions on lighting in public spaces at night — in a bid to redirect more natural gas towards exports and increase hard currency inflows.

The bill wasn’t waved through unopposed, with some MPs voicing skepticism that the change would produce the savings the government claimed and others airing concerns about the potential health implications. “In 2016, the government insisted that daylight saving time be scrapped on the grounds it was of no use, but now it comes to us again to say that it will save power consumption,” said Rep, Ayman Abul Ela, a member of the liberal Reform and Development Party, before suggesting that changing clocks raises the risk of heart disease.

REACTION- Year-round summer time? “We should look into permanently adopting daylight saving,”Rep. Mohamed Abou El Enein said, pointing at Morocco, which is on daylight saving time permanently except for Ramadan, when it sets clocks back an hour. He said that such a move would help us cut back on our energy use while not messing with our biological clocks. Ala Mas’ouleety (watch, runtime: 4:05) had coverage. House Local Administration Committee member El Sayed Shams El Din joined El Hekaya’s Amr Adib (watch, runtime: 7:15) to defend the House’s vote.

The jury is still out internationally on whether daylight saving time “works” — for the human body and for economies.

Also approved by MPs yesterday:

  • Weather reporters, watch out:A draft law that will regulate the General Meteorological Authority got the nod. The bill will impose fines of up toEGP 5 mn on people caught spreading “fake weather news,” which lawmakers say could cost the country “bns of USD.”
  • Handing more power to the tourism federation: A draft tourism bill that would strip thepower to form and regulate tourism chambers from the tourism minister and place it in the hands of the Egyptian Tourism Federation (ETF).
  • US aid for education: A USD 40 mn USAID grant, which aims at improving the employability of higher education Egyptian graduates and helping more of them to get scholarships at US universities.
  • More drilling:MPs approved four bills allowing the Oil Ministry to sign exploration agreements with foreign oil and gas companies. Ukrainian state-owned Naftagas Ukrayinyis looking to drill for oil in the Western Desert, while Eni subsidiary IEOC wants to launch oil and gas exploration at three East Mediterranean concessions: one in partnership with BP, one with state-owned EGAS, and one on its own.
  • Protecting the ozone layer:The Kigali amendment to Montreal's Protocol on Ozone Layer, which will see signatory nations, including Egypt, phase out chlorofluorocarbons (CFCs) — a class of compounds that have damaging effects on the ozone layer.

What’s next: All of the bills will shortly be signed into law by President Abdel Fattah El Sisi.

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7

DISPUTE WATCH

Nile Cotton Ginning settles ownership dispute with Egyptian government

The Nile Cotton Ginning privatization dispute is officially settled: The international owner of Nile Cotton Ginning Company (NCGC) and the Holding Company for Construction and Development (HCCD) have signed to settle a 12-year dispute over the ownership of the formerly state-owned company, according to a Public Enterprise Ministry statement.

NCGC parent company IMEX international will pay HCCD EGP 231 mn in compensation under the terms of the settlement, which was first brokeredby the government’s investment dispute resolution committee back in 2020.

BACKGROUND- The company has been mired in a decade-long dispute that arose after a court ruling in 2011 to reverse the company’s Mubarak-era sale to private investors, claiming that the company had been undervalued. An appeal was turned down in 2013 by the Administrative Court. IMEX International acquired 94% of the formerly EGX-listed company in 2020, taking it private.

SMART POLICY- The Madbouly gov’t is sending a signal of reassurance to investors. “The state is keen to support investment,” the ministry statement reads. The government last year reached agreements to settle a number of disputes — including with Dutch Future Pipe and Italy’s Maire Tecnimont — as it looks to improve the investment environment and attract more foreign inflows.

As are the courts: The Supreme Constitutional Court’s recent decision to uphold the Appeals Against State Contracts Act, which prohibits third-party lawsuits against government contracts, will also provide additional comfort to investors.

REMEMBER- Improving investor confidence will be key to the privatization program, which aims to attract USD 40 bn in private investment by 2026 through public share offerings, stake sales to strategic investors, and expanding public-private partnerships.

SPEAKING OF WHICH- The private sector is getting a bigger voice in dispute settlement. The state’s investment dispute resolution committeewill now include a representative from the Federation of Egyptian Industries and one from the Federation of Egyptian Chambers of Commerce, according to a prime ministerial decision published in the Official Gazette yesterday. The two new members will join the finance, local development, housing, and trade ministers and committee head Justice Minister Omar Marwan as well as other government officials.

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8

DEBT WATCH

Egyptian consumer finance company Contact Financial closed EGP 1.9 bn securitization issuance

Contact Financial has closed an EGP 1.9 bn securitized bond issuance for its consumer finance arms Contact Creditech and Contact Credit, it said in a statement(pdf). The three-tranche issuance is backed by an EGP 2.9 bn portfolio and has tenors ranging between 13 and 60 months and ratings of AA+, AA, and A from the Middle East Ratings & Investors Service (MERIS).

Who bought in? Contact Financial Holding, the National Bank of Egypt, Banque Misr, CIB, AAIB, Al Ahly Pharos, and CI Capital all acted as underwriters. Unnamed banking and non-banking institutional investors also subscribed to the transaction, the statement reads.

Contact is now some 30% through its EGP 10 bn securitization program, which kicked off last Novemberwith an EGP 1.1 bn issuance.

Advisors: Contact Financial Holding was bookrunner and arranger for the issuance. CI Capital was promoter, while the good people at Alieldean Weshahi & Partners were counsel.

It’s looking like a hot year for securitization: This latest issuance takes the total value of securitized bond issuances this year to EGP 12.5 bn, up some 26% from the same period last year.

This story was corrected on 10 April, 2023 to reflect that the total value of securitized bond issuances YTD is 26% higher than the same period in 2022, not 36% as previously stated. 

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9

EGYPT IN THE NEWS

It’s quiet for Egypt in the foreign press on 4 April 2023

The suhoor President Abdel Fattah El Sisi shared with Saudi Crown Prince Mohammed bin Salman yesterday was picked up by Reuters, AP News, and Agence France-Press on an otherwise silent day for mentions of Egypt in the foreign press.

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10

Also on our Radar

Egypt’s SCZone to drum up investment in India in June. PLUS: IFC helps CIB manage climate risk

SUEZ CANAL-

The SCZone roadshow is heading to India: Representatives from the Suez Canal Economic Zone (SCZone) will head to the Indian capital of New Delhi in June, according to a statement. The representatives will meet with Indian businesses and investors in sectors including automotive, pharma, and green fuel in efforts to attract more foreign investors to the zone. The roadshow has already passed through Vietnam and Japan and is expected to head to China this month.

AND- The SCZone plans to hand over a new 1 km container berth to the East Port Said Port by May, Al Mal reports, citing sources it says are in the know. The berth comes as part of SCCT’s plans to invest USD 500 mn to expand the capacity of the East Port Said Port.

Read the full story in this morning’s edition of Enterprise Logistics — our new daily roundup of news, analysis, and insight into the biggest stories from MENA logistics players, four days a week.

CLIMATE-

IFC to help CIB manage climate risk: The International Finance Corporation (IFC) will help CIB develop and implement a climate risk management framework to aid the bank in assessing climate risk exposure and “ensuring any climate-related financial risks are disclosed in its portfolio,” the IFC said in a statement (pdf). The project, which is also backed by Germany’s Ministry for Economic Affairs and Climate Action, will see the IFC help CIB screen its existing portfolio for climate risk.

REMEMBER- The IFC covered all of CIB’s USD 100 mn green bond issuance in 2021 — Egypt’s first corporate green bond issuance.

ALSO WORTH NOTING-

QNB Al Ahli will offer installment plans of up to five years to customers of used-car retailer Sylndr. (Statement, pdf)

More tech companies in freezones? The Madbouly government will form a committee to look into proposals to set up services companies — including tech, outsourcing, software services, and R&D firms — in freezones. (Statement)

Contracting company DMC is getting an EGP 350 mn loan from Al Baraka Bank to finance the extension of a Mountain View project in New Cairo. (Statement, pdf)

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11

PLANET FINANCE

Brent crude oil sees biggest one-day gain in a year on OPEC shock production cuts

Oil spikes after OPEC’s shock production cuts: Brent crude prices jumped 6.4% to almost USD 85 per barrel yesterday — its largest single-day gain in a year — on the back of Sunday’s surprise decision by the OPEC+ oil cartel to further restrict supply.

Back to the days of USD 100+ per barrel? Brent could soar as high as USD 110 per barrel by the summer on the cartel’s move to slash output more than 1 mn barrels per day (bpd), Reuters reports, citing Rystad Energy forecasts. The last time oil prices hit similar highs was in the aftermath of the outbreak of war in Ukraine, which drove a wedge between Western nations and Moscow that set in motion an ongoing realignment of the world’s energy map.

The West is not impressed: OPEC’s move is likely to fuel tensions between cartel leader Saudi Arabia and the US, which has repeatedly pleaded with oil-rich nations to ease supply as its central bank battles high inflation. The Paris-based International Energy Agency said the production cuts “risk exacerbating” strains on the market, “pushing up oil prices at a time when strong inflationary pressures are hurting vulnerable consumers around the world."

OPEC’s move sent ripples through the financial markets: The picture was mixed for global stock markets on Monday as traders digested the news. Energy companies were the unsurprising benefactors, while growth stocks took a hit as investors worried that higher inflation could spur the US Federal Reserve to continue with rate hikes. The S&P 500 gained 0.4% and the Dow Jones Industrial Average was up 1%, while the Nasdaq fell 0.3%.

The fallout is everywhere in the international business press: Bloomberg | Wall Street Journal | Financial Times | AP | Washington Post.

EGX30

17,057

+2.2% (YTD: +16.8%)

USD (CBE)

Buy 30.84

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

18.25% deposit

19.25% lending

Tadawul

10,807

+1.6% (YTD: +3.1%)

ADX

9,501

+0.6% (YTD: -7%)

DFM

3,437

+0.9% (YTD: +3%)

S&P 500

4,125

+0.4% (YTD: +7.4%)

FTSE 100

7,673

+0.5% (YTD: +3%)

Euro Stoxx 50

4,311

-0.1% (YTD: +13.6%)

Brent crude

USD 84.93

+6.3%

Natural gas (Nymex)

USD 2.12

-0.1%

Gold

USD 2,002

+14.2%

BTC

USD 27,569

-1.8% (YTD: +66.5%)

THE CLOSING BELL-

The EGX30 rose 2.2% at yesterday’s close on turnover of EGP 2.4 bn, (21% above the trailing 90-day average). Foreign investors were net buyers. The index is up 16.8% YTD.

In the green: GB Auto (+9.4%), Qalaa Holdings (+8.8%) and Abu Qir Fertilizers (+6.8%).

In the red: Taleem (-3.0%), CIRA Education (-1.5%) and Juhayna (-0.4%).

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12

Diplomacy

China’s tourism minister heads delegation to Egypt, his first trip abroad since China eased covid restrictions

More Chinese tourists, please: A delegation of Chinese tour operators wrapped up a four-day visit to Egypt today, according to a Tourism Ministry statement. Tourism Minister Ahmed Issa sat down with his Chinese counterpart Hu Heping to kick off the visit — Hu’s first foreign trip since China relaxed strict covid restrictions on travel earlier this year, a separatestatementreads. The delegation visited the Giza Pyramids complex, the Egyptian Museum in Tahrir, and several sites in Luxor, as well as taking a Nile cruise.

REMEMBER- Chinese tourists can now get a visa on arrival to Egypt, part of moves meant to ease entry restrictions for tourists and draw visitors from new markets in a bid to double the number of tourists to Egypt to 30 mn annually by 2028. EgyptAir is also upping flights to Chinese cities, which resumed last month following a three-year hiatus thanks to covid.

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Our weekly deep dive into the green economy and ESG issue in Egypt.

Published every Tuesday in EnterpriseAM.

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Going Green

Startups in Egypt are capitalizing on the country’s plastic waste problem — will VCs follow?

How Egyptian startups are turning plastic trash into cash: Egypt is estimated to generate up to 5.7 mn tons annually in plastic waste,according to a UNIDO 2021 report (pdf). And the problem could only worsen: “The plastics market in Egypt is expected to grow at a rate of 10% annually in the next 10 years,” putting Egypt as the largest consumer of plastics in Africa, the report states. In the MENA region, 40% of plastic is mismanaged or uncollected, 54% ends up in landfills, and just 5% is recycled. Local companies have noticed the problem, and are capitalizing on its potential.

Homegrown companies are tapping into the plastics recycling market: Local startups have spotted the potential in our recycling industry, with startups collecting, treating and turning plastic waste into new products. Some have already started exporting these products while others are planning to do so. We spoke with some of these startups, who tell us that more companies are setting up shop and entering the recycling business in Egypt as Egyptians — both on an individual and industry level — are becoming more environmentally aware. There’s potential for Egyptian companies to export, especially with more global awareness and readiness to adopt recycled goods. Yet despite this, VCs are either hesitant or unaware of the potential of this industry, which is in need of their investment.

More startups are entering the space: “There was no ecosystem in 2015, people had no idea what we were doing, but in the last few years there’s been more activity and more startups coming into the scene and creating products from waste” said Yara Yassin (LinkedIn), co-founder of Upfuse, a company that turns plastic waste into bags and apparel. She’s not wrong: there have been a variety of startups entering the recycling space, including Mobikya, Reform Studio, Dawar, Very Nile, TileGreen and Mubun Furniture, to name a few.

Egyptian consumers are more eco-conscious: “More consumers are appreciating Verynile’s work,” says Farah Abdel Baki (LinkedIn), Very Nile’s marketing and communications consultant. In addition to clearing the Nile of 200 tons of plastic waste, the company has partnered with the Egyptian clothing bank to collect plastic bags, which they turn into sellable fashion and furniture.

Abdel Baki goes on to say that she’s noticed clusters of eco-friendly consumers changing the way some businesses operate, “for example some cafes now offer wicker instead of plastic straws.”

This has translated into growth: Upfuse revenues doubled y-o-y in 2022 and the company is putting final touches on a new store in Gouna, scheduled to open in late April, said Yassin. TileGreen, a company that produces construction materials out of recycled plastics, has over the past six months installed floors for corporate offices, including for SODIC, Nestle, Redcon, and Henkel, said co-founder and CEO Amr Shalan (LinkedIn). Meanwhile, Very Nile’s revenues almost tripled in 2022, Abdel Baki told us.

Cue exports: Although always part of their growth strategies, some are now expediting export growth as a means to increase their sales. With all three companies upcycling plastic waste and exporting finished products rather than exporting the plastic waste itself. “We’re starting to get orders from Europe and are focusing a lot on growing in the GCC, because the market is booming,” said Upfuse’s Yassin. Very Nile’s Abdel Baki told us that the company is partnering with a distributor in Europe while TileGreen is looking to capitalize on upcoming climate talks in Abu Dhabi. “We are in talks with several real estate developers in the UAE to roll out different pilots in the run up to COP28,” Shalan told us.

So then why are VCs not taking note? For one, there’s very little information on the wider recycling industry, which is fragmented. “There isn’t real specific data to help us get a figure, but I look to other markets that have numbers as a guide. I believe Egypt is a big market, and there is global demand for high-quality recycled products,” Tarek Roushdy (LinkedIn), founder and Managing Partner at boutique investment outfit UI Investments, tells us. This and the fact that the formal recycling industry in Egypt is in its infancy, has meant many investors are cautious. But Roushdy remains confident in the sector, going on to say that he is already assessing a few other companies in plastics recycling for potential investment opportunities.

Furthermore, quite a few of the investors we spoke to expressed that this is not an industry on their radar. “The industry hasn’t been tested, unlike the metals recycling industry which has been around since the 1930s — so investors are reluctant to back plastics recycling,” says Mohamed Abou Hashish, founder and CEO of Pharos Recycling Company.

But some startups with a proven business model are managing to tap into the investment scene: TileGreen have already received a USD six figure backing from UI Investments and are gearing up for a seed round of fundraising, Shalan told us. Yassin, meanwhile, said that Upfuse has been approached by investors, however wouldn’t disclose who it was or the amount of money they are looking to raise.

Your top green economy stories for the week:

  • Carbon market boost: The EGX will list carbon credits issued by international provider Global Carbon Council (GCC) on its planned carbon market.
  • Alcazar Energy is singing the praises of our renewables sector in the Wall Street Journal.
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CALENDAR

APRIL

April: GAFIto launch the country’s first integrated electronic platform to facilitate setting up a business.

April: SCZone roadshow in China.

April: SCZone to begin providing ship bunkering services in the Suez Canal’s ports.

6 April (Thursday): Al Ansari Financial Services shares to start trading in Dubai.

9 April (Sunday): Senate to reconvene.

11 April (Tuesday): House to reconvene.

10-16 April (Monday-Sunday): IMF / World Bank Spring Meetings, Marrakesh, Morocco.

11 April (Tuesday): Deadline for NGOs to reconcile their status.

12 April (Wednesday): National Paints Holding’s and Eagle Chemicals’ MTOs for Pachin ends.

15 April: Lamees El Hadidi’s startup competition show, El Forsa, closes applications.

16 April (Sunday): Coptic Easter

17 April (Monday): Sham El Nessim.

21 April (Friday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

27 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC).

30 April (Sunday): Tenth of Ramadan dry port tender deadline.

30 April (Sunday): Deadline for self-employed to register for e-invoicing.

30 April (Sunday): End of Mediterranean, Nile Delta oil + gas exploration tender.

Late April – 15 May: 1Q2023 earnings season.

MAY

1 May (Monday): Labor Day.

2-3 May (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 May (Wednesday): National Dialogue begins.

4 May (Thursday): National holiday in observance of Labor Day (TBC).

4 May (Thursday): IEF-IGU Ministerial Gas Forum, Cairo.

9-11 May (Tuesday-Thursday): First edition of the Arab Actuarial Conference, Cairo.

12-15 May (Friday-Monday): Egypt Fashion Week.

14 May (Sunday): Expat car import scheme ends.

15 May (Monday): Enterprise Exports & FDI Forum, Four Seasons Hotel Cairo at Nile Plaza.

16-18 May (Tuesday-Thursday): Egypt will host its first conferenceon cybersecurity and defense intelligence systems (CDIS-Egypt).

18 May (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

19 May (Friday): Arab League summit, Riyadh.

20-21 May (Saturday-Sunday): eGlob Expo, St. Regis Almasa Hotel, Cairo.

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

JUNE

June: Indian representatives to discuss prospect investments in the Suez Canal.

7-10 (Wednesday-Saturday): The second edition of Africa Health Excon.

10 June (Saturday): Thanaweya Amma examinations begin.

12 June - 15 July (Monday-Saturday): Thanaweya Amma exams.

13-14 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15 June (Thursday): Deadline for bids in EGPC’s mature oil fields tender.

19-21 June (Monday-Wednesday): Egypt Infrastructure and Water Expo debuts at the Egypt International Exhibition Center.

22 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

28 June-2 July (Wednesday-Sunday): Eid El Adha (TBC).

30 June (Friday): June 30 Revolution Day.

30 June (Friday): Egypt to exit Grains Trade Convention.

JULY

1 July: House of Representatives deadline to approve the FY 2023-2024 budget.

18 July (Tuesday): Islamic New Year.

20 July (Thursday): National holiday in observance of Islamic New Year (TBC).

23 July (Sunday): Revolution Day.

25-26 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

27 July (Thursday): National holiday in observance of Revolution Day.

Late July-14 August: 2Q2023 earnings season.

AUGUST

August: Hassan Allam Utilities + Agility to open Yanmu East logistics park.

3 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

22-24 August (Tuesday-Thursday): BRICS summit, Johannesburg, South Africa.

SEPTEMBER

9-10 September (Saturday-Sunday): G20 summit, New Delhi, India.

15 September (Friday): IMF to review USD 3 bn program.

19-20 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

21 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

21-23 September (Thursday-Saturday): Narrative PR Summit, Somabay.

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

OCTOBER

2-5 October (Monday-Thursday): ADIPEC 2023, Abu Dhabi National Exhibition Center.

6 October (Friday): Armed Forces Day.

13 October- 20 October (Friday-Friday): The sixth edition of El Gouna Film Festival (GFF).

Late October-14 November: 3Q2023 earnings season.

31 October - 1 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

NOVEMBER

November: Cairo to hostIntra-African Trade Fair.

2 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

15-24 November (Wednesday-Friday): Cairo International Film Festival, Cairo.

DECEMBER

12-13 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

21 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

1Q 2023: Egypt + Qatar to launch joint business forum.

1Q 2023: FRA to introduce new rules for short selling.

1Q 2023: Internal trade database to launch.

Summer 2023: EGX to launch a shariah-compliant index.

1H 2023: GAFI roadshow set to launch to drum up foreign investment for golden licenses

1H 2023: Abu Dhabi Islamic Bank intends to launch a digital consumer finance company

2H 2023: Egyptian government expected to sign agreements with a consultant for the EuroAfrica electricity interconnector.

2H 2023: President Abdel Fattah El Sisi and Turkish President Recep Tayyip Erdogan expected to hold a summit.

4Q 2023: EGX to launch its new futures exchange.

End of 2023: A Developments’ first phase of the Lazoghly development completed.

November 2024: Egypt to host the 12th session of the World Urban Forum (WUF12).

2Q 2025: Safaga Terminal 2 to initiate operations.

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