Gov’t offers fresh incentives to reel in healthcare investments

Wednesday, 15 May 2024

Gov’t offers fresh incentives to reel in healthcare investments

An independent publication supported by

Opening up a world of opportunity

Realize More

Live More

Powering with nature

Driving growth

Today at a glance

Healthcare

Fresh incentives to attract healthcare investments.

What We're Tracking Today

CBE pulls a record EGP 1.1 tn in liquidity from local banks.

Development finance

IFC pledges USD 50 mn to support mid-cap companies in Africa.

Banking

NBE raises limits on FX transactions.

M&A WATCH

Emaar Misr eyes stakes in Albro North Coast, Skytower.

Automotive

GV Auto signs agreement with China’s FAW to manufacture, assemble, distribute, and export EVs.

Also on our Radar

GIZ backs local SMEs in food and agriculture.

PLANET FINANCE

US quadruples tariffs on Chinese EVs to 100%.

HARDHAT

The IMF lays out how Egypt can remove inefficiencies in public investments and increase private sector contributions.

What We're Tracking Today

Egypt’s central banks pulls a record EGP 1.1 tn in liquidity from the banking sector

Good morning, folks. The news flow has picked up after a couple of less than eventful days with news of fresh incentives to reel in healthcare investments, more banks loosening their FX spending limit, and yet another Egyptian-Chinese EV venture.

WATCH THIS SPACE-

#1- CBE pulled a record EGP 1.1 tn in liquidity from local banks: The Central Bank of Egypt (CBE) yesterday accepted bids for a record EGP 1.1 tn in fixed-rate deposits at a rate of 27.75% during its weekly fixed-rate auction, according to data on its website. This is the CBE’s largest single withdrawal of surplus liquidity from the domestic banking system to date.

Remember: The CBE last month introduced a new mechanism for its weekly fixed-rate auctions, switching to a full allotment system that ensures all the bids submitted by commercial banks are accepted. Previously, the CBE only accepted a portion of the bids based on criteria outlined by the bank.

SOUND SMART: Deposit auctions are one of the open market operations used by the CBE to manage liquidity in the banking system. They aim to reduce the money supply and curb inflation.

#2- Four new freezones incoming: The General Authority for Investment and Freezones (GAFI) will set up four freezones within the next six months, GAFI deputy chairman Yasser Abbas told the House Economic Committee yesterday. There are currently nine public freezones in the country, according to GAFI’s website.

We could be looking at new private freezones as well: Al Ahly Sabbour Developments and Redcon Construction have filed requests to the government to set up private freezones in New Cairo, while a third undisclosed investor has also filed a request to establish a private freezone in Sharm El Sheikh. The government will soon announce the new licensing requirements for private freezones.

#3- Senate greenlights proposal to usher in private equity funds: The Senate and the Financial Regulatory Authority (FRA) have given the go ahead for an amendment to the Capital Market Act that would open the door for the establishment of private equity funds, Al Mal reports. According to the proposal, private equity funds would take the form of limited liability companies and simple partnerships.

WANT TO ATTEND OUR NEXT FORUM?

Foreign investors are falling in love with Egypt again… Foreign investors we speak with (debt, equity, and strategic alike) have a growing appetite for Egypt. They’re buying into local debt, eyeing promising shares, and committing bns of USD to both new ventures here and the growth of their existing businesses. They like the Egypt story that’s taking shape after the float of the EGP, and its competitive advantages are clear to many of them: It’s a massive consumer opportunity and a regional export hub of tomorrow.

The Enterprise Optimism Forum 2024 will do exactly what it says on the tin: Spark conversations about a future that we think is much brighter than so many in our community feel right now. Think of it as much-needed shock therapy combined with an early, actionable roadmap for those of us who are “long Egypt.”

We’ll be talking with you about the agenda over the coming couple of weeks. It features speakers from Egypt and abroad who are future-proofing their businesses and angling to capture tomorrow’s opportunities — and who aren’t afraid to answer some tough questions.

*** Interested in attending? Tap or click here to let us know. Seating is limited.

DATA POINT-

A whole lot of green projects up for grabs: Egypt’s green economy offers USD 120 bn worth of potential investments through 2035, Asharq Business quotes United Nations Industrial Development Organization Egypt’s Annachiara Scandone as saying. These include investments in new energy and waste management, among other areas.

PSA-

The soft launch of phase 3C of Cairo Metro Line 3:The latest extension of Cairo Metro Line 3 will kick off passenger trial operations today, according to a cabinet statement. This phase extends the city’s metro system to the Rod El Farrag axis west of the ring road. The route extends from Rod El Farrag’s El Tawfikia to Cairo University, and passes through three other stations. The passenger trials follow a testing period during which all of the metro’s systems — such as lighting, air conditioning, ventilation, and firefighting — were examined.

WEATHER- It’s sunny in Cairo today, with a high of 30°C and a low of 19°C, according to our favorite weather app.

It’s a little cooler in Alexandria, with a high of 26°C and a low of 16°C.

** DID YOU KNOW that we now cover Saudi Arabia and the UAE?

** Were you forwarded this email? Tap or click here to get your own copy delivered every weekday before 7am Cairo time — without charge.

THE BIG STORY ABROAD-

It’s a mixed bag on global front pages this morning as a number of stories captivate the attention of the business pages.

The US has imposed a series of new tariffs on Chinese imports, including a 100% tariff on Chinese EVs as part of “ a package of measures designed to protect US manufacturers from cheap imports.” Also on the list: semiconductors. We have the details in this morning’s Planet Finance, below.

YOUR DAILY DOSE OF AI NEWS- Google introduced its AI assistant Project Astra. Think of Project Astra as your personal assistant who can help you find the keys you misplaced or explain a complicated piece of code. It will be powered by an upgraded version of Google’s Gemini and eventually be available across all of Google’s software. Like OpenAI’s Scarlett Johansson-sounding model yesterday, Project Astra can interact with users through text, audio, and video. The Verge’s David Pierce has a solid rundown here if you want more.

Google is also going to start to roll out AI search summaries to its users, starting in the US.

AND- OpenAI cofounder’s and chief scientist is out. Ilya Sutskever leaves six months after he participated in a palace coup that saw CEO Sam Altman briefly kicked out of the hot AI startup.

MEANWHILE- THE MEME STOCK FRENZY CONTINUES as Roaring Kitty and his army of winged monkeys pushed Reddit shares up 7% to USD 62.34 during trading yesterday. It’s reddit’s second-highest close since it made its market debut.

Want the backstory? Check out yesterday’s Planet Finance, where we dove into the return of Roaring Kitty and its impact on meme stocks. The Wall Street Journal is not along in wondering whether Kitty coming “out of hibernation” means meme stocks are a thing again — or if this is just a blip.

ALSO- Mining group Anglo American is planning to break up after rejecting second BHP offer in a bid to retain control of its most profitable companies, including its copper mining outfit — a smart move given the current copper boom.

FROM THE REGION- Saudi officials are worried about their economy overheating. Saudi Finance Minister Mohamed Al Jadaan thinks the country needs to pace itself when it comes to all these massive investments. The Saudi economy needs to “catch up” with the projects being implemented or else it risks “overheating” and “leakages.”

CIRCLE YOUR CALENDAR-

THIS WEEKEND- Go to the Empower Her Art Forum at the National Museum of Egyptian Civilization, which opens Saturday, 18 May at 6:30pm and runs though Wednesday, 22 May. More than 140 artists from 40 countries will be participating to celebrate the “resilience, strength, and creativity of women artists worldwide.” Empower Her Art Forum is organized by Shereen Badr and her team at Artoday. The exhibition is backed by the UN, UN Women Regional Office in Egypt, UNHCR, European Union in Egypt, New York Contemporary Art Society, and Womenovation Foundation.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We look at the IMF’s suggestions for how the country can remove inefficiencies in public investments and increase private sector contributions.

Tags:

Central Bank of Egypt What We're Tracking Today

Discover your dream getaway with our signature collection of vacation homes and let our expert team craft your perfect holiday experience.

Healthcare

Golden licenses and other incentives on offer in new government healthcare investment initiative

New incentives for healthcare investors: Health Ministry together with the General Authority for Freezones and Investment have come up with a list of incentives to encourage investors to invest in healthcare projects across the country, Al Mal reports. Proposed projects are rated against a 12-point criteria and given a score out of 100 that determines what incentives investors can gain access to.

The kind of projects the government is looking to encourage: The bigger the better when it comes to capacity, with the number of beds contributing up to 25 out of the 100 points that projects are judged upon. The location of the project is judged as an important factor in deciding what incentives are made available, with projects planned for areas that are most in need of healthcare facilities able to bring in 15 points. Also each bringing in up to 15 points is the prevalence of FX in funding the project and how long the projects will take to get off the ground.

The projects will also be judged on: The project’s focus on research, amount of jobs it will create, number of beds offered for no charge, medical specialisms, proliferation of technological expertise, use of renewable energy, training offered, and corporate social responsibility also contribute with smaller weights to the project’s overall rating.

The incentives on offer and for who:

Healthcare projects scoring between 85-100 will be able to receive a golden license, ten years of being exempt from usufruct fees, and the state covering half of training costs, among other incentives;
Projects scoring 75-85 will get the same incentives, but the state will only fund 30% of training costs and get a five-year exemption from land use fees;
Projects in the 65-75 range will still receive a golden license and other incentives, but the state will only cover 15% of training costs and offer a three-year exemption from land use fees;
While for projects racking up between 50-65 points, investors will get the same package but with a commitment from the state to fund 5% of training costs and offer a two-year exemption from land use fees.

Tags:

GAFI golden licenses Health Ministry healthcare investment watch

This publication is proudly sponsored by

Banking

National Bank of Egypt raises limits for FX transactions

NBE loosens FX restrictions as banking sector liquidity concerns ease: The National Bank of Egypt (NBE) has raised its FX usage limits for credit cards, the bank announced on its website. Customers wanting to use their cards abroad and those with FX expenses to pay at home will automatically have access to the increased limits.

The new monthly transaction limits:

Visa Gold and Mastercard Titanium will have a limit of the FX equivalent of EGP 25k, up from EGP 7.5k previously;
Visa Platinum, Mastercard Platinum, and UEFA Champions League Mastercard will have a limit equal to EGP 40k, from EGP 12.5k previously;
Mastercard World, Visa Signature, Mastercard World Elite, Visa Infinite, and Corporate Credit Cards will have an FX limit matching EGP 60k, from EGP 20k previously.
Limits on Visa Classic, MasterCard Standard, and MasterCard EgyptAir cards were kept unchanged at the FX equivalent of EGP 5k.

You can unlock a much larger limit for spending abroad if you get in contact in advance: The bank’s customers can pop into a branch or jump on the phone at least 48 hours before they travel to unlock a substantially larger spending limit for overseas. The limits for different card types are listed here (p df).

But with one important caveat for wanting the larger limit: Customers must provide proof of travel no more than 90 days after the bank unlocks the larger spending limit. Failure to do so can result in a negative rating from I-Score Egypt that can seriously complicate accessing banking services.

Tags:

banking foreign exchange National Bank of Egypt

M&A WATCH

Emaar Misr eyes stakes in Albro North Coast, Skytower

Emaar is eyeing up a complete takeover of Albro North Coast: Emaar Misr will submit a non-binding preliminary offer to Albro North Coast for Developments’ shareholders to acquire up to 75% of their stake in the company via a share swap after its board approved the move, the company said in an EGX disclosure (pdf). The transaction would give Emaar Misr — which currently holds a 25% stake in Albro — full ownership of the company.

Emaar also wants a slice of Skytower: Emaar Misr will also submit a non-binding preliminary offer to purchase a 25% stake in Skytower for Real Estate Development in an all-cash transaction after its board greenlit the move.

Full ownership ahead? Emaar Misr could acquire the remaining 75% of Skytower through a share swap.

It’s all very early stages: Both offers are preliminary and non-binding, meaning they can be scrapped at any stage if the participating parties fail to reach an agreement. The swap ratio on both transactions will be determined following the fair value studies to be conducted by an independent financial advisor.

Market reax: Emaar Misr’s shares gained 13.8% during trading yesterday to close at EGP 5.28 following the announcement.

What’s next? If the offers are approved by the selling parties, Emaar Misr will press ahead with the legal procedures needed to carry out the acquisitions.

What does Emaar want with Albro and Skytower? Emaar has been in talks with the Egyptian government to buy high-rises along the North Coast in the New Alamein, founder and chairman Mohamed Alabbar said in October.

Tags:

Emaar Misr M&A Watch real estate

Automotive

GV Auto signs agreement with China’s FAW to manufacture, assemble, distribute, and export EVs

Another Egyptian-Chinese EV venture in the works: GV Investments’ automotive arm GV Auto has signed a partnership agreement with Chinese state-owned auto manufacturer FAW Group to locally manufacture, assemble, market, distribute, and export EVs, GV Investments Chairman Sherif Hamouda told Al Borsa. The partnership will be backed up with an initial investment of EPG 3 bn, Hamouda told Asharq Business.

Chinese EVs, assembled in Egypt: Locally assembled EVs from the partnership should start rolling out by the beginning of next year, Hamouda added. The two companies will use already existing factories to assemble the vehicles and have already set their sights on what models to assemble locally.

Not just local assembly, but local manufacture too: “The partnership will not be limited to local assembly only, but rather complete parts will be manufactured locally as well,” Hamouda told Asharq Business. The partnership aims to eventually have a 65% local component quota.

Exporting EVs is also part of the plan: The companies are planning to establish a hub from which they aim to export EVs from Egypt, Hamouda said.

GV Auto aren’t the only ones teaming up with EV automakers abroad: In the first few months of the year, we’ve already seen Ezz El Arab partner with Germany's Smart Automobile to bring its electric vehicles to the local market in 3Q 2024. Meanwhile, Raya Holding’s auto unit inked an agreement with China’s XPeng to bring its EVs into the local market and to work towards assembling the vehicles locally. State-owned El Nasr Automotive also kept up its search for a foreign partner to produce EVs with and was in talks with Indian conglomerate Hinduja Group earlier in the year, after ventures with Chinese EV manufacturers in previous years fell through.

Tags:

automotive EVs GV Investments Manufacturing

Development finance

IFC pledges USD 50 mn to support mid-cap companies in Africa as part of a wider USD 150 mn package

The International Finance Corporation (IFC) has earmarked USD 50 mn to invest in SPE PEF III — an SPE Capital-run private equity fund that focuses on mid-cap companies in Africa — to support entrepreneurs and create more jobs, according to a statement (pdf) from the IFC. At least a quarter of the fund’s capital will go to women entrepreneurs.

How will the funds be allocated? Some USD 30 mn will be funneled into the fund via an equity investment, while the remaining USD 20 mn will be funded via a co-investment, the lender explained.

Local currency swap with Banque Misr: The IFC has also agreed to a local currency swap with Banque Misr to boost the IFC’s lending capacity to local companies with limited access to foreign currency.

Part of a bigger package: This comes as part of a USD 150 mn package, which also includes on-lent financing for Banque du Caire and an advisory program for the Universal Health Ins. Authority — both of which were announced earlier this week during the IFC’s Regional Vice President for Africa Sérgio Pimenta’s visit to Egypt.

ICYMI: The IFC has agreed to grant Banque du Caire USD 100 mn in financing, half of which will be on-lent to micro, small, and medium enterprises, and female entrepreneurs, while USD 50 mn will support the country’s imports and exports under the IFC Global Trade Finance Program.

Tags:

Banque du Caire Banque Misr development finance International Finance Corporation SMEs SPE Capital

EARNINGS WATCH

Rameda’s top line climbs 16% y-o-y in 1Q 2024 thanks to growing sales and exports

Private sales and exports drove Rameda’s top line in 1Q 2024: Egyptian pharma player Rameda saw its top line climb 16.4% y-o-y to 456.2 mn in the first quarter of the year on the back of growth in private sales and exports, the company wrote in its latest earnings release (pdf). The volume of private sales rose 15.9% y-o-y to 6.8 mn units during the period, driving private sales revenue up 28% y-o-y to EGP 338.3 mn.

But macroeconomic challenges took a toll on Rameda’s bottom line in the quarter: Rameda saw its net income drop 12.4% y-o-y to EGP 60.1 mn in 1Q 2024, which the company attributed to pressures from FX shortages, currency depreciation, and a steep 99% y-o-y increase in financing costs due to interest rate hikes. Its net profit margin narrowed by 4.3 percentage points in the same period to 13.2%.

Price hikes incoming? “We look forward to receiving a large round of approvals for price hikes over the course of the year as we seek to maintain our growth trajectory and improve Rameda’s profitability amidst challenging market conditions,” CEO Amr Mosry said.

Tags:

earnings watch healthcare pharma Rameda Pharma

LAST NIGHT’S TALK SHOWS

Shoukry denounces Israeli claims that Egypt is standing in the way of the opening of the Rafah crossing

Last night’s talk shows honed in on the growing tension between Egypt and Israel after Israeli Foreign Minister Israel Katz said it was up to Cairo to open the Rafah crossing and allow aid deliveries into Gaza, adding that he was talking to EU officials about “the need to persuade Egypt to reopen the Rafah crossing.” The remarks prompted Foreign Minister Sameh Shoukry to denounce what he called “desperate attempts” to shift the blame, rejecting Israel’s “policy of distorting the facts” in a ministry statement.

Shoukry shoots down Israel’s blame game: “The unprecedented humanitarian crisis facing the Gaza Strip … is a direct result of indiscriminate Israeli attacks against the Palestinians for more than seven months,” Shoukry said. Kelma Akhira’s Lamees El Hadidi (watch, runtime: 7:47) and Al Hayah Al Youm’s Mohamed Shardi (watch, runtime: 4:22) took to the airwaves to chime in on the matter, casting the spotlight on Shoukry’s response.

Decisive Arab action soon? Israel’s war on Gaza was at the center of the Arab League ministerial meetings taking place ahead of the Arab Summit, which will be held in Bahrain tomorrow, Arab League Assistant Secretary-General Hossam Zaki told Yahduth Fi Masr (watch, runtime: 8:50). “The Arab League will take decisive decisions on the Israeli aggression against Gaza,” Zaki said.

ALSO ON THE AIRWAVES- Uber’s debacle: Yahduth Fi Masr’s Sherif Amer spotlighted the attempted assault case of a young woman by her Uber driver (watch, runtime: 5:47). The Public Prosecution has a suspect in detention and should be out with a statement on the matter later today, a journalist with knowledge of the matter told Amer. The incident, which sparked public outcry over the safety of ride-hailing services in Egypt, comes only months after a similar case that ended with the passing of the victim.

Tags:

LAST NIGHT’S TALK SHOWS Sameh Shoukry

EGYPT IN THE NEWS

Rafah seizure heightens rift between Israel and Egypt

Egypt and Israel’s uneasy peace is once again under the spotlight of the Western press, with the Wall Street Journal and New York Times looking into how Israel’s seizure of the Palestinian side of the Rafah border crossing is irking officials and straining the two countries’ complicated relationship. The WSJ claims that Egypt is considering downgrading diplomatic relations, citing what it says are unnamed Egyptian officials.

Tags:

Gaza Middle East politics

Also on our Radar

GIZ support for Egyptian food and agriculture SMEs

SMES-

GIZ backs local SMEs in food and agriculture: Egypt’s Industrial Modernization Center has inked an agreement with the German development agency GIZ to support local SMEs in the food and agricultural sectors over an 18-month period, according to a statement from the agency. The support will take the form of vocational training programs, as well as courses on how to register with the National Food Safety Authority and comply with international health and safety standards.

RENEWABLES-

Sun Way acquires Go Solar and Green Solar: Egyptian renewable energy firm Sun Way Egypt has completed its acquisition of Go Solar and Green Solar — two local firms operating in the installation and supply of solar energy projects — Sun Way Egypt CEO Ahmed Ghandour told Al Arabiya Business, without specifying the value of the transaction.

Next for Sun Way: The company is currently in talks with a number of EGX officials as it looks to list on the bourse. It has already grown familiar with the listing requirement and it aims to make its debut next year, Ghandour said.

REAL ESTATE-

Egyptian developer Golden Town Development will invest over EGP 10 bn in “the next stage” in the local real estate market under a newly-inked partnership with Saudi businessman Ahmed Al Juhani, according to a press release. “This alliance aims to pump huge investments, acquire a large and distinctive land portfolio, and establish many real estate projects during the coming period,” Golden Town Chairman Raafat Maher said.

Tags:

ALSO ON OUR RADAR GiZ real estate renewables SMEs solar power

PLANET FINANCE

US quadruples tariffs on Chinese EVs to 100%

The US has gone on the offensive in the trade war with China, with the White House yesterday announcing a raft of tariff increases on USD 18 bn worth of Chinese imports that will each begin taking effect between 2024 and 2026.

Biden has his eyes set on green tech, deciding that tariffs on Chinese EVs will quadruple to 100%, those on lithium-ion EV batteries to more than triple to 25%, those on solar cells to double to 50%. And he hasn’t forgotten about semiconductors, as tariffs on chips from the world’s second biggest economy are set to double to 50%.

Biden’s tough talk seems to be directed to US voters as much as it does to China, warning the world’s factory yesterday that “when you make tactics like this, you’re not competing, it’s not competition, it’s cheating. And we’ve seen damage here in America” (watch, runtime: 22:30). The US is a minor market for Chinese EVs today.

YOU HAVE TO LOVE IT- Evli Emerging Frontier Fund has beaten 99% of its peers over the past five years. Its next big thing? small-cap stocks, this time in Turkey. An ambitious fund manager that’s building a story about a great segment of the economy in a country that has plenty of challenges — and tons of potential? What’s not to like. Bloomberg has more.

ALSO- BlackRock is making its presence felt in the crypto space after building up USD 16.7 bn in assets since the launch of its crypto exchange-traded fund (ETF) in January 2024. Despite initial reluctance to move into crypto — which CEO Larry Fink called “an index of money laundering” in 2017 — BlackRock is now the second-largest BTC fund after market leader Grayscale. The asset manager has also rolled out a crypto treasury fund that is already being used by hedge funds and money markets to source collateral for crypto trades.

MARKETS THIS MORNING-

It’s a mixed morning in Asia: The Shanghai Composite is down, the Nikkei is up, and markets in both Hong Kong and South Korea are closed in observance of Buddha’s birthday. Futures suggest European and US markets will open in the green later today as traders wait for a key US consumer price report.

EGX30	25,340	-0.2% (YTD: +1.8%)
USD (CBE)	Buy 46.80	Sell 46.93
USD (CIB)	Buy 46.84	Sell 46.94
Interest rates CBE	27.25% deposit	28.25% lending
Tadawul	12,121	-1.1% (YTD: +1.3%)
ADX	9,058	-0.4% (YTD: -5.4%)
DFM	4,137	-0.9% (YTD: +1.9%)
S&P 500	5,247	+0.5% (YTD: +10.0%)
FTSE 100	8,428	+0.2% (YTD: +9.0%)
Euro Stoxx 50	5,080	0.0% (YTD: +12.4%)
Brent crude	USD 82.38	-1.2%
Natural gas (Nymex)	USD 2.34	-0.2%
Gold	USD 2,363	+0.1%
BTC	USD 61,595	-2.1% (YTD: +45.9%)

THE CLOSING BELL-

The EGX30 fell 0.2% at yesterday’s close on turnover of EGP 2.5 bn (48.3% below the 90-day average). Foreign investors were net buyers. The index is up 1.8% YTD.

In the green: Fawry (+4.0%), GB Corp (+1.7%), and Juhayna (+1.7%).

In the red: Qalaa Holdings (-6.2%), Egypt Kuwait Holding -EGP (-3.1%), and Alexandria Containers and Cargo Handling (-2.4%).

CORPORATE ACTIONS-

#1-Elsewedy Electric will pay out dividends of EGP 0.50 per share on its 2023 earnings, it said in an EGX disclosure (pdf).

#2- e-Finance capital increase approved: e-Finance’s ordinary general assembly approved a decision to hike its paid-in and issued capital to EGP 1.16 bn, up from EGP 924.4 mn, according to a bourse disclosure (pdf).

Tags:

China Financial Markets Planet Finance trade

HARDHAT

The IMF lays out how Egypt can remove inefficiencies in public investments and increase private sector contributions

Egypt isn’t hitting its infrastructure investment potential: Despite a recent uptick in public investments flowing into Egypt, a lack of regulatory oversight and monitoring systems is stunting the potential of infrastructure investment efficiency and limiting contributions from the private sector, writes the International Monetary Fund in its latest Technical Assistance report (pdf) for Egypt. Plus, where investment is needed, fiscal space to finance projects is limited due to high government debt with current arrears just to international oil and gas companies estimated to stand at USD 6.25 bn in March.

By the numbers: In 2019, Egypt’s efficiency gap for physical infrastructure stood at 39% — putting it near the global average and above others in the region. However, the infrastructure quality gap came in at 28% — which puts Egypt below the global average.

A large chunk of the fiscal year 2024-2025 Public Government Budget will go towards the state’s infrastructure priorities, with total spending penciled in to rise 29% y-o-y to EGP 3.9 tn. The government will make efforts to reel in off-budget spending, placing an EGP 1 tn cap on public investments in response to the IMF’s request to slow spending on infrastructure projects and rationalize fiscal policy. Urban development is another top priority, expected to see some EGP 186 bn in funding, with EGP 136 bn earmarked for the oil and gas sector, and EGP 85 bn for ICT.

Investment efficiency? Efficient public spending increases the volume and quality of a country’s infrastructure assets without adding to expenditure and can solve issues of need and limited financial options, an IMF report on public investment (pdf) explains. Inefficient infrastructure investments can be seen worldwide in the form of uncompleted or disused projects and those that have little to no improvement in the delivery of public services or fail to result in a greater stock of infrastructure assets.

The implications of falling infrastructure investment: Not only are Egypt’s investment needs compounded by rapid population growth — with the population expected to grow by 20 mn people between 2021-2030 — but climate change requires that the government direct public investment to building resilient infrastructure assets that can adapt to challenges such as higher temperatures, desertification, water insecurity, and coastal degradation.

It’s a global issue: There is considerable underinvestment relative to the capital required for growth, thinks Goldman Sachs’ Teresa Mattamouros (listen: 23:46). In 2022, G20 countries spent around USD 1 tn on infrastructure, accounting for some 5% of their central government budgets or about 1% of GDP, yet the value needed to support economic growth and reach environmental net zero targets is closer to USD 5 tn.

The IMF has five recommendations as to how Egypt can ensure value for money from public infrastructure investments.

#1- Strengthen project appraisal and selection processes: The state should issue and publish executive regulations that set requirements for project appraisal, planning, and implementation at each stage of the public investment process, to remove the potential of ad hoc selection and inadequate project implementation. Appraisal and approval processes must be reviewed and define clear and transparent criteria and processes for project selection.

#2- Enable private sector involvement in public infrastructure provision: Regulatory structures are not sufficient to attract the private sector to infrastructure investments, thinks the IMF. The government should further deregulate markets with fully independent regulators and ensure that PPP structures are consistently integrated within the budget and their fiscal implications are reflected in headline fiscal indicators.

#3- Operationalize public financial management law provisions for medium-term budgeting: Short-term budgetary cycles obscure effective planning, while Egypt’s budgets lack sufficient detail, and are ambiguous regarding sub-national funding and uncertainty on cash availability, the report reads. Egypt must publish medium-term capital budgets and annual public sector investment plans that detail project costs, funding, and responsible delivery agencies. Furthermore, the state should formalize mechanisms for distributing resources to sub-national government entities and work with spending entities to improve the accuracy of forecasting cash needs.

#4- Strengthen asset management and ensure sufficient maintenance: The absence of consolidated asset registers and standard procedures for maintenance funding in Egypt undermines the durability of infrastructure assets. This could be supported by consolidating government entity asset registers, establishing standardized methodologies for assessing maintenance needs, and publishing budget and account spending.

#5- Strengthen procurement, project, and portfolio management: Egypt lacks standardized project management implementation processes, with monitoring concentrated on individual projects. The IMF suggests that the government develop an electronic procurement system and deploy standardized diagnostic tools such as Methodology to Assess Procurement System (MAPS) to evaluate the system's operation with published reviews. Additionally, Egypt should establish a standard project management model for government projects, use technology to track key developments in cost, scheduling, and benefits and identify risks, and undertake reviews of major projects that are also published.

Your top infrastructure stories for the week:

The government is looking into expanding 13 airports across the country to accommodate an anticipated surge in hotel capacity that could see some 24k hotel rooms added to the market this year alone. (Asharq Business)
Water treatment plants in Mauritania: A consortium including Egypt-based Samcrete Engineers and Contractors and Saudi SARH ATTQNIA Co. is set to ink an agreement to build water treatment plants in Mauritania that will cost USD 200 mn. The agreement will be inked in 3Q 2024 and construction will take 18 months. (Asharq Business)

Tags:

Hardhat IMF infrastructure investment watch

CALENDAR

2024

MAY

19-21 May (Sunday-Tuesday): Egypt International Summit for Digital Transformation and Cybersecurity.

20 May (Monday): Malaysian Palm Oil Forum in Cairo, with attendance from Malaysian Plantation and Commodities Minister Johari Abdul Ghani.

22 May (Wednesday): Egypt will host the annual meetings of Arab financial authorities, at the New Administrative Capital.

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

25-27 May (Saturday - Monday): Techne Summit, Cairo International Stadium.

29 May (Wednesday): Virtual launch of Chicago Booth Executive Program.

JUNE

5 June (Wednesday): The Optimism Forum, Cairo, Egypt.

15-19 June (Saturday-Wednesday): Eid El Adha (TBC) (national holiday).

29-30 June (Saturday-Sunday): EU-Egypt Investment Conference.

30 June (Sunday): June 30 Revolution Day (national holiday).

JULY

7 July (Sunday): National holiday in observance of Islamic New Year (TBC).

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

23 July (Tuesday): Revolution Day (national holiday).

AUGUST

4-5 August (Monday-Tuesday): Egypt Expat Forum.

SEPTEMBER

2-5 September (Monday-Thursday): Egypt International Airshow, El Alamein International Airport.

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

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

25-26 September (Wednesday - Thursday): The Asian Infrastructure Investment Bank’s (AIIB) 2024 annual meeting, Samarkand, Uzbekistan.

OCTOBER

6 October (Sunday): Armed Forces Day.

17 October (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

21-27 October (Monday-Sunday): The World Bank and IMF annual meetings.

NOVEMBER

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

DECEMBER

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

EVENTS WITH NO SET DATE

April 2024: President Abdel Fattah El Sisi will visit Turkey.

1Q 2024: Egyptian-Qatari Joint Supreme Committee.

1Q 2024: Opening of the newly developed Pyramids Plateau in Giza.

1Q 2024: The government is set to finalize the sale of the Gabal El Zeit wind farm.

February-May: The Grand Egyptian Museum could officially open to visitors.

March 2024: The USD 2.7 bn MIDOR Refinery is set to begin full operations.

May 2024: Egypt to receive USD 20 bn of Ras El Hekma funds.

May 2024: Arab Finance Ministers’ meeting at Egypt’s administrative capital.

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

Mid-year: The fifth Japan-Arab Economic Forum.

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

2H 2024: Gov’t to launch the Cairo Ring Road BRT buses.

November 2024: Egypt to host the World Urban Forum (WUF12).

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

2025

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

20 January-7 February: Egypt to host the African Games

EVENTS WITH NO SET DATE

End of 2027: Trial operations at the Dabaa nuclear power plant expected to take place.

Sections

About

Privacy & Support

Get EnterpriseAM daily