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Monday, 11 Sep 2023

What We're Tracking Today
Economy
Ipo
Diplomacy
Diplomacy
A Message From Hsbc
Moves
Last Night’s Talk Shows
Also On Our Radar
Planet Finance
Blackboard
Calendar

Inflation hits fresh all-time high in August

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Today at a glance

1

Economy

Inflation hits fresh high in August.
2

What We're Tracking Today

The Enterprise Finance Forum starts a week today.
3

Diplomacy

El Sisi, Erdogan hold first-ever bilateral talks at G20.
4

Diplomacy

Ethiopia says it’s filled the GERD, drawing condemnation from Cairo.
5

Also on our Radar

Investor interest in state-owned Sinai Manganese.
6

What We're Tracking Today

Our imports of Israeli gas rose more than 20% during the first half of the year.
7

Also on our Radar

The UAE’s Khalaf Al Habtoor wants to work with the SFE.
8

PLANET FINANCE

Federal Reserve to hold interest rates at September meeting -WSJ.
9

BLACKBOARD

Gov’t imposed cap on tuition fee hikes limits growth and profit potential for private schools.

Monday, 11 Sep 2023

What We're Tracking Today
Economy
Ipo
Diplomacy
Diplomacy
A Message From Hsbc
Moves
Last Night’s Talk Shows
Also On Our Radar
Planet Finance
Blackboard
Calendar
1

What We're Tracking Today

Egypt increased Israeli gas imports during the first six months of 2023 -Asharq

Good morning, wonderful people. A week from today, we’ll be meeting many of you at our first-ever two day event on finance. We’ll be talking about everything from AI and digital banks to fintech, the outlook on 2024, and why nobody seems to want to be a banker anymore. If you’ve received an invitation, please make sure to RSVP right away — space is strictly limited.

ONE WEEK TO GO- There are just seven days until the Enterprise Finance Forum, which takes place 18-19 September (Monday and Tuesday) at the St. Regis Hotel on the Nile Corniche. This flagship forum is the latest in our must-attend series of invitation-only events, where CEOs, bankers, investors, founders, and corporate leaders will meet to discuss the trends shaping the future of banking, finance, NBFIs, and fintech — and of their clients.

What to expect : Join Amr Allam (co-CEO, Hassan Allam Holding), Pakinam Kafafi (CEO, Taqa Arabia), Sherif El Kholy (partner and head of MENA, Actis), Tarek Abdel Rahman (managing partner, Compass Capital), Tarek Assaad (managing partner, Algebra Ventures), Ahmed Sobhy (chief investment officer, Banque Misr), and many others for talks on everything from how PE and VC players are tackling fundraising in a challenging climate to what major corporate customers of banking and finance need to see from their institutions.

Tap or click here to view the FULL AGENDA withSPEAKERS.

We are honored to count some of the region’s most important financial institutions as

our partners for this special event. The Enterprise Finance Forum could not take place without the support of our partners including Banque Misr, Al Baraka Bank, FAB Misr, HSBC, Mashreq, CI Capital, Global Corp, Visa, Hassan Allam Utilities, and the IFC.

MORNING MUST-READ- Can we pitch ourselves to Chinese companies as the lynchpin in their China +1 strategy? That’s the suggestion in this morning’s fortnightly column from HSBC (below), wherein Egypt CEO Todd Wilcox reports on investor interest after a spell on the road in Asia.

DATA POINT- More gas from Israel: Egypt’s gas imports from Israel rose 21.5% y-o-y to 903 mn cubic feet per day (cf/d) on average in 1H 2023, Asharq Business reports, citing an unnamed official source. Gas imports from Israel are not only used to meet local demand but also to supply our two LNG plants, where gas is liquefied for re-export to Europe.

Expect another increase starting October: Israel gas imports could rise as high as 1.05 bn cf/d starting October due to falling seasonal demand in Israel, A sharq report ed previously.

REMEMBER- More Israeli gas could help us restart exports: Soaring domestic energy demand and falling domestic gas production have caused rolling blackouts across the country this summer, leading to an effective pause on our LNG exports since June. Israel has long-term plans to significantly boost its gas exports to Egypt over the next 11 years, following a landmark gas agreement the two countries signed with the EU last year to ramp up exports to the bloc as it looks to phase out reliance on Russian fossil fuels.

HAPPENING TODAY-

Sahara expo: The Sahara agriculture exhibition continues today at the Egypt International Exhibition Center (EIEC), showcasing agricultural machinery, water management systems, and post-harvest technologies. The event runs through to tomorrow.

HAPPENING THIS WEEK-

#1- DEBT WATCH- Fresh securitizations from EFG Corp Solutions and Al Ahly Tamkeen this week? That’s according to an unconfirmed report from Al Borsa, which said yesterday that:

  • The EFG Finance unit will sell about EGP 800 mn worth of bonds;
  • Al Ahly Tamkeen, the microlending unit of the National Bank of Egypt, will take about EGP 700 mn of bonds to market.

Advisors: Both parent companies are running financial advisory services on the issuances, with EFG Hermes working for EFG Corp-Solutions and Al Ahly Pharos helming the Al Ahly Tamkeen sale, according to Al Borsa. Dreny & Partners will reportedly act as the legal counsel.

COMING SOON- Another huge issuance from NUCA: The New Urban Communities Authority (NUCA) will issue EGP 15 bn in securitized bonds in November, completing its EGP 30 bn program started in July, Al Borsa reported separately.

NUCA is by far the biggest player in the local securitization market: NUCA has securitized EGP 55 bn of its portfolio over the past five years, accounting for more than a third of total securitization volumes during the period, according to data tracked by Enterprise. The total value of securitized bonds taken to market this year is up almost 12% on 2022 as of this week at EGP 50.8 bn.

#2- The National Dialogue: The National Dialogue will hold a new round of closed-door meetings this week to draft a new batch of recommendations, said Mahmoud Fawzi, the secretary-general of the Dialogue’s board of trustees. The group sent its first batch of recommendations to the president for approval last month.

#3- US to make decision on military aid by Thursday: The US State Department is set to decide whether to withhold a portion of Egypt’s annual USD 1.3 bn of military aid on human rights grounds by 14 September.

Remember: A number of Democratic lawmakers in the House and the Senate have called on the Biden administration in recent weeks to withhold a quarter of the USD 1.3 bn. This would be the third consecutive year that Egypt has had some of its military aid withheld: the Biden administration blocked Egypt from receiving USD 130 mn of aid in 2021, a figure that rose to USD 205 mn last year.

#4- The Hydrogen Egypt Summit opens its doors at the Nile Ritz Carlton on Wednesday and Thursday. Industry leaders at local and global energy players will discuss how to realize Egypt’s potential to become a regional green hydrogen hub.

TECH TUESDAY-

We’ll get our first look at the new-look iPhone tomorrow when Apple holds its annual product event. Expect updated iPhones, two refreshed watches, and a switch away Lightning ports to USB-C (thanks, European Union, for making all of our cables redundant). You can watch the event here at 8pm CLT on Apple’s website or its Youtube channel.

Other tech unveilings this fall: Microsoft will show off new hardware on Thursday, 21 September and Google will formally announce the Pixel 8 and an updated watch on Wednesday, 4 October.

THE BIG STORIES ABROAD-

The devastating earthquake in Morocco is still dominating the global front pages this morning: The death toll from Saturday’s disaster has now risen to more than 2.1k while more than 2.4k have been injured. The number of dead is expected to rise further in the coming days as rescuers continue to search collapsed buildings in mountain villages. (New York Times | Washington Post | Wall Street Journal)

The closing day of the G20 summit is still getting a lot of attention in the Western media, which is still focusing on the Ukraine-lite joint declaration as well as Biden’s meeting with Chinese premier Li Qiang yesterday (Reuters | Bloomberg | Financial Times | CNBC).

What you need to know from the final day:

  • Empowered MDBs? The role of multilateral development banks in helping to restructure debt and finance the climate transition was a key point of discussion during the summit, with India’s prime minister Narandra Modi calling for increasing the mandates of banks. Separately, the EU backed handing low- and middle-income countries more power over decision-making at the World Bank, an idea unlikely to go down well in Washington, should it give China more power in the institution. (Financial Times)
  • Fresh climate pledges. Sort of. Leaders pledged to triple global renewable energy usage by 2030 and work to phase out the use of coal but did not agree to any new targets to make it happen. (Reuters)
  • Day 1 recap: The African Union now has permanent representation at the G20 + the US and EU want to help fund new trade links between the Middle East and India. Read more here.

** The G20 presidency is heading to Brazil in 2024, where world leaders will convene in Rio de Janeiro on 18–19 November.

*** 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.

In today’s issue: The government just introduced new caps on education tuition fees, and school operators aren’t happy.

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2

Economy

Egypt inflation hits fresh all-time high in August

Inflation hits another all-time high in August: Annual urban inflation jumped to 37.4% in August from 36.5% the month before, marking a third consecutive month of record-breaking highs, according to data released by state statistics agency Capmas (pdf) on Sunday. Inflation has been running above 30% since February as prices soar on the back of a series of currency devaluations.

Price hikes came in hotter than expected: While most analysts had expected inflation to continue to accelerate, the 37.4% headline rate was a bit higher than many expected. The median forecast predicted by analysts in a Reuters poll last week was for 37.1%.

Food prices once again to blame: Food and beverage prices — the largest component of the basket of goods and services used to calculate inflation — hit a record high of 71.4% y-o-y, with meat and poultry prices almost doubling from August 2022 and vegetables surging 92.5%.

Monthly inflation offers some hope: Monthly inflation came in at 1.6%, down from 1.9% in July, marking the third consecutive month in which month-on-month price increases slowed. The cooling monthly figure is “tentatively a sign that prices are consolidating at these levels,” Naeem Brokerage’s Allen Sandeep told Reuters.

Core inflation slows (but maybe not for long?): Core inflation — which strips out volatile items such as food and fuel — recorded 40.4% y-o-y in August, down marginally from 40.7% the month prior, according to central bank data. Economist Mona Bedeir told Enterprise that core inflation is likely to increase in the coming months due to seasonal factors like the back-to-school period, as well as a boom in tourism.

LOOKING AHEAD-

Where does inflation go from here? It depends on the currency: In a note yesterday Al Ahy Pharos said that inflation will “likely remain elevated” until the end of the year. It could start to temper in 2024 due to the favorable base effect though this will depend on how far the EGP falls against the greenback in a devaluation anticipated to occur before the end of the year. Meanwhile, Goldman Sachs is predicting inflation will remain above 30% through to the end of this year before going into “a sharp decline through 2024” — assuming that the EGP doesn’t weaken further against the USD, Bloomberg reports. An earlier Reuters poll had EFG Hermes and Standard Chartered suggesting that there are signs inflation could be slowing.

The target: The CBE is still targeting inflation of 7% on average — plus or minus two percentage points — by 4Q 2024 and 5% by 4Q 2026.

What does this mean for interest rates? Analysts are skeptical that August’s inflation figures will persuade the central bank to raise interest rates when it meets on 21 September, saying movement on the USD-EGP exchange rate is likely to come ahead of any rate rise. “We don’t expect there will be another hike, unless we see some progress on the issue of the exchange rate,” economist Mona Bedeir told Enterprise. “Monetary policy will not anchor inflation expectations without first anchoring expectations of an exchange devaluation,” she said.

Remember: The CBE made a surprise 100-bps rate hike at its last meeting in August in an effort to curb inflation, raising its benchmark rate to 19.25%. The central bank has hiked rates by 1.1k bps since March 2022.

All eyes on the EGP: “We’re still expecting a fourth round of devaluation,” Bedeir told us. “We don’t expect the year to end without seeing another devaluation; the lack of one has been amplifying the crisis and feeding inflation,” she said.

Pundits remain pessimistic on our carry trade: “Egypt’s interest rates are too low to attract foreign capital, despite a surprise hike in August,” said Bloomberg economist Ziad Daoud. “High inflation has pushed Egypt's real rates to be among the lowest in emerging markets. And the risk of devaluation could wipe out interest-rate gains.”

The international p ress also has the story: Bloomberg | Reuters | AFP | Xinhua | The National

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3

IPO

Egypt-born ADES eyes USD 1.2 bn from Saudi IPO

ADES sees strong demand from investors for landmark IPO: Egypt-born regional oil and gas services driller ADES Holding’ s initial public offering (IPO) on the Saudi stock exchange was oversubscribed within hours of the company releasing pricing on its shares, Bloomberg reports, citing a terms sheet it has seen.

KSA’s biggest debut so far this year: The company set the price range for the offering at between SAR 12.50 - 13.50 (USD 3.33- 3.60) per share, ADES said in a statement (pdf) yesterday, valuing the company at as much as SAR 15.2 bn (USD 4.05 bn) by our math. This would see the oil and gas driller raise up to SAR 4.5 bn (USD 1.2 bn) from the offering, which is expected to be the largest on the Saudi stock exchange this year. The company is selling a 30% stake(c. 338.7 mn shares) on the Saudi Tadawul, nearly one-third of which will be sold by existing investors, while the remainder are freshly issued shares.

Remember: ADES finally pulled the trigger on the Riyadh listing last month, which has been in the works since at least last year but reportedly stalled due to unfavorable market conditions. The oil and gas driller was previously listed on the London Exchange but delisted following a PIF-backed takeover in 2021. ADES is one of Egypt’s largest off-shore gas and oil drillers and was established in Egypt before listing on the London Exchange in 2017.

Book-building underway: The institutional book-building process kicked off yesterday and will continue until Thursday 14 September, while the final pricing will be revealed on 20 September. The retail offering will now start six days later than planned and will now take place on 26-28 September.

Advisors: EFG Hermes, Goldman Sachs, JPMorgan and SNB Capital will act as the financial advisors, global coordinators, bookrunners, and underwriters on the transaction. SNB Capital will also act as the lead manager. HSBC, GIB Capital, Al Rajhi Capital, and Saudi Fransi Capital were appointed as bookrunners and underwriters to the offering. Lazard Financial Advisory is ADES’s independent financial advisor.

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4

Diplomacy

Egypt’s El Sisi, Turkey’s Erdogan hold first-ever bilateral talks at G20

A first face-to-face round of talks for El Sisi, Erdogan: Turkish President Tayyip Erdogan hailed “a new era” for relations between Egypt and Turkey in his first-ever meeting with President Abdel Fattah El Sisi following the decision to restore diplomatic ties in July, according to a Turkish statement on X, formerly known as Twitter. Meeting on the sidelines of the G20 summit in New Delhi, the pair agreed to work to restore bilateral ties and strengthen regional cooperation “based on respect, common interests, and sincere intentions,” Ittihadiya said in a statement.

Remember: The two countries restored diplomatic ties and reappointed ambassadors in July, bringing to an end a decade of tensions.

Turkey wants to do business with us — especially on energy: Erdogan’ emphasized the importance of the “Egyptian administration's support to Turkish investors and companies,” adding that Turkey is eyeing cooperation on LNG, nuclear energy, culture, and education.

The meeting received attention in the global press: Reuters | The National | Al Arabiya.

ALSO FROM THE G20- El Sisi met with German Chancellor Olaf Scholz during the summit, according to a separate Ittihadiya statement. The two discussed how to boost German investment in Egypt as well as ongoing cooperation in transport, manufacturing, and energy projects. They also touched on efforts to combat illegal immigration, as well as the latest from Sudan and the war in Russia-Ukraine.

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5

Diplomacy

Ethiopia completes final stage of filling the GERD

GERD is full: Ethiopia has completed the fourth and final phase of filling the reservoir of the Grand Ethiopian Renaissance Dam (GERD), Ethiopian Prime Minister Abiy Ahmed said in a social media post yesterday.

Refresher: The country started work on the USD 4 bn hydropower dam in 2011 and began unilaterally filling its reservoir three years ago, causing consternation with its downstream neighbors Egypt and Sudan, who have said the dam could endanger their water supply.

Unsurprisingly, Egypt wasn’t pleased with yesterday’s news: In a statement, the Foreign Ministry accused Addis Ababa of breaching international law and ignoring Egypt and Sudan’s rights to water security.

There had been modest signs of progress in recent months: The leaders of Egypt and Ethiopia agreed in July to finalize an agreement within four months on the filling and operation of the dam, leading to a round of talks in Cairo last week — the first to take place on GERD in two years. The meeting yielded no breakthrough, but officials agreed to gather in the Ethiopian capital for a new round of talks this month.

The filling could make an agreement harder, Foreign Ministry suggests: “[The filling process] places a burden on the course of the resumed negotiations,” the ministry said, expressing hope that this month’s talks will produce a “tangible and real breakthrough.” Dates for the next round of talks have not yet been announced.

The news is getting coverage in the foreign press: Bloomberg | Reuters | AFP | The National.

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6

A MESSAGE FROM HSBC

Egypt remains the destination of future opportunities

A series of roadshows that we have helped organize for clients in Asia this year have underscored how highly investors regard the future that exists for them in Egypt.

The most recent saw HSBC team up with the Egyptian General Authority for Investment (GAFI) to connect with investors, clients and government stakeholders in Singapore and China.

The mission showcased Egypt’s Vision 2030 sustainable development strategy at the Africa Singapore Business Forum and also at an event HSBC hosted in partnership with the Singapore Business Federation.

From Singapore, we headed to Beijing to meet with Chinese investors and corporates, working with our HSBC China colleagues at our China-Middle East Summit: Unlocking New Growth.

Building ties between Asia and MENA: This visit is one of a series being undertaken to drive and facilitate the very substantial business potential that exists in the trade and investment that flows between the two regions — and how our unique heritage at both ends of this business corridor gives our clients the most advantageous way to realize that potential.

The conversations we’ve had with colleagues and potential customers during these events highlights for me how important it is to have face-to-face discussions, presenting Egypt’s economic outlook, and showcasing the country’s potential in a wide range of sectors — be it mega projects and infrastructure, manufacturing, digital or sustainable and green technology.

GAFI CEO Hossam Heiba made clear to us that Egypt can be a magnet for Asian trade and investment, and we’ve already been witnessing this in our ports, railways, energy, power, and automotive sectors.

Stimulating investment: Egypt’s diversified economy, strategic location as a global gateway for trade for thousands of years, its large consumer market, and numerous national projects including the Suez Canal Economic Zone are stimulating investment, which underpins our belief in the country’s long-term potential.

These are exciting times on both sides as rapid transformation, energy transition and consumer spending drive tremendous growth.

Egypt has a strong track record of delivering on its commitments, including the economic reform program that started in 2016. The government’s program that targets a doubling of the private sector’s share in the economy over the next four years, while attracting bns of USD in investment, is indicative of the country’s continued ambitions for growth and development.

The Egyptian government’s reform package to boost investment on top of May's decisions by the Supreme Investment Council to boost direct investment in Egypt are commendable steps to improve the business environment and increase the country’s export growth.

With the right policies and investments in place, Egypt can become an even more attractive destination for foreign investment and a hub for regional trade and commerce.

Todd Wilcox (LinkedIn) is HSBC Egypt’s deputy chairman and chief executive officer. HSBC’s column in Enterprise appears every second Monday.

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7

Moves

Egyptian developer SODIC gets two new board members

ADQ puts fresh faces on SODIC board: Leading real estate developer SODIC welcomed two new representatives for shareholder ADQ to its board, according to an EGX disclosure (pdf) yesterday. Roque Solabarrieta (LinkedIn) and Khalifa Albloushi (LinkedIn) will replace Omar Mehanna and Amer Al Ameri as the two representatives of the Abu Dhabi sovereign wealth fund.

Remember: ADQ has had two seats on the board since it, together with Emirati real estate developer Aldar, acquired an 85.5% stake in the company in 2021.Aldar holds another five seats on the board.

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8

LAST NIGHT’S TALK SHOWS

GERD, the G20 and the Morocco earthquake dominate the conversation on Egypt's talk shows

It was a mixed bag on the airwaves last night,with the Grand Ethiopian Renaissance Dam, the G20 summit, and Saturday’s earthquake in Morocco all getting coverage.

GERD went big after the Ethiopian prime minister yesterday announced that the country had finished the fourth and final phase of the filling of the dam ’s reservoir. El Hekaya’s Amr Adib, still broadcasting from London, got the reaction of Cairo University water resources professor Abbas Sharaky (watch, runtime: 3:11 | 23:39) while Ala Mas’ouleety dedicated a shorter segment to the news (watch, runtime: 3:28). We have more details on the story in this morning’s news well, above.

Does final really mean final? Sharaky cast doubt on the language used by the Ethiopian government, suggesting that it could continue to fill the reservoir in the coming years and further jeopardize Egypt and Sudan’s water security. The dam was constructed to hold around 74 bn cubic meters of water but currently Ethiopia has stored only 41 bn cbm. “If this was indeed the final filling, then it’s good news,” he said. “A half bomb is better than a full 74-bn cubic-meter bomb.”

A call for international help: Sharaky argued that more international parties must have an active role at the negotiating table, a suggestion frequently rejected by Ethiopia. Egypt has repeatedly called for new mediators to join the African Union in leading the talks, and has lobbied the UN Security Council to pressure Addis Ababa to come to the table.

Suez Canal threatened by proposed India-MENA trade link? Not a chance, Ala Mas’ouleety host Ahmed Moussa confidently told his audience last night, while listing a host of other potential problems with the project including the price and the length of time it’ll take to get up and running (watch, runtime 17:05). In what is being seen as the West’s answer to China’s Belt and Road Initiative, the proposed project, unveiled at the G20 summit this weekend, would see US and EU funding help finance the construction of new rail networks in the Middle East and port infrastructure in India to boost trade links between South Asia, the Gulf and Europe.

ALSO GETTING AIRTIME LAST NIGHT-

  • G20: There was more comment on President Abdel Fattah El Sisi’s trip to India for the G20 summit, courtesy of journalist Bilal El Dawi who appeared on Al Hayah Al Youm (watch, runtime: 18:37).
  • Morocco earthquake: The deadly earthquake that struck Morocco on Saturday continued getting attention on the airwaves, with Masaa DMC (watch, runtime: 2:09) and Al Hayah Al Youm (watch, runtime: 3:59) both covering the latest updates.
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9

Also on our Radar

Some investors are interested in state-owned Sinai Manganese. PLUS: Al Habtoor likes the SFE, Suez Cement is now Heidelberg Materials, Russian wheat doesn’t have to be Russian + TMG goes to Riyadh

PRIVATIZATION WATCH-

Investors want a slice of Sinai Manganese: Several local and international investors are eyeing a stake in state-owned manganese producer Sinai Manganese, A l Ma l reports, citing sources it says have knowledge of the matter. Authorities are reportedly still studying the offers. The company is being shopped around by the Sovereign Fund of Egypt (SFE), whose pre-IPO fund has been restructuring some companies ahead of share sales, according to Al Mal’s sources.

Overhaul under way: Parent firm Chemical Industries Holding Company is reportedly preparing a study to help Sinai Manganese better utilize its mines and raise production capacity to increase its market value.

Remember: The company is on the government’s list of 35 companies up for stake sales to strategic investors, via the EGX, or a mix of both. The state aims to raise USD 5 bn from asset sales between October 2023 and June 2024.

INVESTMENT-

Al Habtoor eyes investments in SFE projects: Emirati business leader Khalaf Al Habtoor, founder and chairman of conglomerate Al Habtoor Group, is interested in investing in projects offered by the Sovereign Fund of Egypt (SFE), he told the local press (Al M al | Al Borsa). Al Habtoor said the group has not held any direct talks with the SFE, and did not disclose any specific investment plans, saying only that the North Coast has potential. Al Habtoor was speaking on the sidelines of the Habtoor Research Center’s opening in Cairo on Saturday.

Habtoor Research: Founded in 2022, the Habtoor Research Center is a think tank for political studies, economics, and risk in the region and worldwide. The institution seeks to cater to Arab culture, Al Habtoor said, adding that it chose Egypt as its destination because of its academic landscape.

RETAIL-

Local banks throw Awlad Ragab a lifeline? Indebted supermarket chain Awlad Ragab has reportedly reached preliminary agreements with four unnamed local lenders — including one state-owned bank — to reschedule EGP 400-mn worth of loan payments, Al Shorouk reports, citing an unnamed source. The chain has managed to pay some EGP 300 mn of outstanding debts since March, reducing its outstanding debt to EGP 1.3 bn, according to the local news outlet.

Awlad Ragab is liquidating some EGP 850 mn worth of assets this year: The company is reportedly selling eight branches, a factory, and a warehouse to repay part of its dues to banks, leasing companies, and suppliers.

INDUSTRY -

Suez Cement is now Heidelberg Materials: Suez Cement has rebranded under the name of its global parent company Heidelberg Materials, it announced yesterday.

COMMODITIES-

Our Russian wheat doesn’t have to come from Russia: The Supply Ministry will allow Russian crop trader Solaris to source the 480k tons of wheat it sold to Egypt last week from any origin, Supply Minister Ali El Moselhy said in an interview with Bloomberg. Solaris will still need to inform state grains buyer GASC of the origin of the grain, which must meet the standards agreed in the purchase contract.

REAL ESTATE-

Talaat Moustafa Group to work on USD 11 bn housing development in Riyadh: Talaat Moustafa Group (TMG) and Saudi-based National Housing Company (NHC) have signed an agreement to build a mixed-use development in Riyadh, according to NHC website. The 10-mn square-meter project will include some 28k housing units, commercial services, and health and education facilities. The cost of the project is around SAR 40 bn (USD 11 bn), according to TMG CEO and Managing Director Hisham Talaat Moustafa, Asharq Business reported.

REGULATION-

FRA introduces new pricing index for MSMEs finance: The Financial Regulatory Authority (FRA) yesterday launched a pricing index for MSME financing products designed to give small business owners clearer information about the loan market, it said in a statement yesterday.

What’s it for? The index will give MSMEs access to standardized information about loans being offered by various financial institutions, helping them to compare between different financing products and lowering the cost of borrowing.

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10

PLANET FINANCE

Federal Reserve to hold interest rates at September meeting -WSJ

Another Fed hold next week? Slowing inflation and signs of weakness in the labor market will likely see the US Federal Reserve leave rates on hold for a second consecutive meeting next week, according to the Wall Street Journal’s Nick Timiraos.

Times are changing: The Journal reports that there are now two camps on the Fed board: one that favors further hikes in anticipation of a potential rise in inflation in the coming months, and another that is calling for a pause on tightening and holding rates higher for longer. Which one of these camps will swing the vote at the central bank’s November and December meetings remains to be seen.

EGX30

19,578

+1.0% (YTD: +34.1%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

19.25% deposit

20.25% lending

Ta d awul

11,154

-0.6% (YTD: +6.7%)

ADX

9,691

+0.3% (YTD: -5.1%)

DFM

4,067

+0.2% (YTD: +21.9%)

S&P 500

4,457

+0.1% (YTD: +16.1%)

FTSE 100

7,478

+0.5% (YTD: +0.4%)

Euro Stoxx 50

4,237

+0.4% (YTD: +11.7%)

Brent crude

USD 90.65

+0.8%

Natural gas (Nymex)

USD 2.61

+1.0%

Gold

USD 1,942.70

0.0%

BTC

USD 25,814

-0.2% (YTD: +56.1%)

THE CLOSING BELL-

The EGX30 rose 1.0% at yesterday’s close on turnover of EGP 1.9 bn (9.6% below the 90-day average). Foreign investors were net sellers. The index is up 34.1% YTD.

In the green: Abu Qir Fertilizers (+6.2%), Eastern Company (+4.7%) and Telecom Egypt (+4.3%).

In the red: Oriental Weavers (-1.5%), Edita (-1.1%) and Sidi Kerir Petrochemicals (-1.1%).

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Our weekly deep dive into education in Egypt, from K-12 to post-secondary.

Published every Monday in EnterpriseAM.

Read Blackboard
11

BLACKBOARD

Gov’t imposed cap on tuition fee hikes limits growth and profit potential for private schools

A tighter cap on how much privately owned schools can raise tuition fees will hit profitability and slow investment in growth, school officials tell Enterprise. The execs were reacting to an Education Ministry decree that sharply caps tuition rises at higher-end schools. The result: Already-struggling private-sector school operators will be less profitable, less able to hire foreign staff, and less likely to invest in growth in a climate that is marketed by high inflation, poor availability of FX, and a divergence between the official and parallel market value of the EGP against foreign currencies.

Essential background: Last week, the Education Ministry issued a decree introducing a new tiered system of caps on annual hikes of tuition fees at privately owned schools teaching both local and international curriculums. Under the new system, schools that charge tuition fees of EGP 35k and above will not be allowed to hike fees by more than 6% for this academic year, down from the previous 7% cap. The decision does not impact schools that fall outside of the ministry’s purview, among them institutions owned by associations and other bodies. (Thing: CAC, MBIS, BISC.)

International and private schools have been lobbying the Education Ministry to allow them to raise their tuition fees beyond the 7% threshold to be able to cover rising costs on the back of soaring inflation and a weakening local currency, a government source told Enterprise on condition of anonymity. The ministry introduced the tiered system after mulling how much of an increase to allow; that process involved listening to operators and to parents’ demands to keep price hikes under control, the source added.

REFRESHER- Since 2017, international and private schools have faced a cap on tuition fee hikes after parents lobbied the ministry to put a stop to what they said were “unfair” increases. Private providers were allowed to raise prices by as little as 7% each year on their 2015-2016 fees, which the government deemed their baseline year, meaning the actual increase increment has remained steady each year. Private schools with tuition fees below EGP 10k per year had a 10-25% cap on their annual tuition fee increases.

A brief reprieve: Last year, the Education Ministry agreed to allow schools to calculate the annual increase based on the previous academic year rather than the 2015-2016 fees, providing some breathing room.

The EGP deval is a continuous pain point for int’l schools: The devaluation of the EGP poses a significant challenge for international schools, most of which have contracts with their international staff committing to paying a significant portion of their salaries in foreign currencies. This practice has been straining the schools’ financial resources, particularly in the face of recent currency devaluations, CIRA Education CEO Mohamed El Kalla told Enterprise.

Will we see fewer foreign teachers in Egypt as a result? The tightened cap has prompted some schools to modify their agreements with their international staff by offering a larger portion of their salaries in EGP rather than hard currency, considering the current difficulties in sourcing FX, El Alsson Executive Director Karim Rogers told Enterprise. This kind of contractual adjustment is often met with resistance by foreign teachers, some of whom end up quitting, said Rogers. “They want to get paid in hard currency so they can save and have the benefit of some that money when they return home,” he said.

Not all schools can afford to cut int’l staff: “Labor costs in international schools account for up to 60% of expenditures, and the schools are constrained from reducing the share of foreign staff within their workforce, as international agreements mandate maintaining a specific level of foreign staffing,” El Kalla told us.

And it’s leading to some business going on pause: CIRA Education is freezing projects with a high composition of foreign staff, El Kalla said.

ANOTHER LIMITATION- New regs on school uniforms: Education Minister Reda Hegazy issued a decision to standardize school uniform specifications for all students in Egypt, including those in public, private, and international schools, aiming to reduce financial burdens on families. The decision bans schools from mandating parents to buy uniforms from specific sources, cutting schools off another possible source of revenues for schools that sell uniforms in-house. The decision also called on schools to avoid complex uniform requirements and encouraged the use of standard colors and logos.

What industry players wanted to see: Schools would have been better able to maneuver the new caps if the ministry’s decision had accounted for the percentage of foreign staff members on schools’ payrolls and set the fee increases accordingly, El Kalla suggested. Alternatively, it would have also been favorable if the ministry were to consider the cap on a case-by-case basis, he said.

Some room to push the cap — if you can convince the ministry you’re making a loss. “Schools that can provide proof of incurring losses can apply to the Education Ministry for exemptions from the current caps and in some cases the requests came back with approvals for increases of between 15-60%,” Karim Mostafa, CEO of education management company Eduhive, told us. However, “the application process for such exemptions is time-consuming and in some cases takes more than four months,” said Rogers.

One industry association exec thinks the 7% price hike will still allow most schools to live to see next year. “The adjustments are still far from covering the extra costs incurred by the schools due to inflation hovering near 40%, but it’s a good improvement that will allow schools to survive this school year, given they can make another raise next year,” Private Schools Owners Association Chairman Badawy Allam told Enterprise.

Your top education stories for the week :

  • AfricInvest buys into BUE: Pan-African private equity firm AfricInvest is investing USD 40 mn(EGP 1.2 bn) in British University in Egypt (BUE) to boost the university’s growth plans.
  • CIRA bonds and buyouts: CIRA Education is set to securitize future cashflows worth EGP 700 mn before the end of the month.
  • Egypt x Japan x Jordan: Foreign Minister Sameh Shoukry discussed introducing an Egyptian-Japanese school model in Lebanon with his Japanese and Jordanian counterparts during a three-way meeting last week.
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CALENDAR

SEPTEMBER

10-12 September (Sunday-Tuesday): Sahara agriculture exhibition, Egypt International Exhibition Center, Cairo.

13-14 September (Wednesday-Thursday): Hydrogen Egypt Summit, Nile Ritz Carlton, Cairo.

13 September (Wednesday): Deadline for settling outstanding military service in FX.

15 September (Friday): Ultraibex Wadi Degla Protectorate clean-up event.

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

15 September (Friday): Deadline for applications to EGYAID scholarship program.

15 September (Friday): Deadline for FX bureaus to comply with new capital requirements.

17-18 September (Sunday-Monday): Arab Security Conference and Exhibition, Nile Ritz Carlton, Cairo.

17-19 September (Sunday-Tuesday): Sharm Rendezvous (insurance conference), Rixos Premium Seagate, Sharm ElSheikh.

18-19 September (Monday-Tuesday): Enterprise Finance Forum, St. Regis Hotel, Cairo.

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

20-23 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo.

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

25 September (Monday): Nasdaq deadline for Swvl Holdings Corp to increase its market value of publicly held shares to a minimum of USD 15 mn.

25-26 September (Monday-Tuesday): Egypt to host the Asian Infrastructure Investment Bank’s annual board meeting, Sharm El Sheikh.

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

26 September (Tuesday): Taqa Arabia’s ordinary general assembly meeting.

27 September (Wednesday): Deadline for bidding in the fifth phase of the investment map offered by the Industrial Development Authority (IDA).

27 September (Wednesday): Deadline for bidding in tender for five solar plants on north coast.

28 September (Thursday): Eastern Company will hold an ordinary general assembly meeting to approve the company’s financials for the 2022-2023 FY.

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

28-29 September (Thursday-Friday): Medical Tourism Conference, Sharm El Sheikh.

30 September (Saturday): The start of the new academic year for Egyptian universities.

30 September (Saturday): The start of the new academic year for Egyptian schools.

Signposted to happen sometime in September:

  • Sustainable Debt Coalition Initiative agreed at COP27 to launch
  • IDH to open first branch in Saudi Arabia
  • The Egypt-Germany trade and investment joint conference in Cairo
  • ADQ to acquire stakes in Elab, Ethydco and EDC by end of month

OCTOBER

1-3 October (Sunday-Tuesday) International Expotec for water economics management, Egypt International Exhibition Center, Fifth Settlement, Cairo.

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

2 October (Monday): Government meeting with investors to look into liberalizing electricity grid.

6 October (Friday): Armed Forces Day.

9 October (Monday): The Narrative PR Summit, Somabay Red Sea.

9-11 October (Monday-Wednesday): Arabs Savings and Financial Literacy Conference, Four Seasons Hotel.

10-12 October ( Tuesday-Thursday) Ceramica Expo, Cairo International Convention Center.

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

Late October-14 November: 3Q2023 earnings season.

15-17 October (Sunday-Tuesday): Egypt Automotive Aftermarket Exhibition, Cairo International Convention Center.

26 October (Thursday): Daylight saving time ends.

29-31 October (Sunday-Tuesday): Egypt Energy, Egypt International Exhibition Center.

29 October - 2 November (Sunday- Thursday): Cairo Water Week.

30-31 October (Monday-Tuesday): Intelligent Cities Exhibition and Conference, Dusit Thani LakeView, Cairo.

30-31 October (Monday-Tuesday): Global Business School Network (GBSN), American University of Cairo.

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

Signposted to happen some time in October:

  • Deadline for ins. providers to link their databases with the FRA
  • Egyptian-Jordanian Business Council, Amman, Jordan
  • Gov’t expects to finalize sale of Gabal El Zeit wind plant
  • October or November: Gov’t expects to finalize stake sale for military-owned fuel retailer Wataniya

NOVEMBER

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

9-15 November (Thursday-Wednesday): Intra-African Trade Fair, Cairo.

14-15 November (Tuesday-Wednesday): Destination Africa, Royal Maxim Palace Kempinski Hotel.

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

19-22 November (Sunday-Wednesday): Cairo ICT, Egypt International Exhibition Center.

22 November (Wednesday): Deadline to apply to FRA for credit rating license.

23 November (Thursday): Worldview Education Fair, Cairo. (Register here)

30 November-12 December (Thursday-Tuesday): COP28, Dubai.

DECEMBER

10-11 December (Sunday-Monday): eGlobe Expo, St. Regis Almasa Hotel, Cairo.

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

12-14 December (Tuesday-Thursday): Food Africa Expo, Egypt International Exhibition Center.

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

Signposted to happen sometime in December:

  • Gov’t expects to finalize sale of a stake in military-owned bottled drinks company Safi
  • Gov’t expects to finalize sale of Zafarana wind farm

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

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.

3Q 2023: E-Finance to launch in Saudi Arabia.

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

4Q 2023: EGX to launch a shariah-compliant index.

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

2024: Standard Chartered Bank to open a branch in Egypt.

June 2024: Gov’t expects to finalize sale of Beni Suef combined-cycle power plant.

1H 2024: Gov’t expects to finalize sale of four water desalination plants.

End of 2024: The launch of the high-speed train line linking Ain Sokhna with Al Alamein City.

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

2Q 2025: Safaga Terminal 2 to start operations.

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