As pressure mounts on the EGP, the EU is readying a multi-bn EUR investment package

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WHAT WE’RE TRACKING TODAY

EU reportedly readying Egyptian financial support package as EGP pressures mount

Good morning, friends. We have a big issue for you this morning as the workweek roars to a close.

The two BIG STORIES HERE AT HOME: The European Union is said to be mulling a package of investmentin Egypt that could clock in at nearly USD 10 bn — and that it wants to “explore options with member states to help Egypt address its heavy debt burden.” That would be very welcome news indeed, possibly giving the central bank a bit of breathing room to tackle a float of the EGP as pressure builds. The greenback broke past the EGP 50 mark yesterday on the parallel market and forwards have hit a new low, as we note below.

MEANWHILE: Eastern faces monopoly complaint. Two major cigarette distributors have filed a complaint with the Egyptian Competition Authority alleging that Eastern Company and a key shareholder have engaged in unfair competitive practices. We have that story in the news well, below.

MAJOR EU ASSISTANCE PACKAGE COMING?

WATCH THIS SPACE- Brussels is putting together a major financial assistance package for Egypt: The EU plans to marshal bns of EUR of investment for Egypt and potentially provide debt relief in some form as the bloc tries to help stabilize the economy and curb migration across the Mediterranean in the wake of the conflict in Gaza, Bloomberg reported yesterday, citing sources familiar with the matter.

The plan: The EU wants to mobilize EUR 9 bn of investment (USD 9.8 bn) in sectors including digital, energy, agriculture and transport — and hold an investment conference in spring 2024. It would also include measures to strengthen the country’s border security and crack down on smuggling as part of plans for a wider strategic partnership with Egypt.

This is much more ambitious than what we’ve heard so far: Sparse details reported by the Financial Times last month claimed that the bloc was looking to fund job creation and the green transition, as well as provide access to more Ukrainian grain and fertilizers.

VdL will be in Cairo this weekend: EU Commission President Ursula von der Leyen will visit Cairo for talks with President Abdel Fattah El Sisi on Saturday, her spokesperson, Eric Mamer, said yesterday. Mamer didn’t get into what’s on the agenda, though Bloomberg’s sources suggested that the rescue package will be a key focus of the talks. VdL will head to Jordan to meet with King Abdullah following the meeting.

The key line: “The EU was already exploring a partnership but now wants to accelerate the push given Cairo’s strategic significance and concerns about increasing refugee flows,” Bloomberg writes. The story was reported by the business information service’s Brussels bureau.

BNS MORE FROM AFREXIMBANK?

A lot more Afreximbank funding could also be in the works: The continental lender is looking to extend USD 11 bn in credit facilities to a number of Egyptian companies, the bank’s director of trade and corporate finance Ayman El Zoghby told CNBC Arabia yesterday. Afreximbank inked 65 agreements worth a combined USD 40 bn during this week’s Intra-African Trade Fair in Cairo, USD 3 bn of which went to projects led by Egyptian corporates. The bank is also looking to set up its own freezone in Egypt and aims to finish up the necessary paperwork during 1Q 2024.

MOUNTING PRESSURE ON THE EGP

EGP WATCH- Pressure continued to build on the EGP in the parallel and derivatives markets yesterday, raising pressure on policymakers to move ahead with a true float of the currency.

#1- The USD / EGP breaks the 50.0 barrier in the parallel market: The EGP weakened to a record low against the greenback in the parallel market yesterday. Local media reported the currency changing hands at more than 50.0 per USD yesterday, more than 60% below the official exchange rate of 30.9.

#2- Currency forwards hit a fresh record low: Non-deliverable forwards (NDF) contracts have fallen to a record low since the war in Gaza began last month. The three-month EGP contract is down 14% over the period to 37.7 and the 12-month NDF has slid 11% since late September to 47.0, Bloomberg reports.

How to think about the gap between forwards and the parallel market. In a nutshell: Black market = our current mental state. Forwards = future direction of travel. Forwards often miss the mark, but the market for them is a lot more liquid — and a vastly more transparent — than the parallel market. The parallel market is disproportionately influenced by the sentiment of individual sellers rather than by corporates making (comparatively) large purchases to cover L/Cs and transfers.

Retail sentiment matters: The greenback was already changing hands at EGP 40-41 in the parallel market — 30% lower than the official rate — in the middle of October, but the CBE’s decision to impose restrictions on credit card use triggered a rush out of the EGP. Within a week, the exchange rate had weakened to 48.00 from 42.00. It has since slid further due to anxiety about the impact of the war on the Egyptian economy.

#3- The gap between CIB’s London- and Egypt-listed securities is widening: CIB’s London-listed depository receipts are now trading at a 46% discount to the bank’s shares on the EGX, the widest the gap has been since 1997.

Analysts are split over how soon after next month’s election the central bank will float the currency: Analysts at Societe Generale think the central bank could move soon after the presidential election, while Deutsche Bank and Morgan Stanley are forecasting a move in the first quarter of 2024, according to Bloomberg.

The sooner the better: “The later authorities adjust the valuation of the currency, the more they’ll need to do. Time is certainly against them,” SocGen emerging markets strategist Gergely Urmossy told Bloomberg.

Bloomberg is now factoring in Egypt’s refusal to take in Palestinian refugees into its outlook: “Adding to the negative outlook, hopes are fading that Egypt will quickly receive any meaningful financial assistance related to its role in supporting Palestinians fleeing Israel’s bombardment of the Gaza Strip,” it writes.

DATA POINT-

Read the latest budget figures through your fingers (or not at all): Sharply higher borrowing costs mean that the Finance Ministry’s latest fiscal report (pdf) isn’t exactly light reading material.

Interest bill more than doubles:We spent EGP 391.8 bn on debt service in the first two months of the fiscal year. That’s 160% higher than the EGP 149.9 bn spent in the same period last year.
That’s almost double revenues: The government brought in EGP 206.9 bn during the two-month period. The debt service bill alone was almost double this.
Budget deficit widens: The surging interest bill caused the budget deficit to widen to 3.2% of GDP in the two-month period from 1.4% the year before.
New forecasts are probably going to be needed: The government forecast interest payments to rise 45% to EGP 1.12 tn across the entire 2023-24 fiscal year. We’ve spent more than a third of this in just the first two months.

PSA- Attention, shopaholics: The Central Bank of Egypt (CBE) has doubled the limit on daily and monthly prepaid cards, financial inclusion accounts, and mobile wallets, according to a circular (pdf) published yesterday. Individuals can now withdraw, transfer, or make purchases of up to EGP 60k a day, up from EGP 30k, while the monthly limit has doubled to EGP 200k.

There’s also good news for registered companies and microenterprises: Registered companies and microenterprises can now use EGP 80k a day and EGP 400k a month, double the previous allowance.

Worry not, unregistered microenterprises and the self-employed: The daily and monthly limit for unregistered microbusiness and self-employed workers is doubling to EGP 60k a day and EGP 200k a day, the same as for individuals.

HELP GAZA-

Want to support relief efforts in Gaza, but don’t know how? We’ve got you. More than 1 mn people in Gaza have been thrown from their homes and every human being there lacks access to food, water, and fuel amid the most intense bombardment any population has endured this century.

The folks at Talabat are processing donations for a range of Gaza relief appeals by charities including the Egyptian Food Bank and Misr El Kheir. Pay in EGP using your credit card.

Or check out our list of charities to which you can make direct donations via bank deposit and / or Fawry.

THE BIG STORIES ABROAD-

It was all going so well at the big Biden-Xi meet: Presidents Biden and Xi agreed to restore military communications and strengthen cooperation in several areas including AI in a potentially landmark meeting in San Fran aimed at patching things up between the two rivals. In what was only their second face-to-face meeting since Biden entered the White House in 2021, the discussions took place against the backdrop of rising tensions between the two superpowers over tech supremacy and Beijing’s ambitions regarding Taiwan.

But then… In a move almost certain to undo any goodwill generated during the sit-down, Biden again referred to the Chinese president as a dictator in an off-the-cuff remark at a media briefing. When asked by a reporter whether he still considers Xi a dictator, the US president responded by saying, “Well, look, he is.” *facepalm*

One Fed official thinks it’s too soon to declare victory against inflation: One Federal Reserve official is trying to temper the market elation that greeted this week’s soft inflation report, yesterday cautioning that the slower-than-expected figures don’t necessarily mean that the central bank is done raising rates. The Fed needs to be “thoughtful, take our time, not rush to judgment and not make declarations,” head of the San Francisco Fed, Mary Daly, told the Financial Times.

This matters to markets: Stocks soared on Tuesday and Wednesday after new US inflation data stoked optimism that the Federal Reserve will call time on its tightening cycle and not raise rates further.

SIGN OF THE TIMES-

Could AI be the answer to the scourge of “fake weather news” our elected representatives recently tried to outlaw? AI research lab Google DeepMind has developed an AI model that can generate 10-day weather forecasts in under one minute and with greater accuracy than the industry gold-standard weather simulation system. “We believe this marks a turning point in weather forecasting,” the lab said in a peer-reviewed study published this week

More on the story here: Financial Times | Washington Post | BBC.

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There are signs of unrest in our local tobacco industry: The Egyptian Competition Authority (ECA) has received a complaint from tobacco distributors JTI-Nakhla and Al Mansour International Distribution Company (AMIDC). The complaint alleges that state-owned tobacco manufacturer Eastern Company and its new majority shareholder Global Investment Holding (GIH) are engaging in monopolizing practices, a senior government official told Enterprise on condition of anonymity.

JTI-Nakhla and AMIDC think they’re unfairly being pushed out of the market: JTI-Nakhla, the local arm of Japan Tobacco International, and AMIDC accuse Eastern Tobacco of blocking them agreeing to new contracts (or renewing old ones) to have Eastern manufacture their cigarettes, according to our source.

Why this matters: Eastern Company and Philip Morris’ local subsidiary, United Tobacco, are the only licensed tobacco manufacturers in Egypt. Other companies in the local market that sell cigarettes either import them from abroad or enter into operation contracts with Eastern, which manufactures their cigarettes for them.

Eastern playing ball has never been more important: Tobacco distributors’ reliance on Eastern Company has increased with new amendments to cigarette tax laws passed earlier this month, according to our source at the ECA. The new law bans the import of middle-range cigarettes that many tobacco companies focus on, meaning that JTI-Nakhla and AMIDC have no other choice but to manufacture those product lines locally.

ICYMI: This isn’t the first time JTI-Nakhla and AMIDC have alleged monopolistic practices. The two had twice boycotted a tender offering up the rights to become our second licensed tobacco manufacturer, citing concerns about monopolistic practices and what they claimed were unfair tender conditions.

Our two tobacco manufacturers are connected at the hip: The UAE’s Global Investment Holding became Eastern’s largest shareholder in September after it bought a 30% stake from the government’s Holding Company for Chemical Industries for USD 625 mn. Unconfirmed local media reports also claimed that GIH is part-owned by an investor in the country’s other tobacco manufacturer, United Tobacco. Eastern Company acquired a 24% stake in United Tobacco in May 2022 as part of an agreement that would allow the Philip Morris subsidiary to become the second company to locally manufacture tobacco products.

IT’S BEEN AN EVENTFUL WEEK FOR EASTERN-

It’s earnings season: EGX-listedEastern Company saw its new revenue fall 32.5% to EGP 3.1 bn in 1Q FY2023 from EGP 4.6 bn in the same period last year, according to earnings release (pdf) out on Tuesday. Net income fared slightly better and dropped 20.0% y-o-y in the quarter to EGP 1.1 bn from EGP 1.4 bn.

Market reax: Eastern Company shares fell 2.0% to close at EGP 27.7 on Wednesday after it released its earnings.

Egypt’s unemployment inches up to 7.1% in the third quarter of 2023

Egypt’s unemployment rate inched up to 7.1% in 3Q2023, a 0.1 percentage point increase from the previous quarter, according to data released yesterday by state statistics agency Capmas. Unemployment was down 0.3 percentage points compared with the same period last year.

Unemployment rates among both men and women held steady: The male unemployment rate was unchanged from the previous quarter 4.8% in 3Q2023, but was down from 5.2% in the third quarter of the previous year. Unemployment among women dipped to 17.2% (-0.1 percentage points from the last quarter) and down from 19.1% in the same period last year.

More young people are out of work: Folks aged 15-29 accounted for 64.3% of all jobless people in 3Q 2023, compared to 61.8% the previous quarter. Capmas doesn’t provide an official rate of youth unemployment.

REMEMBER- By definition, the official unemployment rate only includes people who are looking for work. The labor force participation rate — which counts everyone aged 15-64 either in work or actively looking for work — came in at 44.6%, up from 43.0% in the last quarter and up from 42.7% in the third quarter of 2022.

DATA POINT: Egypt’s labor force now stands at 32 mn, up 3.2% on the previous quarter. Men make up 82% of the workforce and women make up 18%.

Dice founder’s reacquisition bid has finally wrapped: The founders of EGX-listed Dice Sports and Casual Wear have bought back 545 mn shares of the company at EGP 0.80 per share through a mandatory tender offer (MTO), according to a statement on the EGX yesterday. The founding family’s Toma Company for Commercial and Industrial Investments raised the family’s total stake in the company by 30.5% at a cost of EGP 436 mn.

So how much of the company has the founders clawed back? The family now owns 63.4% of the company after buying back 30.5% of the company through the re-acquisition bid and selling 3.9% of the company on Tuesday, according to an EGX disclosure (pdf). It held 32.9% before the transaction started.

This is a smaller chunk of the company than they were hoping to reclaim: The founders submitted an MTO last month to buy back over 838 mn shares — or 46.9% — of their company in bid to get to c.80%. Only around two-thirds of the shareholders responded to the offer.

What’s next for Dice? Post-acquisition, the founders are looking to upgrade and expand Dice’s production lines, launch new products, and increase the company’s market share. The founders also want to boost Dice’s exports and step into new markets across the region.

BACKGROUND- In September this year, they submitted an initial bid that would have restored a 90% total stake in Dice after selling over half the company to public investors during an IPO on the EGX in 2017.

Advisors: Beltone Financial Holding’s Beltone Securities acted as broker on the transaction, while its investment banking unit acted as financial advisor. Matouk Bassiouny & Hennawy served as counsel.

Correction on 25 November 2023: An earlier version of this story miscalculated the stake Toma Company for Commercial and Industrial Investments holds in Dice post acquisition.

Israel raids hospital — and finds patients and doctors

24 hours into the Al Shifa Hospital raid, Israeli forces are struggling to find the Hamas Starkiller Base: Israeli troops withdrew from Gaza’s main hospital yesterday after finding scant evidence of the “beating heart” of Hamas they had alleged was inside the facility.

Israel and its backers in Washington justified the siege on the hospital by claiming that Hamas had located a large command center underneath the complex. After raiding the premises for 24 hours, the IDF produced only images of a few guns and pieces of military equipment — items that Hamas accused Israel of planting at the scene. The armed Palestinian group and the hospital’s management have repeatedly denied that militants operate on the premises and have called for an international investigation.

Destruction and humiliation: Healthcare officials from inside the hospital have shared terrified accounts of the few hundred patients and thousands of refugees and medical workers who have been trapped inside without fuel and basic supplies for almost a week. Some 1k Palestinian men were stripped naked in the courtyard by Israeli soldiers and searched for explosives, while troops reportedly destroyed hospital equipment and bulldozers demolished part of the hospital entrance. Not a single bullet was fired from within the complex during the raid, general director of hospitals in Gaza, Mohamed Zaqout, said.

Security Council finally acts: The UN Security Council has passed a Malta-proposed resolution calling for “humanitarian pauses and the release of hostages.” Twelve of the 15 member countries voted in favor, while Russia, the UK, and the US abstained. The US had previously vetoed two resolutions calling for a ceasefire, calling for a humanitarian pause instead.

Israel has no intention of pausing: Israel’s ambassador to the UN Gilad Erdan called the resolution “disconnected from reality and meaningless” and vowed to continue the operation until Hamas is “destroyed.”

HOSTAGES- Hamas has tentatively agreed to release at least 50 captive women and children in return for a three-day ceasefire, increased aid shipments to the strip, and the release of an unknown number of Palestinian women and children detained in Israeli prisons, an Arab diplomat reportedly told the Washington Post. Israel is yet to respond to the proposal, which Qatar is attempting to broker.

ON THE GROUND-

Around 70% of Gazans no longer have access to clean water;
Fuel has entered Gaza for the first time since 7 October. All of the 23k liters of diesel that entered will go to UN aid trucks;
Paltel: Fuel shortage to trigger complete communications blackout in coming hours.

DIPLOMACY-

ASEAN defense ministers called for an end to the war;
Iran’s foreign minister met with UN and Red Cross officials to discuss the situation in Gaza;
Erdogan: Israel is a “terrorist state”;
El Sisi received the French Defense Minister Sebastien Lecornu;
Foreign Minister Sameh Shoukry held a presser with his Irish counterpart, Micheal Martin, at which they called for an immediate ceasefire.

EFG Holding, E-Finance, Palm Hills + Macro Group report 3Q earnings

EFG Holding income, revenues up on investment, commercial bank growth:EFG Holding’s net income after tax and minority interest rose 24% y-o-y to EGP 395 mn in 3Q 2023 on the back of strong growth at its investment bank and aiBank, according to its earn ings release (p df). Revenues during the quarter climbed 27% y-o-y to EGP 3 bn. Net income and revenues are each up by more than two-thirds on a year-to-date basis.

The breakdown:

Investment bank revenues rose 30% y-o-y to EGP 1.4 bn during the July-September quarter backed by the increase in brokerage revenues in Egypt and the UAE, asset management incentive fees in Egypt, and private equity management fees.
aiBank’s revenues climbed 53% y-o-y to EGP 890 mn, while its bottom line more than tripled y-o-y to EGP 345 mn. The growth was driven by higher interest income and higher fees and commissions on trade finance.
Consumer finance platform valU’s top line more than doubled to reach EGP 314 mn. Revenues across the group’s NBFI division were flat due to a pull-back in revenues at its leasing operations and Tanmeyah.

Some love for Valu: “While we saw broad-based strength across our multiple verticals this quarter, the outstanding contributions from our innovative fintech company Valu were a strategically important part of the EFG Finance story,” said (pdf) EFG Holding Group CEO Karim Awad.

RECORD SALES AT PALM HILLS-

Real estate developer Palm Hills Developments reported both strong revenue and sales growth in 9M 2023 on the back of strong demand and higher prices, according to its latest earnings release (pdf). The company’s top line climbed 18% y-o-y to EGP 11.3 bn during the January-September period, resulting in a 15% increase in net income to EGP 1 bn.

New sales doubled y-o-y to EGP 35 bn over the nine-month period on the back of rising prices and higher sales volumes, PHD said. Sales in West Cairo surged more than 140% to EGP 19 bn, largely thanks to its Badya project, where sales more than tripled following a 65% increase in sales and higher prices. Strong performance at its Hacienda Bay project helped North Coast sales to more than double to EGP 9.8 bn, while East Cairo sales rose 44% to EGP 6 bn.

The need for speed: “We are still pursuing the strategy of spending more on construction and accelerating the execution pace in the key projects, to hedge from cost inflation,” said CEO Yasseen Mansour. “Therefore, we spent more than EGP 5 bn in 9M2023 both on commercial and residential projects.”

A STRONG QUARTER FOR E-FINANCE-

E-Finance earnings cross EGP 1 bn mark for the first time: E-Finance’s net income afterminority interest jumped 68% y-o-y in 9M 2023 to EGP 1.1 bn, topping the nine-figure mark for the first time, the fintech player said in its earnings release (pdf). The company generated EGP 2.8 bn during the nine-month period, up 43% y-o-y, driven by strong growth at its digital operations business. The company’s quarterly revenues also crossed the EGP 1 bn threshold for the first time, rising 52% y-o-y to more than EGP 1 bn. Net income more than doubled to EGP 429.0 mn in the July-September period.

The breakdown:

Revenues at its flagship digital operations business grew 45% y-o-y to EGP 2.5 bnduring 9M 2023, contributing 90% of the group’s total revenues. The business’s growth was driven by solid results in its transaction revenue, cloud hosting services, and its build and operate services.
eCards revenues slipped 1% to EGP 213.7 mn. After inter-company eliminations, revenues were 39% higher at EGP 162.6 mn thanks to a doubling of card management revenues.
The top line of the company’s e-ticketing arm E-Aswaaq climbed 71% to EGP 161.0 mn on the back of solid growth in the subsidiary’s digital platforms and applications across tourism and e-commerce, as well as its digital Agri-lending platform.

What they said: “The group has kicked off the second half of the year on an impressive note and has booked record results across the board,” Chairman Ibrahim Sarhan said. “Net income surpassing the EGP 1 bn mark for the first time … reflects our ability to generate strong returns from our higher margin revenue streams.”

MACRO GROUP SEES INCOME DIP, REVENUES RISE

A jump in costs weighs on Macro Group’s bottom line: Pharma and cosmeceuticals firm Macro Group saw its net income slip 24% y-o-y in 9M 2023 to EGP 98 mn, according to its earnings release (pdf). The company attributed the dip in income to a 540% y-o-y jump in net finance costs and a drop in net operating income.

Revenues were up: Revenues increased 13% y-o-y during the first nine months of the year to EGP 590 mn, driven by an increase in pricing, which helped offset a 19% y-o-y dip in volumes sold. The revenues were driven by skincare sales, which made up 40% of the company’s revenues for the period, followed by haircare (18%) and female care (13%). The company also recorded a 33% y-o-y increase in export revenues and a 9% y-o-y jump in e-commerce revenues.

Looking ahead: “Moving ahead, our foremost priority is to enhance product volumes, revenue, and profitability, even in the face of the persistent economic challenges,” company chairman Ahmed Elnayeb said in the release.

ALSO REPORTING- Ibnsina Pharma reported 3Q 2023 net income of EGP 42.0 mn (+35% over the same period last year) on net revenues of EGP 9.1 bn. The distributor claimed a market share of 24% in the quarter and said (pdf) it expects to “retrieve … previous profitability levels once interest rates start to decline.”

Egypt Ventures appoints Ayman Ismail as new board chairman

Egypt Ventures has a new board chairman:Ayman Ismail (LinkedIn) has been appointed as chairman of the board at fintech-focussed accelerator Egypt Ventures, according to a recent post by Ismail on LinkedIn. Harvard- and MIT-educated Ismail has ample experience working with Egypt’s startups, having founded NGO accelerator Nahdet El Mahrousa as well as AUC Venture Lab, Egypt’s first university-based incubator and accelerator. He’s also an associate professor at AUC and is chairman of Paymob.

Hear from the man himself: Ismail shared his morning routine with us back in 2019.

Our nation’s talkshow hosts reminded us that there’s still an election going on!_StoryTags_! Middle East politics, Israel-Palestine conflict, election 2023

The nation’s talking heads toned things down a little to ease us into the weekend.Coverage was still dominated by the war on Gaza, but next month’s presidential election and the economy made brief appearances.

Campaign 2023: Yahduth Fi Masr’s Sherif Amer brought together a panel of Egyptian journalists to discuss the presidential candidates’ campaigns. “Ever since the war on Gaza broke out, the coverage of the presidential elections decreased to a scary extent,” Al Shorouk Editor in Chief Emad El Din Hussein told Amer (watch, runtime: 3:04). Fellow journalist Mohamed Fathy highlighted the need for presidential candidates to up their social media presence (watch, runtime: 3:11).

Want to catch a campaign up close and in person? Masa’a DMC (watch, runtime: 0:43) laid out the weekend campaign schedules for a number of the presidential candidates.

Palestinian officials on the airwaves: “The current priority at the moment is to completely put a stop to the violence in Gaza … We have lost almost 12k Gazans,” Palestinian presidential advisor Mahmoud Al Habbash told Yahduth Fi Masr (watch, runtime: 5:05). “We are losing people with every passing second … We are in a race with time to put an end to this violence, all other issues can be revisited at a later time,” he added.

Israeli hospital raid sparks outrage: Our nation's talking heads also turned their attention to the Israeli raid on one of Gaza’s largest hospitals that has been dominating headlines in the region and across the globe. The hospital has no supplies of electricity, water, or food, and dwindling medical supplies, Palestinian Health Minister Mai Al Kaila told Masa’a DMC (watch, runtime: 7:17). “The situation at Al Shifa Hospital is disastrous … there are still corpses at the hospital, whose bodies are decomposing,” she added. We have more on the story in this morning’s War Watch, above.

Big spenders: The Central Bank of Egypt yesterday announced that it is doubling the limit on withdrawals, purchases, and transactions using prepaid cards and online banking for individuals to EGP 60k a day and EGP 200k a month. The move comes following a wave of inflation that pushed up prices, which in turn increased spending, economic analyst Ahmed Shawky told Salet El Tahrir (watch, runtime: 10:18). “It is also a message of reassurance that there is liquidity in the banking sector,” he said.

MEC buys back UCP shares from US shareholder. PLUS: News from Hassan Allam, Thales, Elsewedy Electric, Oriental Weavers

M&A WATCH-

HO Group is now the sole owner of UCP:HO Group ’s pharma arm Middle East Chemicals (MEC) has bought back a 50% stake in its subsidiary pharma distributor United Company of Pharmacists (UCP), giving it full ownership of the company, Al Mal reported, citing sources close to the matter. MEC bought back its shares from US-based wholesale company Cencora (formerly known as AmerisourceBergen) in a USD 50 mn transaction. The pharma distributor has been on the lookout for new finance sources to resolve a growing debt problem.

Goodbye, rumored Saudi shareholder: Asharq Business reported earlier this month that Saudi Arabia’s medical supplies giant Tamer Group was close to acquiring a 30% stake in UCP from Cencora.

TECH-

Safer Egyptian cities: Our friends at Hassan Allam Construction have inked an agreement with French defense and security firm Thales to develop a digital platform, based on big data and AI, that will enhance and automate security systems in cities across Egypt and the region, the two companies said in a joint statement (pdf).

INFRASTRUCTURE-

Elsewedy Electric grows footprint in Saudi: The Saudi arm of Elsewedy Electric has signed a SAR 59 mn (USD 15.7 mn) agreement with the state-owned electricity distributor Saudi Electricity Company to build a new turnkey underground cable project in Mecca, it said in a LinkedIn post yesterday. The project will link a new 110/13.8 kV substation with the existing 110 kV network in Mecca, and it comes as part of a wider plan to increase the capacity of the electricity network in larger cities in the country.

ENERGY-

Oriental Weavers factory goes green: Oriental Weavers will start operating one of its Tenth of Ramadan factories using renewable energy, the company said in a statement (pdf). Under an agreement with Amarenco Solarize, the solar power producer will provide the factory with a solar power station with a capacity of 1.3 MW, covering 80% of the factory’s energy consumption. The move will reduce the factory’s carbon emissions by 2.3k tons a year.

Saudi stocks lure foreign investors back after October outflows

Investors go running back to Saudi Arabia: Foreign investors have bought SAR 12.7 bn (USD 3.4 bn) worth of Saudi stocks in just the first two weeks of the month, after having sold SAR 26 bn (USD 6.9 bn) last month when they rushed to exit the Saudi market, Bloomberg reported. Mounting concerns that the Israel-Hamas war could escalate into a regional conflict and volatility in the oil market scared off investors from the Saudi market, but investors are returning on the back of promising equity valuations, according to the outlet.

One of MENA’s biggest asset managers is going to get even bigger: Abu Dhabi’s Chimera Investment and ADQ are in reportedly talks to add another USD 50 bn worth of assets to an existing USD 50 bn joint fund Lunate, Bloomberg reported, citing unnamed sources it says are in the know. Lunate was announced in September and plans to invest in “private equity, venture capital, private credit, real assets, public equities, and public credit,” according to a statement (pdf).

ALSO WORTH NOTING-

Dangers remain for China’s economic recovery despite promising October figures: Analysts are still concerned about China’s economic health despite industrial output and retail y-o-y figures for October beating expectations, pointing to the struggling property sector and lack of reforms. (Reuters)
Morocco’s Neo Motors eyes IPO: Morocco’s first carmaker Neo Motors is targeting a domestic listing on the Casablanca Stock Exchange to help it expand into EV production. (Bloomberg)

EGX30	24,139	+1.0% (YTD: +65.4%)
USD (CBE)	Buy 30.83	Sell 30.96
USD atCIB	Buy 30.85	Sell 30.95
Interest rates CBE	19.25% deposit	20.25% lending
Tadawul	11,023	+1.5% (YTD: +5.2%)
ADX	9,566	+0.4% (YTD: -6.3%)
DFM	3,961	-0.3% (YTD: +18.7%)
S&P 500	4,503	+0.2% (YTD: +17.3%)
FTSE 100	7,487	+0.6% (YTD: +0.5%)
Euro Stoxx 50	4,316	+0.6% (YTD: +13.8%)
Brent crude	USD 81.18	-1.6%
Natural gas (Nymex)	USD 3.15	-1.4%
Gold	USD 1,964.30	-0.1%
BTC	USD 37,654.40	+5.8% (YTD: +126.8%)

THE CLOSING BELL-

The EGX30 rose 1.0% at yesterday’s close on turnover of EGP 3.4 bn (29.9% above the 90-day average). Local investors were net buyers. The index is up 65.4% YTD.

In the green: Palm Hills Development (+5.7%), Alexandria Containers and Cargo Handling (+5.1%) and E-Finance (+5.0%).

In the red: Telecom Egypt (-2.9%), Eastern Company (-2.0%) and Ezz Steel (-1.9%).

My Morning Routine: Raoul Vaswani, managing director of Bafra Industries

Raoul Vaswani, managing director of Bafra Industries, owner of the Moments collection: Each week, My Morning Routine looks at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Raoul Vaswani (LinkedIn), managing director of luxury leather goods manufacturer Bafra Industries, the company behind Moments.

My name is Raoul Vaswani and I am the managing director of Bafra Industries. Bafra is a family-owned business in Alexandria established by my father and we create high-end leather bags and wallets as well as printed products and corporate goods.

My mornings start with my childrens’ feet in my ribs and my wife poking me to go and make coffee, but I love it because it means I have a happy, healthy family. After getting my two sons ready for school, I try to do some exercise, either with a trainer or at the gym. I spend a lot of time driving between Alexandria and Cairo, so it’s normally the time when I catch up on emails, calls and read Enterprise.

The work day tends to go in different directions, so I find it helps to always have a paper and pen in front of me for doodling or mind maps. I might never look at it again but the process of putting pen to paper has a way of embedding thoughts in my head. My work day starts with breaking down my tasks for the day, because if I sit and think about everything that needs to be done it can become overwhelming.

I try to balance day-to-day problem solving with planning for the future of the company: If we’re always looking at what’s happening today we’ll wake up at some point in time and we’ll no longer be relevant. I’m attending a trade fair next week in Dubai to try and see if we can reopen some export channels. We currently sell 100% of our products in Egypt and if we can’t restart exports in the next year or two, I don’t see our business being sustainable, at least not in its current form.

We consider ourselves a teaching factory: We train our employees starting with basic skills until they can get involved in more advanced tasks and later make a product from scratch.

Yet that’s become harder and harder over time, as few of the younger generation in Egypt are enthusiastic about learning a trade, especially as there’s still a certain stigma associated with working with your hands. Even when labeled artisanal craftsmanship, manual labor is often seen as something less worthy than sitting at a desktop on a computer in Egypt.

I think there’s satisfaction in creating something: When you see something that you havebeen involved in the creation of, there is an emotion attached to it on every level. My father’s 74 years old and he'll still sometimes go to the factory and if he's in a bad mood, roll up his sleeves and just go and cut leather.

We’ve tried to increase the number of women that we hire within our production cycle, generally as we find they are more willing and eager to learn. However, due to societal pressures, once they get married they often don’t return to the workforce.

The younger generation want Made in Egypt brands: Trends no longer lean towards flashy bags with branding, customers want brands that they can relate to. For a lot of people in Egypt, that's about saying, okay this is an Egyptian brand that's supporting local workmanship and is something that we can be proud to say is Egyptian made. As a traditional brand we need to balance this with not alienating our existing customer base, which tends to sit in the 40-50 plus age bracket.

Customers connect with sustainability: The leather industry globally comes under a lot of pressure for not being environmentally friendly, due to the volume of water used in the tanning process, or the fact that it’s an animal-based product. Yet we have customers who come in on a daily basis and tell us that they have had bags for 20-30 years or that they’ve inherited from their mothers and are still in perfect condition. There’s a lot that can be done to improve production processes from an environmental perspective but people also connect with sustainability and longevity in products.

Life is work and work is life — it’s all one and the same: I don’t think it’s a good mindset to work in order to take a two-week holiday, as work becomes something you’re trying to get to the end of. I try to prioritize my day and be as productive as possible in those areas. Happiness comes from meaning and purpose.

I also just finished the Arnold [Schwarzenegger] documentary on Netflix: I'm fascinated by him or people like Tim Grover who have this kind of elite mentality. I don’t necessarily know if I would want to lead my life that way, but I think it’s great that there are people out there that are just wired towards success. I also enjoyed the Three Little Words podcast by John Bishop and Tony Pitts.

The best piece of advice I think I have would be the idea that perception creates reality;everyone’s version of the world is different, formed by their own thought process. It’s a liberating idea, as it means you don’t always feel the need to convince people or have arguments once you realize that for the most part everything is a fabricated concept.

CALENDAR

NOVEMBER

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

19 November (Sunday): House reconvenes.

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

22 November (Wednesday): The EGY-GCC Business Forum opening session.

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

23 November (Thursday): The Saudi Egyptian Real Estate Investment Conference.

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

Signposted to happen some time in November:

Bidding deadline for 5 gold mine concessions in the Eastern Desert (TBC).

DECEMBER

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

4-7 December (Monday-Thursday): Egypt Defence Expo, Egypt International Exhibition Center.

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 stake sale for military-owned fuel retailer Wataniya.
Gov’t expects to finalize sale of Zafarana wind farm
Kenyan trade conference in Egypt.

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.

Q1 2024: Opening of the new developed Pyramids Plateau in Giza.

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.

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.

2024

JANUARY

7 January (Sunday): Coptic Christmas.

17 January (Wednesday): A delegation of Egyptian companies to visit Istanbul.

25 January (Thursday): Revolution day.

FEBRUARY

11 February (Sunday): The deadline to apply for the Chicago Booth Executive Program

APRIL

9 April (Tuesday): Eid El Fitr (TBC).

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

MAY

1 May (Wednesday): National holiday in observance of Labor Day (TBC).

5 May (Sunday): Coptic Easter.

6 May (Monday): Sham El Nessim (TBC).

29 May (Wednesday): Chicago Booth Executive Program

JUNE

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

30 June (Sunday): June 30 Revolution Day.

JULY

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

23 July (Tuesday): Revolution Day.

SEPTEMBER

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

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

OCTOBER

6 October (Sunday): Armed Forces Day.

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