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Monday, 2 Oct 2023

What We're Tracking Today
Enterprise Finance Forum
Investment Watch
Economy
Privatization
Debt Watch
Fintech
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Around The World
Blackboard
Calendar

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Today at a glance

1

ENTERPRISE FINANCE FORUM

What’s a bank, anyway?
2

Privatization

Is Midar on the privatization auction block?
3

Investment Watch

Snackmaker Edita lands USD 45 mn loan from the IFC to fuel growth.
4

Fintech

Valu to expand into Jordan, puts Saudi on hold for now.
5

Economy

Egypt faces more than USD 29 bn in debt repayments in 2024, CBE data suggests.
6

DEBT WATCH

Al Ahly Tamkeen Microfinance closes EGP 707 mn bond issuance.
7

Also on our Radar

Japanese companies are interested in the SCZone for renewables, green fuels investment.
8

PLANET FINANCE

Don’t be the next Instacart, VCs tell startups as Nasdaq newbies tread water.

Monday, 2 Oct 2023

What We're Tracking Today
Enterprise Finance Forum
Investment Watch
Economy
Privatization
Debt Watch
Fintech
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Around The World
Blackboard
Calendar
1

What We're Tracking Today

MPs could vote this week on El Sisi’s package of social support measures

Good morning, friends. It’s particularly busy for a Monday morning with plenty of news on everything from our potential debt repayment schedule in 2024, to corporate expansion beyond our borders (Valu and Edita), and how schools are trying to retain foreign teachers in a high-inflation environment in which FX is rare as hen’s teeth.

BREAKING NEWS- A massive fire swept through multiple floors of the Ismailia Security Directorate headquarters in the early hours of this morning, with Al Arabiya reporting that eyewitnesses saw casualties on the scene. Social media accounts carried videos and photos of what appear to be the fire in real time. No information was available at dispatch time this morning on the cause of the blaze, nor was there confirmation on casualty figures.

THIS WEEK IN THE HOUSE-

It’s parliamentary committee election day: After reconvening for the new legislative cycle yesterday, MPs in all of the House’s 25 committees will today elect a chairman, two deputies and a secretary general. Results will be released tomorrow.

We’ve already got an idea about what will be at the top of the priority list in the opening weeks of the cycle: The government has sent 11 bills and eight agreements to the House for discussion in the coming days and weeks. These include:

  • the recently-announced tax changes that will raise the income tax exemption threshold;
  • a bill that would allow the government to re-open its expat car import initiative for three months to raise FX;
  • changes to law regulating the importers registry ;
  • legislation allowing Safaga Company to manage, operate and maintain a terminal at Safaga port ; and
  • several oil and gas exploration agreements with international energy companies.

Social support measures could go to a vote on Tuesday: There is speculation that the income tax change and exceptional bonuses for public-sector workers and pensioners announced by the president last month could be put up for a vote as soon as Tuesday.

ALSO- Sisi wants the old rent law higher on the agenda: The president yesterday urged lawmakers to address the old rent law, telling a conference in the new capital that it is “unacceptable” that property owners are unable to take economic advantage of what he said amount to 2 mn housing units across the country.

Remember: A draft law that would allow landlords to evict organizations, government agencies, public and private companies, and embassies (among other entities) from their properties has been in limbo for the past 18 months after it received preliminary approval in the House last year

The Senate will also be joining their colleagues back at work on Tuesday: The upper house will be back in session after the summer recess with a vote on whether to accept the resignation of Hazem Omar so he can run as the leader of the People’s Republican Party in December’s presidential election. Senators are also set to declare their intention to run for leading posts in parliamentary committees.

ALSO THIS WEEK-

OPEC+ meeting on Wednesday: The alliance of oil producers are unlikely to make any changes to output when they meet in Vienna this week, according to Reuters. Oil prices have surged to new 10-month highs in recent weeks on the back of Saudi Arabia and Russia’s decision to extend voluntary supply cuts until the end of the year.

PSA- We have another long weekend ahead of us: The government is giving the public and private sectors the day off on Thursday to observe Armed Forces Day, which falls on Friday.

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

WATCH THIS SPACE-

Extend food export restrictions, say local importers: Local importers are calling for tighter and wider ranging restrictions on food export bans following the Trade Ministry’s three-month ban on the export of onions went into effect yesterday in an attempt to contain soaring local prices, reports Ahram Online. “The decision is good for the market and should be applied to other goods like tomatoes, potatoes, and beans to control prices that skyrocketed,” said Ahmed Sheha, a member of the importer's division at the Cairo Chamber of Commerce. “There is still a risk as some vendors may hoard stockpiles. The government should consider extending the ban’s term and crack down on any unethical practices in the market,” he added.

PSA- ENR full steam ahead on student discounts: Egyptian National Railways will allow Egyptian school and university students to purchase train tickets with discounts ranging from 90-98% for Tahya Misr, dynamic ventilation and third class air-conditioned trains, ENR said yesterday. The cut-price tickets come in time for the new academic year and aim to make public transport affordable for all students. Students can apply for subscriptions subject to conditions via an EGP 5 application form at their nearest train station. Forms must be officially stamped by the student’s school, institute or university.

It’s the beginning of a new month- Among the customary news triggers to watch out for in the coming weeks:

  • PMI: S&P Global will publish Egypt’s PMI figures for September this Tuesday, 3 October.
  • Foreign reserves: The central bank will release September’s foreign reserves figures next week.
  • Inflation: Capmas and the CBE will publish the latest inflation data on Tuesday, 10 October.
  • Interest rates: The Central Bank of Egypt will meet for its penultimate policy meeting of 2023 on 2 November.

THE BIG STORIES ABROAD-

Republican civil war brewing in the House of Representatives: Rep. Matt Gaetz said Sunday that he will push to remove fellow Republican House Speaker Kevin McCarthy from his position after he briefly allied with the Democratic side of the House to pass legislation preventing a government shutdown. There was also disquiet from the Democrats, with President Joe Biden urging Republican lawmakers to back a separate bill to secure Ukraine aid after it was dropped from Saturday’s bill before being voted through. The reaction from Wall Street meanwhile has been one of relief, following a volatile week that saw many bracing for a prolonged government shutdown. (Associated Press | Reuters | Bloomberg | Financial Times | New York Times | Washington Post | Wall Street Journal)

Ackman wants to SPARC with X: US b’naire investor Bill Ackman has secured regulatory approval to target privately-held firms through a new type of SPAC known as a special purpose acquisition rights company (SPARC), which have seen little market interest since their 2021 peak. A deal with X could be on the cards, with Ackman telling the WSJ that he is “absolutely” interested in the company formerly known as Twitter. Ackman’s SPARC is also set to target private companies trying to drum up USD 1.5 bn, writes Bloomberg.

Grain ships sail for Ukrainian ports, defying Russia: Five Ukraine ships are heading to Black Sea ports to be loaded with 120k tons of grain destined for Africa and Europe, while three have left loaded with cargo, in defiance of a Russian blockade of Ukrainian commodity exports, reports Bloomberg. Kyiv has had to consider alternative shipping routes as Moscow has threatened to attack vessels after pulling out of the grain export pact with Ukraine in July.

ENERGY UPDATE- Egypt and Saudi’s electricity grids are set to link up by May 2025. The project will start trial operations in May 2025 and officially start operating the first 1.5 GW phase in June 2025, followed by the second 1.5 GW phase the following November, government sources told Al Borsa. The two countries will export any surplus electrical capacity from the project, the sources added.

ICYMI-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we did a deep-dive into the challenges and potential of our budding local smartphone industry and got an inside look from industry leaders.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed.

In today’s issue: How are Egypt’s private and international schools managing to retain expat teachers?

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Together: Three days of music set against the stunning backdrop of Somabay by the Red Sea. From 5-7 October, two events organizers at the forefront of Egyptian nightlife, ByGanz and Nacelle, will bring together world-famous electronic music DJs such as Birds of Mind, Richy Ahmed, Henrik Schwartz, Hunee, and Guti, as well as regional and local artists. Together is a full three-day experience with beach activities from sunset to sunrise.

2

ENTERPRISE FINANCE FORUM

Enterprise Finance Forum: Understanding the characteristics of digital banks + how they measure up against fintechs and NBFIs

Whether you call them digital banks, challenger banks or neobanks, this much is clear: The flavor of the decade in global banking is coming to Egypt in early 2024. That’s when most of us expect the first homegrown digital bank to open its (virtual) doors. Digital banks are all about digitalizing the banking experience — but they go far beyond banks simply having digital or online banking services. These institutions go hand-in-hand with themes of financial inclusion, but have vastly different roles from NBFIs.

On the second day of the Enterprise Finance Forum, we brought together leaders from the firm that’s set to launch Egypt’s first digital bank and a regional powerhouse that’s already launched a neobanking proposition in the GCC + Pakistan: Group Head of Mashreq’s retail banking Fernando Morillo, and Sherif El Behery, CEO of Misr Digital Innovation (MDI).

So… what exactly is a digital bank? Digital banks globally have lower capital requirements than conventional banks, in return for their tech-driven contribution to the national strategies of financial inclusion, said Morillo. “They are characterized by their high percentage of digital interactions and a reduced reliance on physical branches,” said Morillo.

A core characteristic is simply that digital solutions are the foundation of operations: Digital banks “involve being agile and focusing on solving problems with digital-first approaches,” Morillo said.

They’re digital, but they’re more banks than they are NBFIs: Oftentimes, digital banks have distinctive capabilities by virtue of their regulatory environment, allowing them to provide services such as taking deposits, providing loans and facilitating sizable transactions, while non-bank financial institutions (NBFIs) are not allowed to accept deposits, Morillo added. Digital banks are meant to provide a comprehensive suite of services and compete with traditional financial institutions, while fintech firms typically concentrate on specialized market niches, Morillo explained. “We’re not inventing banking products — we’re just packaging banking products and inventing a new way of delivering them,” El Behery said.

And “who” is a digital bank? Some grow out of existing banks. That’s the case with the brand MDI will launch — MDI is owned by Banque Misr, even though it is set up as a separate company. MDI was the first bank in Egypt to apply for a digital banking license. It’s also the case with Mashreq’s various Neo propositions, all of which are brands owned by Mashreq and operated under the bank’s existing licenses. Other times, they’re fintech players or NBFIs that look to bulk up their range of what they can do by starting to take deposits.

Corporate parentage makes a difference: Morillo pointed out that setting up a digital bank as a fresh entity represents a substantial financial commitment that could go up to USD 150 mn, while “established banks can make use of their existing infrastructure and accumulated expertise,” said El Behery. The approach taken by banks varies: While some favor distinct brands operating under the same corporate umbrella, others choose partnerships or establish entirely new digital bank entities. The choice depends on market conditions and specific objectives, said El Behery, noting that MDI is taking the latter strategy.

Personalization + customization are key features of digital banks: Digital banks emphasize the fulfillment of customer requirements over the promotion of particular products, looking to craft a frictionless user journey by customizing their offerings according to individual customer needs, said El Behery. “The essential products are those that address customer needs, including receiving money, making payments, and lending,” El Behery added.

And the regulatory differences between digital banks and NBFIs has a massive impact on the potential growth of each: “In reality, what you see is that digital banks are born without limits, and therefore are born within a scope where the sky’s the limit. When you set up a digital bank, you’re going for all the businesses [as clients] eventually,” Morillo said.

Quality over quantity: Digital banks don’t need to start with a large offering of products, but rather a few that are very well thought-out and seamless in terms of user interface and user experience, said Morillo.

That forward-looking view also factors into the underlying infrastructure for digital banks: Digital banks deliver personalization for users — effectively infinite “tiers” and personal offerings — using advanced technology and data-driven solutions, El Behery said. The tech stack behind MDI’s planned digital bank, for example, is a “refreshed” take on the tech stack already used for Banque Misr, El Behery said. “We redesigned the whole backend system to cater for the needs of the customers for the digital bank,” he added.

Digital banks are first a retail solution, but they can also serve the smaller end of the SME scale very nicely: Sole proprietors are a hybrid of SME and retail clients: “They behave like individuals, but they have a company of their own. Digital banking provides the solutions for this type of client,” Morillo said. These clients lack the time needed to spend a full or half business day at the bank to complete a transaction, he noted. “That’s where there’s a big network to tap into. There’s several hundreds of thousands of individuals that can be served from a digital platform.”

Corporate clients will eventually come along: When it comes to digitization, corporate clients are on their own path, especially given the complexity of their transactions, El Behery said. While they do have distinct needs, the essential shift towards digital banking primarily impacts the retail sector, he said The digitization process in corporate banking frequently revolves around enhancing procedures and managing data efficiently. Corporate banking won’t see in the near term the type of profound tech- and methodology-driven changes that we’re about to see in the retail segment, according to Morillo.

What do digital banks need to truly take off? It’s primarily about the right country, with the right mindset. “You need a country with a regulator that wants a clear and bold agenda of financial inclusion. A country with a young population that is hungry for these types of solutions. A country that is willing to embrace technology. It’s not just about being young — it’s a mindset and it’s about wanting to leapfrog, which we can see in Egypt all over the place,” Morillo said.

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3

Investment Watch

Snackmaker Edita lands USD 45 mn loan from the International Finance Corporation

Off the TODO list: The International Finance Corporation (IFC) has signed off on a USD 45 mn loan to EGX-listed baked goods producer Edita Food Industries to finance growth at home and regionally. Edita will use the proceeds to support working capital, fund expansion, and finance debt repayments, it said in a press release (pdf) yesterday. The facility will have a tenor of eight years with a two-year grace period, Edita said, without disclosing the rate of interest.

This isn’t the first time Edita and the IFC have hooked up: The international lender lent the baked goods producer USD 20 mn in 2019, helping propel Edita into Morocco two years later. Half of this will be refinanced by the new loan, Edita said in an EGX disclosure (pdf) yesterday.

Where’s the growth going to come from? Edita noted that the funding will “allow the company to capitalize on emerging opportunities in new markets” while growing at home both organically and through acquisition.

Edita is borrowing to grow: The new loan will be used in part to fund fresh capex, which the company wants to more than double to EGP 800 mn this year. Those spending plans don’t include the EGP 400 mn it plans to inject into Edita Frozen Food Industries — previously Fancy Foods — which it acquired in May. The transaction is being partly funded by loans worth EGP 390 mn from the National Bank of Kuwait.

FX + jobs: The funding from the IMF will “build Edita’s capacity to withstand shocks and stresses from forex shortage and inflation” and support jobs, according to a disclosure on the IFC’s website. The lender said the finance will protect more than 7k jobs in Egypt and allow the creation of 400 new jobs.

The Edita loan comes less than a week after the lender agreed to lend USD 25 mn to Kandil Steel to “support the company’s operational and financial resilience” amid the FX crunch and soaring input costs.

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4

Economy

Egypt faces more than USD 29 bn in debt repayments in 2024, CBE data suggest

2024 is going to be an expensive year: New central bank projections out last week estimate that we’re going to have to repay almost a fifth of our total external debt obligations in 2024 alone.

How do we manage it all? Economist Hany Geneina floats the possibility of the IMF more than doubling our USD 3 bn assistance program should we deliver on our commitments, providing a vital line of FX that would enable us to narrow our significant external financing gap.

Here’s how it could all play out:

A big year of repayments ahead: Egypt will likely have to spend USD 29.2 bn on debt repayments in 2024, according to updated central bank estimates (pdf) published last week.

The need-to-knows:

  • It’s significantly more than we’re paying this year: This is USD 10 bn more than our expected debt servicing bill for this year, which the central bank now puts at USD 19.3 bn, and is almost a fifth of our total external debt.
  • It’s more than USD 1 bn more than we had previously expected: The central bank in Juneestimated that we will repay around USD 28 bn over the 12-month period.
  • It’s mostly due to higher interest rates: The central bank now projects Egypt will have to repay USD 6.3 bn in interest next year, USD 841 mn more than its previous estimate in June.

Remember: Egypt’s external debt has quadrupled over the past decade, reaching a record high of USD 165.4 bn at the end of March due to increased borrowing from multilateral lenders and international debt markets. This equates to around 38.5% of GDP, below the IMF’s 50% threshold for manageable debt levels, according to the report. More than two-thirds of the country’s external debt is denominated in USD.

We’ll be paying significantly more over the longer term, too: Egypt’s debt repayments between 2024 and 2027 now stand at USD 83.7 bn, according to the central bank. That’s USD 6.4 bn more than it had estimated in June.

Background: Our external position has come under pressure in recent months on the back of higher interest rates, turmoil in the financial markets, and a shortage of foreign currency. The EGP has lost more than half of its value against the USD since March 2022 in a series of devaluations aimed at easing FX liquidity stress.

The financing gap: Goldman Sachs estimates that Egypt is facing a financing gap of more than USD 11 bn over the next five years, which it is trying to fill via a mixture of state asset sales, new concessional financing from multilateral lenders, higher tourism and export revenues, and most recently via currency swap agreements. Authorities are also in negotiations with the IMF regarding the completion of the first and second reviews of the USD 3 bn assistance program, which should release almost USD 700 mn.

How we could potentially fund it: “It’s expected that we receive debt inflows totalling USD 6-7 bn, proceeds from the potential panda and samurai bond sales worth a combined USD 1 bn, the second and third tranches of the IMF loan along with USD 1.2 bn under the IMF’s Resilience and Sustainability Facility, as well as more than USD 5 bn from state asset sales,” economic analyst Hany Geneina told Enterprise yesterday.

The IMF could bump up our loan if we deliver: “It’s expected that the IMF loan gets upsized to USD 6-8 bn, up from USD 3 bn, following the much expected front-loaded reforms early next year — including lifting energy subsidies, an aggressive rate hike that could exceed 300 bps, and a decision to float the EGP,” Geneina told us. The potential bump would also be in line with the fact that we have a debt repayment worth USD 5.1 bn to the IMF next year, surpassing the amount of the current USD 3 bn arrangement, Geneina added.

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5

Privatization

Rumor has it: Midar will IPO on the EGX next year + is looking to sell land to Gulf investors to raise FX

It’s Midar’s turn to be front and center of privatization chatter in the local press: Midar — FKA El Mostakbal Urban Development and one of the four state-owned real estate firms to be included in the privatization program — is the subject of several unconfirmed reports that surfaced in the local press yesterday.

#1- SFE lining Midar up for the EGX? The Sovereign Fund of Egypt (SFE) is preparing to list the state-owned real estate firm on the EGX in 1H 2024, according to Al Borsa, which cites sources it says are familiar with the matter. Earlier this year, the SFE added Midar to its pre-IPO fund, which looks to bring strategics onboard to invest and help restructure state-owned firms before they go public.

It’s not clear what could be on offer: Al Borsa did not include any comment on the percentage stake that could be offered in a potential IPO. It was reported in July that the SFE could offer 25-30% of the company to a strategic investor before later taking it public on the EGX.

The potential sellers: The newspaper says that Banque Misr and the National Investment Bank — which together own almost 75% of the company — intend to fully exit the company. The remaining shareholders are Banque Misr’s investment arm Misr Capital (5.65%), the National Bank of Egypt (8.9%) and Arab Contractors (10.94%).

#2- Midar in talks to sell land to GCC investors? As harq Busine ss reported yesterday that the company is negotiating with GCC investors to sell off some of its land in exchange for greenbacks, citing two sources it says have knowledge of the matter. The company is also reportedly negotiating to enter development partnerships with the unnamed GCC investors.

Remember: Midar was established in 2006 to develop the 11k-feddan Mostakbal City project between New Cairo and the new capital.

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6

DEBT WATCH

NBE’s Al Ahly Tamkeen Microfinance closes EGP 707 mn bond issuance

Al Ahly Capital Holding’s microfinance arm has raised EGP 707 mn in a securitized bond issuance,the transaction’s financial advisor Al Ahly Pharos said in a statement (pdf) yesterday. Al Ahly Pharos Investment Banking, the investment banking arm of the National Bank of Egypt’s Al Ahly Capital Holding, said that the bond was backed by a EGP 787 mn portfolio from Al Ahly Tamkeen Microfinance and issued by Al Ahly Securitization Company.

The details: The bond was split into three tranches rated P1, P1, and A by the Middle East Rating Services (MERIS).

Regional and local banks got involved: The issuance was fully subscribed, with the National Bank of Egypt, AAIB, Attijariwafa Bank Egypt, Bank ABC, and Al Ahly Pharos each buying a piece.

Advisors: Al Ahly Pharos acted as the financial advisor and as one the transaction’s underwriters alongside AAIB and the National Bank of Egypt. AAIB also acted as the custodian and the placement agent, while Dreny & Partners was the legal advisor and KPMG acted as the auditor of the transaction.

DATA POINT- Egyptian companies have issued more than EGP 55.2 bn of securitized bonds so far this year, according to data tracked by Enterprise — almost 22% more than what was taken to market across the whole of 2022 and more than three times the volumes in 2021. Al Ahly Pharos is claiming a market share of north of 44% this year, saying it has taken to market nine transactions worth EGP 24.4 bn so far this year.

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7

Fintech

Egyptian fintech player Valu announces Jordan expansion, puts Saudi venture on hold for now

Valu to enter Jordan next year, scraps Saudi expansion plans: Homegrown fintech platform Valu has announced plans to launch in Jordan by early 2024 under its expansion plan for the region, it said in a statement (pdf) Sunday. Valu is currently in the process of applying for a license from the Central Bank of Jordan and expects to reach profitability within the first two years of launching.

The details: Valu will invest USD 10 mn into expanding into Jordan, around USD 7 mn (JOR 5 mn) of which will go towards capitalizing its local unit, CEO Walid Hassouna told CNBC Arabia.

Hello Jordan, goodbye Saudi: Valu has excluded Saudi Arabia from its regional expansion plans due to market conditions and doubts over profitability, it said in the statement. Market conditions will not allow the company to “flexibly” roll out its financial services while the profitability projections fall outside of its strategy, it said.

Regional growth is a priority for Valu, the Valu statement said, flagging that it is actively looking at markets in North Africa. The company is looking at markets “with favorable dynamics that allow for the implementation of its full product and services … flexibly.” Valu is looking to reach profitability in expansion markets “within 12-24 months of launching.”

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8

LAST NIGHT’S TALK SHOWS

The Homeland conference, elections are all Egypt’s talking heads can talk about right now

The “St ory of a Homeland ” forum once again dominated last night’s talk shows. El Hekaya’s Amr Adib (watch, runtime: 4:39) and Masaa DMC’s Osama Kamal (watch, runtime: 13:04) gave time to President Abdel Fattah El Sisi’s directive to the Transport and Housing ministries to complete national projects “with me or someone else.” Pundits also dedicated time to other presentations including from Housing Minister Assem El Gazzar and Transport Minister Kamal El Wazir. Al Hayah Al Youm (watch, runtime: 17:38) and Masaa DMC (watch, runtime: 1:00) had coverage.

New gateway to Upper Egypt: The new Bashteel railway station in Giza will open this month in time for Armed Forces Day celebrations, El Wazir said during the conference (watch, runtime: 2:36). The station was originally intended to open its doors in March.

Is Amr Adib telegraphing a post-election cabinet shuffle? We need to consider our current members of government, evaluate their efficiency, and the speed at which they have completed government plans and projects, particularly when it comes to housing, infrastructure and transportation, said Adib (watch, runtime: 3:45). Whatever comes next demands competent ministers equipped with the skills to handle global crises with limited resources, he added.

Cr owding, technical issues at notary offices: The National Election Authority has stepped in to reduce crowding and fix technical errors at notary offices providing candidate endorsement forms, reported El Hekaya (watch, runtime: 6:51). Ala Masouleety’s Moussa also covered the issues facing notary offices, and mentioned the NEA’s statement accusing people of spreading rumors about the election (watch, runtime: 3:13).

Historical m ilitary documents could be made public: An armed forces committee is studying the possibility of releasing several documents from the October War, Maj. Gen. Samir Faraj, a member of the committee, said on Ala Masouleety (watch, runtime: 4:07).

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9

EGYPT IN THE NEWS

NYT spotlights Wael Hana, the Egyptian-American businessman tied up in the Bob Menendez corruption scandal

There isn’t much being written about Egypt internationally this morning: The New York Times is out with a piece detailing the rise and fall of the co-defendant in US Senator Robert Menendez’s case, the Egyptian halal meat importer Wael Hana. Meanwhile, the Daily Mail reports that eight storage chambers have been uncovered by an Egyptian, German archeological mission within Sahura’s Pyramid in the Abusir Necropolis.

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10

Also on our Radar

Japanese firms talk renewables, green fuel investments with SCZone. PLUS: GAFI’s plans for silver licenses + SFE interest in EgyCOP

INVESTMENT-

More Japanese investments incoming? The General Authority of the Suez Canal Economic Zone (SCZone) met with representatives from 24 Japanese companies interested in investing in the zone, it said in a statem ent yesterday. The meeting focused on promoting investments in green fuels and renewable energy, and included representatives from local and international energy companies already operating in the country.

STARTUPS-

GAFI could debut silver licenses this year: The General Authority for Investment and Freezones (GAFI) could start to issue silver licenses for local startups in 4Q 2023 to help ease administrative hurdles, A sharq Busines s reports, citing GAFI head Hossam Heiba. GAFI is set to submit the details of the proposed new license to the cabinet for approval within two months, Heiba added.

What’s a silver license? The silver license will provide incentives and ease the process for startups to register their companies onshore and establish their headquarters in Egypt, Heiba said, without providing further details. GAFI last year launched golden licenses, which aim to accelerate projects by requiring companies to receive only one approval before starting work.

CLIMATE-

SFE, local banks eye EgyCOP: The Sovereign Fund of Egypt (SFE) and a number of local banks are considering investing in carbon credit fund EgyCOP, writes Al Borsa, citing a cabinet-issued document. Al Borsa did not name the local banks interested in the Avanz Capital-managed fund.

ICYMI- EgyCOP is set to invest in low-carbon projects that issue carbon credits with an initial EGP 1 bn in funding and will complement the EGX’s planned voluntary carbon market, which policymakers are working to get off the ground.

EgyCOP could launch by December or January next year, Avanz Capital’s managing director Haytham Wagih told Enterprise last week, adding that the firm wants to partner up with international institutions to set up EgyCOP and is in advanced talks with potential investors and institutions that can provide technical assistance, consulting firms, auditors, and verifiers.

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PLANET FINANCE

Don’t be the next Instacart, VCs tell startups as Nasdaq newbies tread water

Market unease about interest rates has soured the mood on the US IPO market, prompting VCs to advise startups to postpone plans to go public despite recent optimism following a spate of tech listings, reports the Financial Times. Tech startups Arm, Instacart and Klaviyo were all met with strong investor demand during their recent IPOs but their start to life on the Nasdaq has been mixed, with investor interest waning following hawkish signals from the Federal Reserve.

Remember: Arm and Instacart both made their debuts on the Nasdaq last month in what were widely seen as bellwether listings that could potentially reinvigorate the stalled US IPO market. Arm shares have spent the past two weeks treading water (though remain up 5% from the USD 51 IPO price), while Instacart has fallen below its USD 30 listing price.

What VCs are saying: Many startups had delayed their plans for initial public offerings over 18 months ago in 2021, but VCs advise waiting another year. “In our portfolio we would advise: unless you really need to, hold back,” said Mike Volpi, general partner at European VC Index Ventures. “The market has been rough in the past few weeks . . . Unless you need to go out, I’d wait until the second half of next year.”

ALSO- Pressure eases on ECB as euro inflation hits new low: Annual inflation in the eurozone slowed to its lowest level in almost two years in September as energy prices continued to fall, according to flash figures (pdf) out Friday. Consumer prices grew at a 4.3% clip during the month, down from 5.2% in August, the weakest rate since October 2021. This comes a few weeks after the European Central Bank raised interest rates to record highs in a bid to curb inflation.

EGX30

20,055

-0.6% (YTD: +37.4%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

19.25% deposit

20.25% lending

Tadawul

11,040

-0.1% (YTD: +5.4%)

ADX

9,785

-0.3% (YTD: -4.2%)

DFM

4,164

+0.5% (YTD: +24.8%)

S&P 500

4,288

-0.3% (YTD: +11.7%)

FTSE 100

7,608

+0.1% (YTD: +2.1%)

Euro Stoxx 50

4,175

+0.3% (YTD: +10.0%)

Brent crude

USD 92.20

-1.0%

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THE CLOSING BELL-

The EGX30 fell 0.6% at yesterday’s close on turnover of EGP 1.9 bn (11.9% below the 90-day average). Foreign investors were net sellers. The index is up 37.4% YTD.

In the green: Orascom Construction (+20.0%), Abu Dhabi Islamic Bank (+4.4%) and Eastern Company (+3.6%).

In the red: Fawry (-7.2%), Mopco (-3.8%) and Ezz Steel (-3.8%).

Asian markets are in the green this morning as we hit dispatch time, with the Hang Seng and Nikkei leading the gainers. Both Korea’s Kospi and Shanghai Composite are also in the green. Traders are reaching positively to news that Chinese factory activity expanded for the first time in six months. Futures hint suggest markets in Europe and the United States will start the day in positive territory, with only Toronto looking at red when the opening bell sounds.

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12

AROUND THE WORLD

Kurdish militants target Turkish parliament in bomb attack

Two Kurdish militants detonated a bomb close to the Turkish parliament building in Ankara yesterday, the same day that MPs returned from recess for the new legislative year. The Kurdistan Workers’ Party (PKK) has claimed responsibility for the apparent suicide attack. “One of the terrorists detonated himself, while the other was neutralized by security forces,” the country’s interior minister wrote on X(formerly known as Twitter). The Turkish military has carried out retaliatory airstrikes on suspected Kurdish militant targets in northern Iraq. (Associated Press | Reuters)

Egypt condemned the attack: The Foreign Ministry con demned the attack “in the strongest terms” and expressed its “full solidarity” with Turkey. The message of solidarity comes a few months after Egypt and Turkey restored diplomatic ties and reappointed ambassadors in July, bringing to an end a decade of tensions.

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

Published every Monday in EnterpriseAM.

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13

BLACKBOARD

Are we about to see an exodus of foreign teachers from Egypt’s international schools?

H ow are Egypt’s private + international schools managing to retain expat teachers? The process of recruiting — and then retaining — expat teachers has become something of an ordeal over the past several months as a result of both the ongoing FX crunch and devaluation. Schools have been struggling to mitigate the effects of the EGP devaluation this year and are bracing for potential further weakening of the currency in the near term, several school officials told Enterprise. Given that private international schools compensate expat teachers using a blend of FX and local currency, schools have been reconsidering the intricacies and potential consequences of this compensation structure.

Going local: In an attempt to tackle the difficulties brought by the present financial constraints, several schools are currently considering both “local international” hires — ie foreigners already residing in Egypt — and local hires for their staffing requirements. Schools are pouring in more money into the development of local hires and the development of their accreditation to maintain their quality standards. Schools have also increased teacher salaries this year—giving Egyptian teachers priority.

Some private + international schools are feeling the pinch more than others: While some schools exclusively hire expats, others have a combination of locally hired staff and expats, and others generally staff only a few expats. Those who are experiencing the highest turnover rate in expats are the third category because they’re unable to offer attractive packages in hard currency, El Alsson Executive Director Karim Rogers told Enterprise.

Schools that have a combination of foreign and local hires have been feeling the hit as well: Schools should ideally maintain a staff requirement of 20% consisting of foreign hires, but the weakening currency has made it difficult to do so. “No international school reached the quota this year,” Rogers tells us. International schools opt for foreign teachers because international certification requirements obligate them to hire a certain number of foreign teachers every year and failing to do so could put these schools’ certifications in jeopardy, CIRA Education CEO Mohamed El Kalla previously told us.

Some expats found themselves getting paid less: At many international schools, foreign teachers have their salaries set in foreign currency, with a portion paid out in FX and the rest in EGP equivalent. After the EGP devaluation, some expats found themselves receiving reduced salaries due to the terms of their contracts. “When I accepted the offer, I hadn’t realized how much I would have been affected by the currency drop because I was originally being paid in EGP and 75% of it would be converted to GBP and I would keep 25% as EGP,” according to a former English teacher at an International school, who relocated to Saudi Arabia due to the devaluation.

Recruitment this year was especially difficult with more expats opting for other markets: Although contracts are finalized now that the academic year is underway, some expats opted to exit Egypt at the end of the last academic year as they were uncomfortable with the current conditions. “After the school year, some expats decided to explore jobs in the Asian, South American, Saudi, and UAE markets, opting to avoid European and American markets because they’re also going through their own cost of living crisis,” said Rogers. Chinese schools attracted significant talent at teacher recruitment fairs earlier this year due to their offer of salaries that Egyptian international schools simply couldn’t match, Sherine Galal, chairman of the Consultancy Group for International Education, told Enterprise.

And there’s a problem with the caliber we’re left with: Given the FX crunch, it is becoming increasingly expensive to hire expats of very high credentials, our sources agreed. “A lot of schools can’t afford to hire the higher calibers of foreign expats, who demand higher salaries in USD, which severely impacts learning at the end of the day,” Galal tells us. Some schools’ decision to hire expatriates with lower qualifications can lead to a decrease in the overall teaching quality, she said.

Old habits die hard: Schools who want to maintain their reputation would try “making a balance of hiring expats, certified local foreign hires, and internationally certified local teachers, is the solution for such an impediment. In doing so, schools would be able to spend the extra fees on technology, educational resources, and professional development for local teachers,” said Galal.

Altogether, schools are getting more creative in where to direct their FX resources: Some are opting to channel their FX towards expats in administrative roles, such as principals or academic coordinators, who are then responsible for recruiting and training local teachers. Other institutions chose to invest in expats who teach base years to maintain the quality of foundation years. Meanwhile, some are opting for more “local foreign” hires — which are less expensive than hiring foreigners from abroad — and then financing their accreditation or helping them get certified abroad, Galal told us. “This year there was a war of who could attract more from the local market,” Rogers told us.

What have schools done to retain teachers? There was a typical salary increase of 15-20% but “we increased the salaries of the Egyptians more than the expats because they were severely affected by the devaluation, and we had to show them our appreciation given that they’re the backbone of our school,” Rogers tells us.

The upshot: The tides are shifting in favor of the local market: As more and more expats have been leaving Egypt since the pandemic hit and the FX crisis has worsened, the realization gradually dawned that there is “significant potential in highly educated and proficient Egyptian teachers readily available locally and open to employment at much cheaper rates,” an anonymous source from SABIS told us. There’s a current “youthfulization of schools,” with many schools showing a growing inclination to hire highly qualified local Egyptians, a significant portion of whom hold a PGCE (Postgraduate Certificate in Education), our source said. This has led teachers to invest in their own professional development, according to our SABIS source.

Your top education stories for the week:

  • Egypt x UNESCO: The cabinet approved Egypt's participation in an amended UNESCO agreement focused on recognizing higher education qualifications in Arab countries.
  • EdMin welcomes new teachers: Those who have passed the “30k teachers” competition will be joining work in the coming days. (Education Ministry statement)
  • A national dialogue conference for education: The Education Ministry plans to launch a national dialogue conference to discuss the development of the public secondary education system. (Education Ministry statement)
  • UK trade envoy to Egypt in town to promote collaboration in higher education: UK Trade Envoy to Egypt Jeffrey Donaldson and representatives from 10 British universities met with PM Madbouly to discuss furthering educational partnerships between the two countries. (Cabinet | British Embassy Cairo, pdf) .
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CALENDAR

OCTOBER

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

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

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

4 October (Wednesday): OPEC+ meeting.

6 October (Friday): Armed Forces Day.

7 October (Saturday): HHD shareholders to consider NOSI’s offer to acquire Heliopark land.

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

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

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

12 October (Thursday): Egyptian-Italian Business Forum.

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

Late October-14 November: 3Q2023 earnings season.

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

20 October (Friday): Deadline for applying for Dar Venture’s Dare incubator.

26 October (Thursday): Daylight saving time ends.

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

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

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

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

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

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

Signposted to happen some time in October:

NOVEMBER

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

8 November (Wednesday): Turkish-Arab Economic Forum 2023, Istanbul.

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

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

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

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

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

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

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

DECEMBER

1-3 December (Friday-Sunday): Egyptian expats vote in the presidential election.

9-15 December (Saturday-Friday) :The Engineering Export Council of Egypt’strade mission to Saudi Arabia.

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

10-12 December (Sunday-Tuesday): Voting in presidential election takes place in Egypt.

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

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

20 December (Wednesday): End of sugar export ban.

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

Signposted to happen sometime in December:

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

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

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

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

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

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

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

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

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

25 February 2024 (Sunday): Deadline for bidders for oil and gas expansion in the 23 new regions.

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

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

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

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

2Q 2025: Safaga Terminal 2 to start operations.

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