Madbouly lays out new govt’s priorities and targets in policy statement to the House

Tuesday, 9 Jul 2024

Madbouly lays out new govt’s priorities and targets in policy statement to the House

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Today at a glance

Cabinet watch

Madbouly lays out the new govt’s priorities for the next three years in policy statement to the House.

Economy

Current account deficit widens 225% y-o-y in 9M FY 2023-24.

M&A WATCH

UAE’s Electra snaps up 20% of Elsewedy Electric for USD 450 mn.

Real estate

Adeer to set up mixed-use development in East Cairo alongside Paragon.

EARNINGS WATCH

Concrete Fashion Group, GoldenTex, QNB report quarterly earnings.

What We're Tracking Today

Act Financial opens up IPO subscription period for retail and institutional investors.

LAST NIGHT’S TALK SHOWS

The new government’s policy statement took the center stage on the airwaves last night.

PLANET FINANCE

Germany’s BTC sell-off is causing market jitters.

Going Green

The hurdles standing in the way of our green hydrogen ambitions and how they can be tackled.

What We're Tracking Today

Remittances surge 73.8% y-o-y in May

Good morning, folks. After a relaxed start to the week, the local business news cycle had picked up and we’re struggling to fit it all into one issue. For you today, we’ve got a rundown of the new government’s priorities that Madbouly delivered to the House yesterday, the latest current account deficit data showing us that we still have a fair way to go, a deep-dive into the challenges facing our green hydrogen industry, and so much more.

DATA POINT-

Remittances from Egyptians abroad surged 73.8% y-o-y in May to USD 2.7 bn, according to a statement (pdf) from the central bank. On a monthly basis, remittances increased for the third consecutive month, rising 26.6%.

Remember: Egyptians abroad have started sending more of their remittances through official channels after the float of the EGP. Remittance inflows had fallen 30% y-o-y in 2023 on the back of a widening gap between the official rate and parallel market pushing many to send remittances into the country outside official channels. The government said it wants to raise remittances — one of Egypt’s biggest sources of FX — from Egyptian expats by 10% each year to reach USD 53 bn by 2030.

PSA-

WEATHER- It’s starting to heat up again in Cairo today, with a high of 38°C and a low of 27°C, according to our favorite weather app.

Temperatures are also on the rise in Alexandria and the North Coast, with a high of 33°C and a low of 22°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.

HAPPENING TODAY-

Retail and institutional investors can start lining up for a piece of Act Financial: The company is offering some 32% of the company — 360 mn shares — in what will be the first IPO the EGX sees in a year. The subscription period for retail investors is set to take place between 9-23 July, while institutional investors will get a chance to subscribe between 9-18 July. The shares will be offered at a price of EGP 2.90 per share, with the company aiming to raise around EGP 1.04 bn through the offering.

The details: Retail investors — who will be offered 60 mn shares — can subscribe to a minimum of 1k shares and a maximum of 1.75 mn shares, EGX disclosure (pdf). Institutional investors — who will be offered 300 mn shares — can subscribe with a minimum of 1.75 mn if they’re qualified individual investors, while financial institutions can subscribe with a minimum of 3.5 mn shares each.

Post IPO: Act Financial plans to use the EGP 1 bn raised from its IPO to invest into three EGX-listed companies this year, Managing Partner Mostafa Abdel Aziz told Enterprise last week. The company is also exploring potential investments in six non-listed local companies with the hopes of eventually listing them on the EGX, Abdel Aziz added, saying that the company has met with over 100 non-listed companies so far.

Advisors: Zilla Capital will manage the IPO, Matouk Bassiouny & Hennawy will act as the company’s legal advisor, Baker Tilly will provide auditing services, and Financial Advice Corporate Transactions will be the independent financial advisor to the transaction.

HAPPENING TOMORROW-

Fresh inflation data incoming: Capmas and the CBE are expected to publish June’s inflation data tomorrow. Policy makers and the business community are hoping for the recent downward trend in inflation levels to continue after annual urban inflation cooled to its lowest level in 16 months in May.

The polls are in: Annual urban inflation is expected to cool 0.6 percentage points for the fourth consecutive month to 27.5%, according to a median prediction of 17 analysts polled by Reuters. Analysts mostly expect that the continuing slowdown in food and beverage prices will help offset the hiking of subsidized bread prices by 300% that came into effect at the beginning of the month.

But not everyone agrees: Barclays has penciled in headline inflation rising 4.2 percentage points to 32.3%, pointing to subsidized bread price increases adding considerable inflationary pressures until the end of the year.

Risks remain: Going forwards, price rises for fuel, gas, meds, fertilizers, and other items could “exert upward inflation pressure, potentially disrupting the anticipated downward trend, according to economist Mona Bedier.

While for core inflation: Core inflation — which excludes volatile items like food and fuel — is forecasted to fall 0.4 percentage points to 26.7%, according to a median of nine analysts polled by the newswire.

WATCH THIS SPACE-

IMF to look into lowering penalties on its biggest borrowers: The International Monetary Fund’s Executive Board will meet on Monday to discuss options to lower the surcharges that it levies on its biggest borrowers, Bloomberg reports, citing anonymous sources. The move comes after several countries raised concerns that the penalties were becoming too hefty in light of higher interest rates and inflation, arguing that they deplete funds needed for basic necessities like food and healthcare.

The local angle: Egypt is the Fund’s third largest debtor with USD 10.3 bn of outstanding credit, behind Ukraine and Argentina. Egypt is forecast to pay the IMF USD 370 mn in surcharges in the next five years, marking the country as the world’s third largest payer of surcharges.

By the numbers: On top of its basic rate of 500 bps, the Fund imposes a surcharge of 200 bps on outstanding loans above 187.5% of a country’s quota, hiking the penalty up to 300 bps if a loan remains above this percentage for three years. In combination with higher interest rates across the globe, some IMF loans have a total rate of over 8%, a two-times increase from before Covid, according to the business information service.

THE BIG STORY ABROAD-

It’s a quiet day in the foreign press, as elections in Europe wrap and heads of state head over to Washington for the Nato summit.

Political analysts are saying it’s a “make-or-break” week for Joe Biden’s re-election as Congress returns from its Fourth of July recess, and today could be an inflection point as Democrats in the Senate hold a caucus meeting at which the way forward for Biden will be Topic #1.

“Go ahead. Challenge me at the convention,” Biden thundered on the call with the hosts of his favorite morning show. “Any of these guys don’t think I should, run against me. Announce for president.” The Financial Times has more on what it’s calling his new “offensive” to keep his campaign.

All eyes will now be on Washington, which plays host to the Nato summit. Russia launched its biggest attack in Ukraine in months on the eve of the summit, hitting a children’s hospital and killing at least 36 people, Reuters reports.

And there’s still no word from France, where centrist and left-wing parties are jostling to see how they can put together a government, France24 notes.

AND IN BUSINESS- There are still folks outside the Middle East committing to venture capital as an asset class. HongShan, formerly the China unit of Sequoia Capital, has raised a USD 2.5 bn, RMB-denominated fund to invest in Chinese startups.

*** 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 take a look at the challenges facing our green hydrogen ambitions and how they can be tackled.

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remittances

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Cabinet watch

Prime Minister Moustafa Madbouly lays out the new Egyptian government’s priorities for the next three years in policy statement to the House

Laying out the new government’s policy priorities: Prime Minister Moustafa Madbouly delivered his new government’s policy statement to the House of Representatives yesterday and delivered a speech to take MPs through the government’s priorities. The 300-page long statement outlines the newly sworn-in government’s agenda for the next three years under the theme Together We Build a Sustainable Future.

Priorities, new and old: Madbouly outlined the new government’s agenda over the next three years by outlining four key pillars that will guide them: building a competitive economy to attract investments, enhancing the livelihoods and welfare of Egyptians, achieving political stability and national unity, and safeguarding national security and foreign policy.

Building a competitive economy: As part of the new government's efforts to push forward the nation’s economy, the prime minister highlighted its targets to strengthen Egypt’s economic foundations, promote private sector involvement, and tame inflation.

Growth targets to get there: During the new government’s first year, a target has been set to increase GDP growth to 4.2%, in line with the budget for the fiscal year. The government has also penciled in an average of 5% growth throughout the entire three-year period.

The private sector and FDI have an important role to play: Private investment should make up 60-65% of total investment by 2030 and Madbouly wants to increase FDI coming into the country by 14% every year.

It’s also certain industries’ time to shine: The government aims to increase the contribution of the industrial, agricultural, communications, and information technology sectors to account for 38% of GDP by the fiscal year ending in 2027. Existing tourism targets will also play an important role, with the prime minister reiterating their commitment to increasing annual tourism numbers to 30 mn by 2028 — roughly twice the current amount. Madbouly also laid out a target to push annual export growth beyond 15% and to focus on pushing commodity, petroleum, and service exports.

Better logistics will help make this possible: The government wants to turn Egypt into a global hub for logistics and trade by developing seven integrated international logistics corridors, completing the construction of 31 dry ports and logistics zones, expanding seaport berths to a total length of 100 km, and forming strategic partnerships with major global shipping players to increase the frequency of international ships docking at Egyptian ports.

Increasing revenue and spending it more wisely is also part of the plan: On average, the government wants to increase public revenues by 16% every year until the fiscal year ending in 2027, while also being more efficient in the way the state uses public funds.

Regional and gender employment disparities will also be addressed: By the fiscal year 2026-27, the new government wants to raise female labor force participation to 19%, while increasing employment rates to at least 37% in Upper Egypt and 45% in border governorates.

Education, education, education: The new Madbouly government is giving priority to setting up new schools in densely populated and remote areas, with a particular emphasis on vocational education to equip students with the right skills for the job market. To do this, the government wants to build over 60 vocational schools in partnership with the private sector, add more Nile Egyptian International Schools and schools for gifted students, and add 100 new Japanese schools by 2026.

What’s next? House Deputy Speaker Ahmed Saadeddin will lead a parliamentary committee that will review the written policy statement, before putting it for a vote in the House within ten days. The House will reconvene on 21 July to discuss the committee’s report on the statement and to hold a vote of confidence for the new government.

ALSO- Madbouly will also be taking on the responsibilities as the minister for administrative reform affairs, after President Abdel Fattah El Sisi appointed him yesterday, according to the Official Gazette.

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Economy

Egypt's current account deficit widens 225% y-o-y in 9M FY 2023-24

Egypt's current account deficit has widened by 225% y-o-y to USD 17.1 bn in the first nine months of FY 2023-24, up from USD 5.3 bn in the same period in the last fiscal year, according to Enterprise calculations, based on the Central Bank of Egypt figures (pdf).

But on the bright side, BoP is in the green: Despite the widening current account deficit, Egypt recorded an overall BoP surplus of USD 4.1 bn during 9M FY 2023-24, a significant increase from the USD 281.9 mn surplus recorded in the same period in the last fiscal year. On a quarterly basis, the balance of payments in the third quarter of the fiscal year was back in a surplus after retracting to a deficit in 2Q FY 2023-24.

DRIVING THE SURGE-

#1- Our oil trade balance fell back into a deficit: The oil trade balance recorded a USD 5.1 bn deficit, compared to a USD 1.7 bn surplus in the same period a year ago. This was primarily due to a 61% y-o-y drop in oil and gas exports to USD 4.6 bn.

#2- Red Sea disruptions are biting into Suez Canal receipts: Suez Canal transit receipts fell 7.4% y-o-y to USD 5.8 bn, with a sharp 57.2% y-o-y drop in the third quarter of the fiscal year after Houthi attacks on vessels passing the waterway started to pick up.

#3- Remittances inflows continued to fall until EGP float : Remittances from Egyptians abroad decreased by 17.1% y-o-y to USD 14.5 bn during the nine-month period, but recorded an 11.1% y-o-y jump in the month of March after the central bank floated the currency near to the beginning of the month.

SOFTENING THE BLOW-

#1- FDI inflows jump towards the end of the nine-month period: Net FDI inflows tripled y-o-y to USD 23.7 bn, up from USD 7.9 bn in the same period a year prior. The lion’s share of the inflows came in the third quarter of the fiscal year, with USD 18.2 bn in FDI being recorded — USD 15 bn of which was from the first payment from the Ras El Hekma agreement.

#2- Portfolio investments reverse course: Egypt recorded a net inflow of USD 14.6 bn in portfolio investments in 9M FY 2024-25, compared to a net outflow of USD 3.4 bn in the previous year, signaling renewed investor confidence at the end of nine-month period after the float in March and the deal with the IMF.

#3- Tourism revenues continue to grow: Tourism revenues increased by 5.3% y-o-y to USD 10.9 bn, up from USD 10.3 bn, driven by higher tourist arrivals and nights spent.

#4- Non-oil trade deficit narrows: The non-oil trade deficit improved by USD 1.5 bn to USD 23.7 bn, thanks to a 2.9% drop in non-oil imports and a 1.1% rise in non-oil exports.

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balance of payments Central Bank of Egypt economy FDI Ras El Hekma

M&A WATCH

UAE’s Electra snaps up 20% of Egypt’s Elsewedy Electric for USD 450 mn

Electra to own 20% of Elsewedy Electric: Elsewedy Electric shareholders have put sell orders of a total of 427.7 mn shares — around 20% of the company — to Abu Dhabi-based electrical equipment manufacturer Electra Investment Holding in response to the latter’s offer, whose validity ended yesterday, according to an EGX bulletin. Electra paid USD 1.05 per share, putting the transaction’s value at some USD 449.1 mn, according to our math.

The stake is in the mid-range of what Electra was shooting for: The voluntary offer submitted by Electra in May targeted a 15-24.5% stake in Elsewedy Electric, which is over 76% collectively owned by the Elsewedy family.

Remember: Electra has been purchasing shares in Elsewedy Electric since early June after receiving the regulatory greenlight to move forward with its offer.

The fair value? Elsewedy Electric has a valuation of EGP 112.1 bn — or EGP 52.38 a share — as per the fair value study conducted ahead of the transaction’s completion. Electra’s purchase price of USD 1.05 is the equivalent of EGP 50.33 at yesterday’s USD / EGP exchange rate.

Advisors: EFG Hermes was Electra’s sole financial advisor, while BDO Keys Financial Consulting was Elsewedy Electric’s financial advisor. MHR & Partners in association with White & Case were Electra’s legal advisor on the transaction.

Market reax: Elsewedy Electric’s shares remained relatively stable yesterday, inching down 0.06% to close at EGP 47.54 following the announcement.

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Elsewedy Electric M&A Watch

A MESSAGE FROM AUC SCHOOL OF BUSINESS EXECUTIVE EDUCATION

From global financial crisis to Ras El Hekma: Egypt’s real estate sector remains resilient

Following the discussions at the AUC Business Forum 2024 Real Estate Roundtable, we delved into the transformative journey of Egypt's real estate sector with JLL Egypt Country Head Ayman Sami and AI Capital Chairman Ayman Ismail.

Here are our key takeaways:

The economic backdrop of 2008-2016 echoes that of 2016-2024. According to Ismail, both periods were characterized by foreign currency shortages, fixed exchange rates, high government deficits, weak social protection programs, and economic growth rates below 7%.

Devaluation significantly impacted the real estate sector. The 2016 devaluation triggered a surge in real estate prices as a hedge against inflation. “We witnessed a 24-28% uptick in prices y-o-y by the end of 2017,” Sami explains, “pushing affordability further out of reach and boosting the rental market.” Multiple devaluations in 2021 and 2023 coupled with the FX crunch once again sent prices soaring. “In Sixth of October, prices skyrocketed by nearly 83% y-o-y, while in New Cairo, they increased by 95%, driven by panic purchasing to safeguard savings,” he added.

Ras El Hekma returned stability to the market. According to Sami, the mega-development project on the North Coast provided some measure of reassurance and a clearer economic vision for the future. It also put an end to the panic buying and attracted more foreign investment, particularly on the North Coast. With a booming tourism sector and plans to bring in 30 mn tourists within the next four years, further investment in hospitality and residential units will be required with Ras El Hekma playing a central role.

Real estate continues to be a primary contributor to economic growth. “Construction and real estate make up approximately 20% of the local economy," said Ismail. “Rising demand is fueled by high marriage rates, rural-urban migration, demand for second homes, and an increasing influx of immigrants, but the market remains highly fragmented and competitive.”

There has been a gradual shift towards the outskirts of Cairo. According to Sami, New Cairo now stands as a key business hub due to its proximity to the airport. Residential real estate has been moving outwards to New Cairo and Sixth of October since the early 2000s, and the next shift is forecasted to be towards fourth-generation cities, such as the New Administrative Capital.

Public vs. private sector spending has evolved. According to Ismail, in the 1990s, public and private sector developers invested equally. By 2008, there was a drastic shift that saw private sector spending on real estate more than double, impacting the availability of subsidized housing. Today, we are witnessing another shift as the government-owned New Urban Communities Authority (NUCA) has become the country’s largest developer.

As Egypt continues to develop mega-projects like Ras El Hekma and attract foreign investment, the future looks promising for the real estate sector. From economic crises to adapting to shifting demographics and market demands, the sector has shown remarkable resilience and growth over the past 15 years.

Visit AUC School of Business - Real Estate Management for more information on AUC School of Business Executive Education Real Estate Management Programs.

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A MESSAGE FROM AUC SCHOOL OF BUSINESS EXECUTIVE EDUCATION AUC

Real estate

Adeer to set up mixed-use development in East Cairo alongside Paragon

Adeer, Paragon to set up a mixed-use development in Cairo: Real estate company Adeer — a subsidiary of KSA’s Sumou Holding Group — is working with local real estate player Paragon Developments to build a mixed-use development in eastern part of Cairo, according to a press release (pdf). The first phase of the project is expected to generate EGP 80 bn in sales.

The details: The 250k-sqm project will include hotels, hotel apartments, shopping malls, and administrative offices.

More on the way: The two companies want to look into other potential investments, the release read.

Two projects in two days: The announcement comes a day after we heard that Adeer had recently inked an agreement with our friends at Hassan Allam Properties to develop a mixed-use development with investments of USD 100-150 mn.

Part of a bigger plan: The company plans to invest USD 400 mn in the Egyptian real estate sector over the next five years, CEO Bassel El Serafy told Asharq Business. Adeer is looking to acquire half of Melee Development, which it currently works with on a SAR 1 bn project developing three Saudi sports clubs across Riyadh, Jeddah, and Khobar.

That’s not all: The company is currently in negotiations with three local real estate players to implement new projects in Saudi Arabia, El Serafy added.

Tags:

Hassan Allam Properties real estate Sumou Holding

EARNINGS WATCH

Concrete Fashion Group, GoldenTex, QNB report quarterly earnings

The last of the post-float 1Q earnings are rolling in and 2Q earnings are beginning to trickle in, with Concrete, GTEX’s GoldenTex, and QNB all releasing earnings this week.

CONCRETE SEES INCOME RISING, SALES DIPPING-

Concrete Fashion Group (CFG) saw its net income increase 65.3% y-o-y to USD 5.5 mn in 1Q 2024, driven by stronger operating profitability coupled with a decline in net financing costs, the company said in its latest earnings release (pdf).

The growth came despite a drop in sales: The company saw its net sales dip 8.0% y-o-y to USD 34.2 mn during the quarter, due to a drop in sales from the company’s manufacturing segment, which was impacted by traffic disruptions in the Red Sea, the company said. However, net sales from the company’s retail segment expanded by 50.8% y-o-y during the quarter, driven by strong financial and operational growth across both Concrete and Euromed — the group’s wholesale and uniform manufacturing arm.

Moving forward: “We are eager to capitalize on Egypt’s increasing attractiveness and the rapid growth of the country’s ready-made garments export industry. We are confident that our established reputation, long-lasting relationships with top fashion houses, and world-class facilities will enable us to capture a growing share of this large and expanding market allowing us to attract foreign currency into the country and create jobs in the local economy,” CEO Alaa Arafa said.

GOLDENTEX SEES DROP IN NET INCOME, WHILE SALES INCREASED-

GTEX Holding’s textile arm GoldenTex saw its net income drop 73.8% y-o-y to EGP 6.4 mn in 1Q 2024, which the company attributed to a sharp increase in financing costs in response to the float of the EGP, GoldenTex said in its latest earnings release (pdf). The company saw its sales grow 9.5% y-o-y to EGP 161.5 mn during the same period.

Remember: CFG and GTEX are the product of a demerger at Arafa Holding that took place earlier this year. Shares of the two companies began trading on the EGX in March following the demerger.

QNB SEES HIKE IN NET INCOME -

QNB saw its net income rally 69.6% y-o-y to EGP 6.7 bn in 2Q 2024 on the back of stronger performance across gains on financial investments and dividend income, according to its latest financial results (pdf). Net interest income rose 36.9% y-o-y during the same period to record EGP 9.95 bn.

Remember: QNB Al Ahli — QNB Group’s Egyptian unit — rebranded to QNB late last month with the aim of boosting its presence in the local market through a closer association to the group’s name.

Tags:

Arafa Holding Concrete Fashion Group earnings watch GTEX Holding QNB Alahli

LAST NIGHT’S TALK SHOWS

The new government’s policy statement took the center stage on the airwaves last night

The spotlight on last night’s airwaves was focused on the government's new policy statement delivered by Prime Minister Moustafa Madbouly before the House of Representatives yesterday.

“The new government faces a tough test before the people, parliament, and President El Sisi,” said Lamees El Hadidi on Kelma Akhira (watch, runtime: 14:49). “The new government has announced clear commitments, and everyone will be held accountable for the commitments made, including specific figures and timelines.” El Hadidi argued that Madbouly aimed to get across the notion that "the government puts the citizens first, followed by the private sector.”

The Kelma Akhira host was also keen that the government keeps to its word, adding that “after this statement, we expect it to evolve into real policies applied on the ground."

More than just a speech: “The statement is decorative and devoid of practical measures, but the Prime Minister compensated that with what he said is a 300-page document to be deposited in parliament containing the details,” MP Atef Maghawri said in a phone call with El Hadidi (watch, runtime: 2:41).

The government’s policy statement received coverage across the airways, including on Al Hayah Al Youm (watch, runtime: 24:45) and Masaa DMC (watch, runtime: 8:21).

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LAST NIGHT’S TALK SHOWS politics

Also on our Radar

Eni looks to up production with plans to drill new wells. PLUS: IBRD allocates loan to help develop railway line, Madinet Masr taps construction company to work on Sarai

ENERGY -

Eni to ramp up operations in Egypt: Italian energy giant Eni plans to drill new wells in its concessions in Egypt as it looks to ramp up production, COO Guido Brusco said during a meeting with newly-appointed Oil Minister Karim Badawi, according to a statement from the ministry.

A change of course: Back in April, it was reported that Eni had slowed down exploration operations in Egypt. The company’s production in Egypt dropped by 11.7% y-o-y to 293k barrels of oil equivalent by the end of the 1Q 2024.

DEBT WATCH-

IBRD allocates loan to help develop railway line: A USD 144 mn long-term loan from the World Bank’s International Bank for Reconstruction and Development (IBRD) has been approved to develop the Bashteel-Al Nadha railway line and to expand it with a parallel railway line, Al Mal reports, citing what it says are informed sources. The loan makes up about 33.6% of the project’s total USD 428 mn investment cost, the source explained, adding that the rest will be sourced by the Egyptian National Railways Authority.

REAL ESTATE -

Madinet Masr taps construction company to work on Sarai: Aboelwafa f or Contracting and Real Estates Development will carry out the construction work of Madinet Masr’s Sarai project with investments of EGP 1 bn under an MoU inked with the real estate player, according to a statement (pdf). The agreement will see Aboelwafa construct residential buildings, fences, and drainage systems, with construction slated for completion by September 2025.

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ALSO ON OUR RADAR debt Egyptian National Railways energy Eni IBRD Madinet Masr oil and gas railways real estate transport

PLANET FINANCE

Germany’s BTC sell-off is causing market jitters

A significant sell-down of BTC by the German government has rattled the market for the cryptocurrency, CNBC reports, adding new selling pressure as traders brace for the continued release of even more supply to creditors of defunct crypto exchange Mt. Gox.

What’s happening? Police in the state of Saxony seized nearly 50k BTC (about USD 2.2 bn worth) back in January. Even after a series of recent sales from that position, it still holds nearly 32.5k BTC that’s worth about USD 1.9 bn at current prices. The government looks to be exiting that position in chunks — it’s sold positions worth USD 379 mn or so, with most of that hitting the market in last two weeks.

It’s a crypto bear… The sales and, in parallel, transfer of German state BTC reserves to other exchanges has helped push the price of BTC to below USD 55k on Friday to mark its lowest level since February. Together with the Mt. Gox transfers, which blockchain data suggests began last week, new supply has helped send BTC down 20% from a month ago.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning, with the ASX 200 and Nikkei, the Kospi and Hang in the red, and the Shanghai Composite largely unchanged. Nasdaq, Dow, and S&P futures were all up in overnight trading after the S&P 500 and Nasdaq closed at fresh highs again yesterday.

Futures point to a mixed open for major European benchmarks, with the Euro Stoxx 50, Germany’s Dax 30, and France’s CAC 40 all on track to open in the red while the FTSE 100 looking set to start the day in the green.

EGX30	28,412	-0.7% (YTD: +14.1%)
USD (CBE)	Buy 47.88	Sell 47.98
USD (CIB)	Buy 47.87	Sell 47.97
Interest rates (CBE)	27.25% deposit	28.25% lending
Tadawul	11,718	+0.3% (YTD: -2.1%)
ADX	9,133	-0.1% (YTD: -4.7%)
DFM	4,082	+0.3% (YTD: +0.6%)
S&P 500	5,573	+0.1% (YTD: +16.8%)
FTSE 100	8,193	-0.1% (YTD: +6.0%)
Euro Stoxx 50	4,970	-0.2% (YTD: +9.9%)
Brent crude	USD 85.75	-0.9%
Natural gas (Nymex)	USD 2.38	+0.5%
Gold	USD 2,363.50	-1.4%
BTC	USD 56,348.50	-1.7% (YTD: +33.3%)

THE CLOSING BELL-

The EGX30 fell 0.7% at yesterday’s close on turnover of EGP 4.4 bn (3.2% above the 90-day average). Foreign investors were net sellers. The index is up 14.1% YTD.

In the green: e-Finance (+5.1%), Delta Sugar (+3.7%), and Palm Hills Development (+1.8%).

In the red: Oriental Weavers (-3.8%), Abu Qir Fertilizers (-3.3%), and Orascom Construction (-3.0%).

CORPORATE ACTIONS-

#1- New investment minister leaves his seat on CFG’s board: Newly-appointed Investment and Foreign Trade Minister Hassan El Khatib is departing Concrete Fashion Group’s board after the board approved his resignation, according to an EGX disclosure (pdf).

#2- Finance Minister Ahmed Kouchouk will continue to serve on Talaat Moustafa Group’s board as a non-executive representative for Misr Ins. Company, according to an EGX statement (pdf).

#3- Fawry has issued some 12.3 mn shares, worth EGP 68.33 mn, to company employees under the company's employee stock ownership plan, according to an EGX bulletin.

#4- BdC wants to raise its capital: Banque du Caire has filed a request with the EGX to raise its authorized capital to EGP 50 bn from EGP 20 bn, according to an EGX bulletin. The bank also wants to increase its issued and paid-up capital to EGP 19 bn from EGP 10 bn by issuing 4.5 bn shares with a nominal value of EGP 2 each.

#5- MTI’s capital increase moves forward: MM Group for Industry and International Trade’s (MTI) extraordinary general assembly approved a decision to raise the company’s issued capital to EGP 936.6 mn from EGP 749.3 mn, according to an EGX disclosure (pdf).

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cryptocurrency Financial Markets Planet Finance

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Published every Tuesday in EnterpriseAM.

Read going Green

Going Green

The hurdles standing in the way of Egypt’s green hydrogen ambitions and how they can be tackled

What’s standing in the way of our green hydrogen ambitions? Last week’s Egypt-EU Investment Conference saw Egypt ink a long list of green hydrogen agreements with a number of EU and non-EU entities, once again opening the conversation around green hydrogen and Egypt’s ambitions to become a hub for green energy.

Our ambitions: The government aims to transform Egypt into a regional hub for green hydrogen production by 2026 and a global hub by 2030, with plans to produce 3.2 mn tons of green hydrogen a year by the end of the president’s third term and 9.2 mn tons a year by 2040.

That will require a whole lotta funds seeing as no matter where green hydrogen is being produced, it’s significantly more expensive than other kinds of fuel or feedstock, one industry insider said during the Green Hydrogen Bridge Conference hosted by the Dutch Embassy last month. The only way to address this is through carbon taxation or subsidized production as in the EU and US, they added.

Accessing finance is difficult without long-term offtake agreements: Even for buyers that are sufficiently incentivized to buy green hydrogen over other kinds of fuel, offtakers are hesitant to sign long-term offtake agreements when prices are expected to be much lower in seven to eight years, another industry insider said. This in turn makes accessing financing more costly, since shorter tenures mean that investors are taking on more risk investing in green hydrogen infrastructure.

High global interest rates and Egypt’s high country risk premium don’t help either: While interest rates should decline by the time many of the green hydrogen projects currently in development enter the final investment decision phase, countries like Egypt will still face a cost much higher than other potential producers, given high country risk premiums and recent credit downgrades, the insider added.

WHAT CAN BE DONE-

Further investment in the grid will help: While Egypt’s grid is well-developed relative to other markets, state investment in grid expansion would heighten the country's strategic advantage in the green hydrogen space, said Globeleq Business Development Manager Ahmed Hisham. More and better grid connections would allow producers to recoup costs by selling excess renewable energy back to the grid, added Scatec Egypt Business Development Head Mahmoud Shata.

Earlier this year, we welcomed green hydrogen incentives that included a series of tax breaks and non-tax incentives to companies implementing green hydrogen projects within five years and deriving a certain percentage of their financing from foreign lenders.

More needs to be done: Although the government’s current incentives package lowers the cost of green hydrogen projects, given current conditions it may not be enough to make green hydrogen production financially feasible, one of the industry insiders said. Ideally, the government would be able to subsidize green hydrogen production itself — though, they added, that this may not be realistic at the present moment.

Int’l cooperation on green hydrogen is in everyone’s best interest: In lieu of direct subsidization, working closely with stakeholders in the EU and international financial institutions to incentivize offtake agreements and share existing expertise is critical to the industry’s success in Egypt. EU countries’ desire to secure energy independence from Russia and maintain green hydrogen’s reputation as a safe fuel means that European companies and state entities have an interest in working closely with potential producers, Port of Rotterdam Energy Transition Business Manager Erik van der Heijden noted.

The bigger picture: Given green hydrogen’s high price compared to carbon-producing energy sources, the key to developing green hydrogen production is a strong commitment by the EU and other advanced economies to carbon transition through regulations that incentivize offtakers in the EU, US, and elsewhere to buy green hydrogen. Regulations like the EU’s Carbon Border Adjustment Mechanism, which places taxes on imports that make up the difference between the local carbon price — if there is one — and the EU’s carbon price, are critical to narrowing the price gap between imports of green hydrogen and dirtier fuels.

It’s not all bad: Despite the challenges, we still have many reasons to get excited about green hydrogen. First, Egypt’s renewable mix makes it an excellent candidate for powering green hydrogen production — few potential producers have both ample wind and solar resources, which tend to produce energy at reciprocal times of day, one of the industry insiders said. Second, Egypt’s strategic location, existing port infrastructure, and expertise in ammonia production — a key green hydrogen derivative — also lend themselves well to securing offtake agreements and rapidly gaining global market share. Third, the government has made clear commitments to developing the sector, including the newly-approved incentives for green hydrogen producers. And finally, once offtake agreements are secured, financing issues should ease.

Your top green economy stories for the week:

Infinity is lining up USD 10.5 bn in investments in Egypt over the coming five years: USD 10 bn will go towards new investments in renewables, while the remaining USD 500 mn is earmarked for EV charging infrastructure.
The road to reach our renewables ambitions is rocky: While the government wants to ramp up the country’s renewables capacity, infrastructure remains underdeveloped.

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CALENDAR

2024

JULY

9-18 July: Act Financial IPO subscription period for institutional investors.

9-23 July: Act Financial IPO subscription period for retail investors.

10 July (Wednesday): CBE and Capmas to publish inflation data for June.

10-11 July (Wednesday-Thursday): The Japan-Arab Economic Forum, Tokyo.

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

16-17 July (Tuesday-Wednesday): The Egypt Mining Forum, Cairo, Egypt.

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

3-5 September (Tuesday-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.

13-17 October (Sunday-Thursday): Cairo Water Week, Water and Climate: Building Resilient Communities, Cairo, Egypt.

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

30 September (Monday): Ban on sugar exports expiration.

NOVEMBER

4-8 November (Monday-Friday): World Urban Forum, Cairo, Egypt.

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

26-28 November (Tuesday-Thursday): Egypt Energy Show, Cairo, Egypt.

DECEMBER

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

EVENTS WITH NO SET DATE

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.

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

3Q 2024: Egyptian-Armenian Joint Committee.

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.

End of 2024: Shalateen Mining Company to launch a gold exploration tender in the Eastern Desert.

2025

July 2025: The first operational trail of Egypt-KSA electricity interconnection line.

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.

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