The sorry state of tires

Sunday, 2 Apr 2023

The sorry state of tires

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Today at a glance

The Big Story Today

Banque Misr + National Bank of Egypt roll out new high-yield CDs.

INSIDE INDUSTRY

How our tire industry is in sore need of development.

FOR YOUR COMMUTE

Will advancing SDGs actually curb population growth?

ON THE TUBE TONIGHT

Mohamed Ramadan doesn’t fail to deliver the usual Bollywood-esque antics in Gaafar El Omda.

Sports

Real Madrid plays 15-point catch up + Medvedev and Sinner battle it out for Miami Open title.

EAT THIS TONIGHT

Delicious artisanal gelato, with some tweaks for Ramadan.

Under the Lamplight

The Lying Life of Adults: All the fibs we tell ourselves.

WHAT WE’RE TRACKING TONIGHT

THIS EVENING: New high-yield CDs from Banque Misr and the National Bank of Egypt

Good afternoon, wonderful people. It’s a busy start to the new week (and month, and quarter), even though many of us are still slogging through the Ramadan fog.

THE BIG STORY TODAY

Big Two roll out new high-yield CDs: Banque Misr and the National Bank of Egypt — the nation’s two largest banks — introduced three-year certificates of deposit (CDs) following the Central Bank of Egypt’s Monetary Policy Committee’s decision last week to raise interest rates by 200 bps, the state-owned banks said in a joint statement (pdf). The certificates include a fixed-rate 19% CD and a second carrying an annual declining rate of 22%, 18%, and 16%. Both CDs have a monthly payout.

THE BIG STORY ABROAD

The banking crisis continues to lead the conversation in the international business press this afternoon: UBS’ takeover of Credit Suisse continues to get play, as Switzerland’s prosecutor kicks off an investigation into the acquisition (Financial Times) and the new entity formed following the takeover is looking at slashing up to 30% of its workforce (Reuters). Meanwhile, OPEC is expected to hold off on raising oil output levels as the oil market is still shaky as a result of the fallout from the collapse of Silicon Valley Bank and Credit Suisse’s troubles (Bloomberg).

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

The CBE did exactly what everyone expected on Thursday: The Central Bank of Egypt (CBE) raised interest rates by 200 bps on Thursday in a bid to rein in inflation.
The automotive industry can’t catch a break right now: The yearlong decline in auto sales accelerated in February as the foreign currency shortage continues to weigh on the sector.
NPH raises its bid for Pachin: Dubai-based National Paints Holding (NPH) has upped its offer for EGX-listed Paint and Chemical Industries (Pachin) in response to Eagle Chemicals’ new bid last week.

*** It’s Inside Industry day —your weekly briefing of all things industrial in Egypt. Inside Industry focuses each Sunday on what it takes to turn Egypt into a manufacturing and export powerhouse, ranging from initial investment and planning to product distribution, through to land allocation to industrial processes, supply chain management, labor, automation and technology, inputs and exports, regulation and policy.

In today’s issue: In the first part of this two-part story, we look at why our local tire industry is falling behind, and how that issue has been compounded by a range of underlying factors beyond the immediate impact of inflation and the FX shortage.

? CIRCLE YOUR CALENDAR-

PSA #1- Start planning the next run of holidays:

Coptic Easter falls on Sunday, 16 April;
Sham El Nessim is on Monday, 17 April;
Eid El Fitr should land on or around Friday, 21 April (it’s still not clear what days will be official holidays);
Tuesday, 25 April, is Sinai Liberation Day, for which we’ll likely have a day off on Thursday, 27 April.

PSA #2- Need funding for a green project? You can now apply to the second round of the Smart Green Projects Initiative until the end of May, according to a Planning Ministry statement. Eligible projects must use technology solutions to address environmental issues, present evidence of feasibility or innovation, and provide a written acknowledgement that no awards have been received during the initiative’s first round, among other requirements. You can view the full list of criteria here and apply here.

☀️ TOMORROW’S WEATHER- We’re heading into a pretty warm couple of days, with the mercury expected to peak at 31°C before falling to a low of 18°C tomorrow, according to our favorite weather app.

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

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

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

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

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Banque Misr National Bank of Egypt WHAT WE’RE TRACKING TONIGHT

FOR YOUR COMMUTE

Will advancing SDGs actually curb population growth? Plus: Google and Microsoft are squabbling over cloud dominance

Investments to curb poverty and advance SDGs could contribute to reducing population growth by 2100, new research (pdf) commissioned by the Club of Rome suggests. Improvements in quality of life — ranging from more equality to better education — could mean declining birth rates. Experts project that with sufficient economic development, the global population could be down to 7 bn people as GDP is negatively correlated with fertility rates, the research shows.

The study compares different findings to assess what is sustainable: While Club of Rome’s projections forecast a population decline with higher anti-poverty investments, research conducted by the UN predicts, on the contrary, that the global population could breach 10 bn people by 2080. The Earth4All study juxtaposes these different scenarios, achieved through four different demographic approaches, to answer a number of questions including “how many people could Earth’s biosphere support?” and “how many people could live sustainably on Earth”?

The world population is not the first culprit: Whether the number of births increase or decrease over the coming century, one thing is certain: Population size is “not the prime driver" behind climate change, experts speaking on the subject were quoted as saying in an article by Sky News. Rather, what is more detrimental is inflated material footprints caused by a select elite at the expense of the majority, according to Jorgen Randers, one of the study’s lead researchers. “Luxury carbon and biosphere consumption” are the main obstacles standing between humanity and a more sustainable future.

Google has complained to EU regulators about alleged anti-competitive cloud practices from Microsoft, claiming that Microsoft is using “bundling practices [...] and pricing and licensing restrictions” to make it harder for customers to choose other providers, Reuters reported. Google claims that Microsoft gained this “unfair advantage” by striking agreements with smaller European companies, which it says are just a way of co-opting smaller players and staving off probes by antitrust regulators after said players had filed complaints, an unnamed source told the newswire. Those agreements create an “unfair advantage to Microsoft and ties the people who complained back to Microsoft anyway,” Vice President Amit Zavery told Reuters. Despite its latest bargains, Microsoft still faces another complaint from CISPE — a group that includes the market’s top player, Amazon.

The stakes have never been higher as the cloud’s impact is unprecedented: A fact that calls for a serious change as Microsoft’s domination is contrary to the very premise of the cloud which was to provide openness and flexibility to customers’ softwares, Zavery said. Resolving particular issues with individual vendors does not address the issue of larger licensing controversies, he added.

Microsoft’s response has been underwhelming. The company’s answer to the barrage of accusations has been to refer to a months-old blogpost by company President Brad Smith in which he acknowledged that some of the antitrust issues raised are valid and the company is working to address them through five “cloud principles” including serving European player’s needs and values and supporting European software developers.

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economy FOR YOUR COMMUTE Google microsoft SDGs

ENTERPRISE RECOMMENDS

Mohamed Ramadan doesn’t fail to deliver the usual Bollywood-esque antics in Gaafar El Omda

? ON THE TUBE TONIGHT-
(all times CLT)

Get your usual Mohamed Ramadan fix with Gaafar El Omda, which doesn’t pack lots of surprises, but gets the job done: The series opens up, as Ramadan’s series usually do, with great tragedy (kidnapped child, accidental killings, time in prison, and enemies galore, etc) as part of the package that comes with Gaafar, a rather fit 50-something real estate mogul living in El Sayeda Zeinab. He is still trying to find his missing son and is fighting off his enemies right, left, and center. Ramadan never fails to deliver his tried and true formula — fight scenes (don’t miss his flannel wearing barefooted fight scene where he doesn’t break a sweat or move a hair), sweet talking the women, and doling out justice on family members who have a tendency to betray him. Most importantly, the plot includes a secret of sorts that we can only uncover through the flashbacks that take him back to 2004 and transports us to 2023. If Ramadan’s Bollywood-esque antics are your thing, catch his series on Shahid.

⚽ Real Madrid is playing catch up on a 15-point gap: Real Madrid will be looking to snag a full three points when it hosts Valladolid today at 4:15pm, as part of La Liga’s Matchday 27. The Meringues are grappling with an ever-widening gap with Barcelona, which is currently topping the league with a 15-point lead.

Over in Serie A, Napoli — which is at the top of the league — clashes with fourth-place AC Milan in an exciting match that kicks off at 8:45pm as part of the championship’s Matchday 28. Napoli, which has been putting on some top-notch performances, has its eyes on the third scudetto in its history, and its first since 1990, when the legendary Maradona was the club star. The southern Italian team has a wide berth of 19 points keeping it ahead of second-place Lazio. Meanwhile, defending champions Milan are working their way up to third place, taking advantage of Inter Milan’s loss against Fiorentina yesterday. This face-off will be repeated two more times in the span of less than three weeks, as the teams will meet again in the quarter finals of the UEFA Champions League.

Today in the English Premier League: West Ham and Southampton hit the field at 3pm, while Newcastle goes head-to-head with Manchester United at 5:30pm.

And the biggest matches in other European leagues we’re keeping an eye on today:

Atletico Madrid v Real Betis (La Liga — 9pm)
Paris Saint Germain v Lyon (Ligue 1 — 8:45pm)

? Meanwhile in the world of tennis, the Miami Open men’s single final match is taking place tonight between World No. 5 Daniil Medvedev and World No. 11 Jannik Sinner at 7pm. Sinner blew past World No. 1 Carlos Alcaraz Garfia in a stunning semi-final upset that saw the Italian player clinch two sets (6-4, 6-2) after Alcaraz Garfia locked in the first set with a tie-break (7-4). World No. 15 Petra Kvitova landed the women’s title yesterday after a grueling match against Elena Rybakina that started with a tie-break that stretched until Kvitova won 16-14, followed by a 6-2 set in Kvitova’s favor.

? EAT THIS TONIGHT-

Variegato’s artisanal gelato has taken a Ramadan twist with their selection of refreshing treats this season. The Palm Hills-based gelato shop is offering their classic items alongside some new additions such as the pistachio ice-cream cake or the lotus bomb cake that includes an outer basbousa dome, stuffed with cream gelato with a Lotus cream marble siting a top a Lotus biscuit case. Variegato also delivers.

? OUT AND ABOUT-
(all times CLT)

We’re a week into Ramadan — can you cover 100 km before the month is over? Participate in the Trifactory’sRamadan Virtual Running Challenge and try to run (or walk) 100 km by the end of the month. Proceeds from participants’ tickets will be donated directly to Misr El Kheir for its annual Ramadan campaign to feed less fortunate families.

The Cairo Opera House is bringing us an instrumental version of Ramadan dramas’theme songs. Maestro Ahmed Amer and his orchestra are performing tonight at 9:30pm — doors open at 8:30. The tickets are available online here.

Get moving after iftar with Trifactory’s Relay Run this Wednesday, 5 April in Palm Hills Club, 6 October. Call up four buddies for a 2-hour (non-konafa-related) competition to run as many laps as possible. This event is happening from 9-11pm. Visit Trifactory’swebsite to register.

For the young and not so young, Goha in Beit Yakan in Al Darb El Labbana puts on a show adapting Goha’s famous anecdotes, along with other short scenes from Egyptian folklore with enduring messages. The production will run this Wednesday, Friday, and Saturday, with ticket proceeds going to public sector children’s hospitals. For more information, check out the event’s Facebook page and for reservations click here.

Want to make new friends in the great outdoors?Head over to the Wadi Degla Protectorate this Friday, 7 April with your food in hand and join others gathering for iftar or sohour. The event is organized by Backpacker.

Expose yourself to some art and culture and walk around central Cairo: Qahrawya are organizing two separate “iftour” (iftar tour) events next month, which entail an art walking tour after sitting down for iftar together. The tours include one in Zamalek on Saturday, 8 April and one in downtown Cairo on Saturday, 22 April, both starting at 5:30pm.

? UNDER THE LAMPLIGHT-

The lies that leaving childhood reveal: From the author of the best selling series, the Neapolitan Quartet, the pages of The Lying Life of Adults are inhabited by Elena Ferrante’s flawed characters. This most recent of Ferrante’s work centers on Giovanna, a young girl navigating and coming to understand the reality of her post-childhood world as she lives between two parts of a city that fear and hate each other — the Naples of the rich, a city of refinement and riches, and the Naples of the poor, full of depravity and vulgarity. And those closest to her, whom she once used to trust, are revealing lives Giovanna never wanted to know existed. The Lying Life of Adults rips aside the lovely tale of childhood, to reveal the lies that we tell not just to others but to ourselves, to reframe the past and the people we are. The book is also available in Arabic.

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GO WITH THE FLOW

What the markets are doing on 2 April, 2023

The EGX30 rose 1.7% at today’s close on turnover of EGP 1.2 bn. Local investors were net buyers. The index is up 14.4% YTD.

In the green: Ezz Steel (+8.8%), Fawry (+7.2%) and Heliopolis Housing and Development (+6.1%).

In the red: Egypt Kuwait Holding (-1.9%), CIRA Education (-1.7%) and Eastern Company (-1.1%).

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EGX Go with the Flow

Our weekly look at the issues, trends, and policies that are shaping Egypt's manufacturing industries.

Published every Sunday in EnterprisePM.

Read Inside Industry

INSIDE INDUSTRY

How our tire industry is in sore need of development

Kicking the tires of our weak tire industry: Annual urban inflation jumped31.9% y-o-y in February, up from 25.8% the month before. And if you’ve gone to get a tire change recently, you may have noticed that tires have not been immune to the jump in prices, with average prices for some tires rising 300% y-o-y, industry insiders tell Enterprise. This mostly comes off the back of a tire shortage resulting from dwindling FX reserves and import restrictions — unsurprising, as Egypt imports 100% of its Passenger Car Radial (PCR) tires.

But the problems of the industry go beyond imports: The shortage has been compounded by a range of underlying factors beyond the immediate impact of inflation and the FX shortage. These include an increase in logistical costs, the closure of key component manufacturing firms, limited know-how and labor shortages.

A fledgling domestic industry:Egypt consumed around 10 mn tires in FY2022, of which only 1.5 mn (or 15%) were produced domestically, with the rest of the supply coming from imports, head of the Arab Federation of Tire and Rubber Industries, Tarek Ahmed tells Enterprise, citing data from the Customs Authority. Egypt only produces truck tires and two & three-wheelers, so almost our entire supply of passenger car tires came from abroad, he noted. On top of that, Egypt exported 680k tires that year, or 45% of all domestically-produced truck tires, with locally produced tires making up the overall tire market, Ahmed noted.

This was not helped by Trenco’s closure in 2022: Domestic tire manufacturer Trenco covered 30% of the internal market before it shut down production, Ahmed said. At present, Pirelli and Pyramid Tires stand as the only tire manufacturers in Egypt, covering around 8.2% of domestic demand, he added.

There’s also the ripple effect of component company shutdowns: Tire production was highly impacted by the closure of component manufacturing companies such as Kordsa, which used to provide nylon cords for tires. “We were forced to shut down as supply for tire production dropped and the MENA region's economy crippled” stated former partner in Kordsa, Hossam Lasheen.

…Made worse by the FX crunch: “Shortages in FX and tires are interrelated, the scarcity of hard currency has a significant impact on tire production,” as it hinders the procurement of essential components required for tire assembly. As a result, the supply chain is disrupted, exacerbating the overall shortage of tires, tire engineering companyBlack Donut’s sales representative, Ahmed Abou El Nasr told us.

Logistics costs are not making it easier to produce the tires we actually make: Logistics costs have been rising, especially as global fuel prices spiked in 2022, Nasr told us.

There’s also the impact of trained labor shortages on product quality: A shortage of trained labor is creating a knowledge gap and posing a significant challenge to our tire market, said Ahmed. The industry requires a workforce with high levels of expertise to produce quality products, and the fact that the average age of workers at Trenco was 55 indicates the need for a younger, more competitive labor force.

Import restrictions are making things worse: The supply of imported tires decreased 20% y-o-y to 8 mn tires in FY2022, on the back of the CBE’Sdecision last year to increase import restrictions by introducing letters of credit (L/Cs) instead of the low-cost documentary collection process, said Ahmed.

Demand remains high:Demand for tires remains untouched by fluctuations in the macroeconomic climate, leaving consumers vulnerable to higher import prices, said Nasr. Prices for most imported tires increased more than 300% y-o-y in FY2022, Ahmed told Enterprise.

The bright side? We have an industry ripe for import substitution, and private and public companies are ready to step in. Several private companies and the Arab Organization for Industrialization (AOI) are eyeing tire production in Egypt, Nasr added. Also, American construction consulting firm Hill International and the AOI have signed a contract to manage a diverse tire factory. Meanwhile, there appears to be moves to incorporate tires as a domestic component in any incentives offered in Egypt’s automotive strategy which aims to encourage local assembly of cars, Nasr Added.

REMEMBER- Reducing imports is fundamental in shoring up FX reserves, and narrowing the current account deficit, which narrowed by 20% to USD 3.2 bn in 1Q2022-23, on the back of higher FDI and a jump in exports and tourism revenues.

NEXT WEEK — We dive deeper into plans to change up the dynamics in the tire industry, courtesy of the private sector and the AOI.

Tags:

automotive INSIDE INDUSTRY Manufacturing Tires

THE ENTERPRISE ENTERTAINMENT CALENDAR

APRIL

16 April (Sunday): Coptic Easter

17 April (Monday): Sham El Nessim.

21-26 April (Friday-Wednesday): LaLiga Egypt Football Camp, Xanadu Hotel, Makadi Bay, Hurghada.

22 April (Saturday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

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

MAY

1 May (Monday): Labor Day.

1 May (Monday): Backstreet Boys at 7pm, ZED East, New Cairo.

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

JUNE

10 June (Saturday): Thanaweya Amma examinations begin.

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

30 June (Friday): June 30 Revolution Day.

JULY

18 July (Tuesday): Islamic New Year.

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

23 July (Sunday): Revolution Day.

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

SEPTEMBER

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

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

OCTOBER

6 October (Friday): Armed Forces Day.

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

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