Central bank leaves rates unchanged

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What We're Tracking Today

Egypt to bid farewell to power cuts, until mid-September

Good morning, folks. We are kicking off this shortened workweek with a brisk issue led by news of the central bank keeping rates unchanged and two fintech players securing major funding.

HAPPENING TODAY-

#1- A long break from power cuts: The government is halting rolling blackouts starting today and until mid-September.

But it won’t come cheap: The cost of importing the LNG and Mazut needed to temporarily pause rolling blackouts is estimated to be around USD 1.2 bn, Al Mal reports, citing unnamed officials from the Electricity Ministry. State gas firm EGAS has so far received five shipments — of the 21 shipments secured — carrying 155k cubic meters of LNG. The shipments are to be regasified on one of the floating storage and regasification units Egypt has access to then fed into the national grid.

#2- Another t-bill auction: The Central Bank of Egypt is looking to raise EGP 65 mn from auctioning off EGP-denominated treasury bills — the bills will have tenors of three and nine months, according to the bank’s website. The submission deadline for the t-bills is today at 11am.

HAPPENING THIS WEEK-

#1- A fuel price hike incoming? We’re expecting the government’s fuel pricing committee to announce its decision on fuel prices for the next three months this week, after concluding its meetings last week.

Remember: The IMF has postponed its executive board meeting to discuss the third review of the USD 8 bn program to Egypt from 10 July to 29 July, as the fund adopts a wait-and-see approach regarding planned subsidy cuts.

#2- Retail investors have until Tuesday to subscribe to the Act Financial IPO. Retail investors — who are being offered 60 mn shares — can subscribe to a minimum of 1k shares and a maximum of 1.75 mn shares. The subscription period for institutional investors wrapped up on Thursday.

High demand from institutional investors, whose offering was 20.2x oversubscribed — the highest demand a subscription period has seen in six years, an informed source told Enterprise.

ICYMI- The company is offering some 32% of the company — 360 mn shares — in the first IPO the EGX has seen in a year. The shares are being offered at a price of EGP 2.90 a pop, with the company aiming to raise around EGP 1.04 bn through the offering.

Vote of confidence from the House: The House general assembly voted in favor of the new Madbouly government’s policy for its three-year term on Thursday. This came only days after the ad hoc committee reviewing the new cabinet’s policy unanimously approved it.

About the policy: The plan, which Prime Minister Moustafa Madbouly presented to the House earlier this month, breaks down the new government’s plans into four simple goals — protecting national security and Egypt’s foreign policy, building up the Egyptian citizen, building a competitive economy that attracts investments, and achieving political stability.

Want the nitty gritty? We already dove into the economic, green, and infrastructure aspects of the new cabinet’s plan.

PSA-

We have another long weekend coming up: Public and private sector workers will have Thursday, 25 July off in observance of the 23 July Revolution.

WEATHER- It’s another hot day in Cairo, with a high of 39°C and a low of 28°C, according to our favorite weather app.

It’s almost as hot in Alexandria either, with a high of 35°C and a low of 25°C.

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

DATA POINT-

A record year for the SCZone: The Suez Canal Economic Zone (SCZone) saw its revenues grow 36% y-o-y to hit a record EGP 8.3 bn during the fiscal year 2023-2024, according to a SCZone statement.

THE BIG STORY ABROAD-

Days later, the world’s biggest IT failure is still making headlines. Many services around the world were upended over the weekend by a global tech failure that, while mercifully sparing most of us here in Egypt, caused vast disruptions to travel and business activity worldwide.

Blue Screens Of Death for everyone: A routine software update pushed by global cybersecurity firm CrowdStrike to its Falcon Sensor software threw some 8.5 mn machines running Microsoft Windows into boot loops. Airlines and some other companies were particularly hard-hit: Microsoft’s Azure platform went down for some late on Thursday.

The irony: CrowdStrike bills itself as the fastest way for IT pros to detect threats to their infrastructure. It serves more than 29k major global companies and institutions, including more than half of the Fortune 1000.

Who was impacted: Many airports and airlines around the world grounded flights and did manual paperwork. Some broadcasters were off air, hospitals canceled procedures, and banking services were offline in many countries, Bloomberg reports. Emergency services were also hit in some countries.

Y2K redux: The tech failure is now being described as one of the biggest tech failures ever and is raising questions about the fragility of the world’s fundamental IT architecture. “This is basically what we were worried about with Y2K,” cybersecurity expert Troy Hunt wrote in an X post Friday, “except it’s actually happened this time.”

The status now: Things are starting to unsnarl as technicians push out fixes, Reuters notes. Windows users who have been impacted have to reboot their machines and manually delete CrowdStrike’s botched update — a process that requires hands-on access to each device, according to Financial Times. It’s a process that could take days for businesses with large fleets of impacted devices and not enough IT staff, experts told FT.

REGIONALLY- the failure impacted some electronic systems in the UAE and had a limited impact on flight operations.

MEANWHILE- Calls for Joe Biden to bow out of the US presidential race continue to gather steam as the octogenarian candidate remains publicly defiant in the face of media and party skepticism. Leaks in and out of Washington — including reports that former president Barack Obama is now calling into question Biden’s ability to win in November — reflect the Democratic Party’s increasing concern with Biden’s candidacy.

What happens next? It’s anyone’s guess, but the New York Times suggests that:

Biden’s advisors wouldn’t want to give Benjamin Netanyahu the satisfaction of Biden dropping out before Netanyahu addresses the US Congress on Wednesday;
Some are looking at possible dates and venues for Biden to announce he’s not seeking a second term;
Party grandees including former House speaker Nancy Pelosi favor an open primary where more than one potential candidate can put themselves forward as potential candidates.

IN THE REGION- Israeli jets struck Houthi targets in Yemen and the International Court of Justice has ruled that Israel’s occupation of Palestinian territory is unlawful and that its actions and policies are “tantamount to the crime of apartheid," the court said in its latest non-binding opinion (pdf)

Our Foreign Ministry welcomed the news: “Egypt demands that all international parties respect and implement the court’s advisory opinion and help to empower the Palestinian people to exercise their legal right to self-determination,” the ministry said in a statement.

The story got plenty of ink from international outlets: Reuters | AP | FT.

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Egypt's central bank keeps interest rates steady as inflation continues to cool

Steady as she goes: The Central Bank of Egypt (CBE) left interest rates unchanged on Thursday, with the Monetary Policy Committee (MPC) citing its commitment to sustaining the current trajectory of inflation moderation, in a statement (pdf).

Where rates stand: The overnight deposit rate remains at 27.25%, the overnight lending rate at 28.25%, and the main operation and discount rates at 27.75%.

Remember: The committee delivered a jumbo 600 bps rate hike following a surprise monetary policy meeting in March, which coincided with the float of the EGP and the securing of an expanded package from the IMF. The CBE left interest rates unchanged at its last meeting in May.

Inflation continues to cool while growth takes a (tiny) dip: The MPC noted that inflationary pressures have continued to recede, with annual urban headline inflation declining for the fourth consecutive month to a 17-month low of 27.5% in June, down from 28.1% in May. The committee also pointed to a 0.1 percentage point decrease in real GDP growth to 2.2% in 1Q 2024, adding that leading economic indicators suggest that economic activity in 2Q 2024 “remains subdued.”

In line with expectations: The CBE's decision was correctly forecasted by all 13 analysts and economists included in our interest rate poll. Those surveyed argued that it was still too early for rate cuts, with most expecting easing to begin in late 2024 or early 2025.

Inflation outlook: The MPC sees inflation stabilizing around current levels in 2024, with a significant decline expected in the first half 2025 “due to the cumulative impact of monetary policy tightening and favorable base effects.” However, the committee noted upside risks, including “an escalation of current geopolitical tensions, unfavorable climate conditions, both domestically and globally, and higher than anticipated fiscal measures.”

Fuel and electricity hikes to keep inflation sticky: The new government “plans to further increase administered prices, especially fuel and electricity, to reduce the subsidy bill and remain compliant with the IMF program,” said Ramona Moubarak, Fitch Solutions' director of MENA country risk, suggesting that “this will keep inflation sticky in the coming months, especially from September onwards when the authorities plan to increase electricity tariffs and the seasonal adjustment to education prices takes place.”

Any rate cuts now will hurt the EGP: Moubarak believes that the Madbouly government is focused on supporting the exchange rate at the moment, ruling out a rate cut in the near future, as “a cut in the rates at this time, when the market is not expecting it, might cause some pressure on the EGP.”

But that could change if the gov’t opts to support economic activity: “There is a risk that the authorities would choose to prioritize supporting economic activity and start cutting rates earlier than we currently expect,” Moubarak noted. However, there are clear signals that the CBE will stick to its stringent policy for a longer period, first indicated by its pulling of tns of EGP of liquidity from the banking system over the past few weeks, EG Bank board member Mohamed Abdel Aal told Enterprise. He pointed to June’s Purchasing Managers Index readings — which saw Egypt nearly edge into growth for the first time in over three years — as a reassuring sign with regard to economic growth.

What's next? The committee’s statement stressed that future interest rate decisions will be guided by inflation expectations, suggesting the CBE is not afraid to keep things tight if that's what it takes to bring inflation to heel in the medium term. The MPC’s next meeting is scheduled for 5 September.

The story was picked by Bloomberg.

Egypt’s MNT-Halan raises USD 157.7 mn from international investors

MNT-Halan raises funds for international expansion: Fintech leader MNT-Halan has raised USD 157.7 mn in a funding round that will contribute to the company’s international expansion plans, the company said in a press release (pdf).

The details: The fresh funding includes USD 40 mn from the International Finance Corporation, with the rest coming from repeat investors including our friends at private equity firm Development Partners International (DPI), Egypt-focused investment firm Lorax Capital Partners, funds managed by Apis Partners, Lunate, and GB Corp.

Focusing on Egypt but aiming beyond: The company plans to channel these new funds into plans to expand into international markets, following on from MNT-Halan’s acquisition of Pakistani microfinance firm Advans Pakistan Microfinance Bank in March. “While Egypt remains our primary market, we are committed to revolutionizing access to financial services through technology beyond Egypt’s borders,” founder and CEO Mounir Nakhla said.

Remember: MNT-Halan raised USD 400 mn in its last funding round in 2023 — our friends at Abu Dhabi-based Chimera Investments invested some USD 200 mn in the firm in a transaction that saw it acquire a 20% stake in MNT-Halan. The fintech firm raised USD 120 mn in 2021.

Advisors: Maatouk Bassiouny & Hennawy and Van Campen Liem served as legal advisors to MNT-Halan, while Hogan Lovells, Freshfields, and Gibson Dunn provided legal counsel to the subscribers. Arqaam Capital served as financial advisor to GB Corp.

Egyptian fintech player Dopay secures USD 13.5 mn in a series A extension round

Dopay raises USD 13.5 mn: Local fintech startup Dopay has closed a USD 13.5 mn series A extension round led by the New York-based emerging markets investment firm Argentem Creek Partners, according to a press release (pdf). The funding tops up a USD 18 mn Series A round the firm closed in 2021 and “marks a significant step in Dopay's mission to transform cash-based economies by digitizing payment.”

Where’s the money going? Dopay will use the freshly-secured funds to fast track its expansion in Egypt, add more services to its platform, and expand into new markets.

About the company: Founded in 2014, Dopay allows businesses to ditch cash payments in favor of electronic transfers to employees and other recipients. Dopay's offering includes a virtual banking system, prepaid Mastercards, and a growing suite of financial services.

What they said: “This funding comes at a pivotal moment, with our growth exhibiting a true hockey stick trajectory,” said Founder and CEO Frans van Eersel. “The new funds will help us elevate our platform and, in collaboration with our partner banks, leverage deposited funds to create a self-financing lending model. This model will allow deposited amounts to fuel a lending portfolio, fostering a sustainable and mutually beneficial financial ecosystem.”

How was Egypt impacted by the Microsoft outage?

Friday’s global tech failure was the main talking point on the airwaves last night, as the nation’s talking heads reflected on the impact of the Microsoft outage — being described as one of the biggest IT failures ever — on Egypt’s sectors. We have the full story in the news well, above.

Egypt left (mostly) unscathed: “Egypt’s banking, aviation, seaports, and other vital sectors were not impacted by the global tech failure,” CIT Minister Amr Talaat told Extra News (watch, runtime: 7:17). Talaat attributed this to “the country's reliance on centralized security methods rather than cloud computing.”

What was affected? While some of the Aviation Ministry’s systems were impacted by the failure, the ministry noted Friday afternoon that no more than 15 international flights had been affected across all of Egypt’s airports. By Friday evening, the Aviation Ministry had announced that a few departing and incoming flights had been delayed. And as of yesterday morning, 97% of international flights were moving as scheduled.

We have our own cloud computing and data storage center, which was inaugurated in April, which Ala Masouleety’s Ahmed Moussa said (watch, runtime: 3:30) helped Egypt stay immune to the tech failure.

The story also received coverage from Salat El Tahrir (watch, runtime: 5:00) and El Sa’a El Sadesa (watch, runtime: 7:33).

UAE’s Beeah to invest USD 136 mn in Egypt

WASTE MANAGEMENT-

Emirati sustainability firm Beeah plans to invest AED 500 mn (c. USD 136 mn) in Egypt’s waste management and sustainability, according to a statement. The firm wants to build multilateral partnerships with local and foreign partners and work with investment funds to reduce risk. This came during a meeting between company representatives and Environment Minister Yasmine Fouad, during which they discussed potential investments available in the local market — medical waste management and agricultural waste recycling.

Beeah is no stranger to Egypt: The firm was tapped in December to develop the solid waste management infrastructure in the new capital. The firm, together with the Administrative Capital for Urban Development, plans to allocate up to EGP 1 bn to the first phase of the project.

ENERGY-

Egypt's natural gas output dropped to 4.3 bn cubic meters in May, its lowest level in over six years, according to data from global energy data repository the Joint Organisations Data Initiative (JODI). The fall in output comes as daily electricity consumption has risen 12% from 2023.

What this means: “The decline is a sign that Egypt will struggle to replicate the gas export boom it saw two years ago, and is likely to become more reliant on imports of liquefied natural gas,” Bloomberg writes.

BP to drill two new wells in its Raven gas field: Global energy giant BP plans to invest some USD 200 mn to drill two new wells at its Raven natural gas field at the North Alexandria concession, according to a statement from the Oil Ministry. The new wells will allow the company to add some 200 mn cubic feet of gas and 8k barrels to its overall output by the third quarter of the fiscal 2024-205.

More to come: The company also plans to invest USD 120 mn to drill two wells in its Giza and Fayoum fields.

MANUFACTURING-

An update on Lionsbridge’s phosphoric acid plant: Wesson Group’s financial consultancy firm Lionsbridge is looking to set up a USD 3 bn phosphoric acid production factory in the Abu Tartour port, according to a statement. The project would be carried out in multiple phases — the first USD 395 mn phase will have a production capacity of 350k tons a year and the second phase will see its capacity doubled. Later phases of the project will see it expand its product range.

Not the first we hear of this: The project first saw the light last year — back then it had a USD 875 mn price tag and was to be carried out by a consortium including Lionsbridge and electrical contractor Westech.

TOURISM-

The Tourism Ministry launched Tourism Alive 365, a two-month campaign promoting various tourist destinations throughout the country targeting Arab tourists.

UAE’s Masdar raised USD 1 bn through the the region’s latest green bond issuance

UAE state-owned renewable energy developer Masdar has raised USD 1 bn in its second green bond issuance: The issuance consisted of two tranches worth USD 500 mn each, with five- and 10-year tenors, carrying yields of 4.875% and 5.25%, according to a press release(pdf). The energy giant raised USD 750 mn last year in its debut green bond sale, which it listed on both the London Stock Exchange and the ADX.

We knew this was in the works: Masdar said in April that it was planning to take a green bond issuance worth between USD 750 mn and 1 bn to market this year to secure funding for its renewable projects in Central Asia, specifically in Uzbekistan and Azerbaijan. This comes as part of a USD 3 bn bonds program aimed at funding clean energy initiatives in the UAE and globally.

The issuance saw strong demand, booking USD 4.6 bn in orders with a 4.6x oversubscription. Some 70% of the allocation went to international investors with the balance going to MENA investors.

ADVISORS: Our friends at HSBC, along with Abu Dhabi Commercial Bank, Citigroup, Credit Agricole, First Abu Dhabi Bank (FAB), Mitsubishi UFJ Financial Group, Natixis, and Standard Chartered Bank acted as joint lead managers and bookrunners.

BACKGROUND- The regional sustainable debt market has been on a tear this year: UAE’s Sharjah government issued EUR 500 mn in sustainability bonds, while Kuwait’s Warba Bank issued USD 500 mn green sukuk, and Qatar’s USD 2.5 green bond attracted USD 14 bn in orders. Al Rajhi also raised USD 1 bn from a 5-year sustainable sukuk sale in March. Meanwhile, Qatar’s QIIB listed USD 500 mn sustainable sukuk issuance on the London Stock Exchange in January, and the UAE sovereign fund Mubadala listed USD 4.5 bn and AED 750 mn green bonds on the ADX.

EGX30	28,653	+1.1% (YTD: +15.1%)
USD (CBE)	Buy 48.18	Sell 48.32
USD (CIB)	Buy 48.2	Sell 48.3
Interest rates (CBE)	27.25% deposit	28.25% lending
Tadawul	12,188	+0.3% (YTD: +1.9%)
ADX	9,246	+0.2% (YTD: -3.5%)
DFM	4,181	+0.3% (YTD: +3.0%)
S&P 500	5,505	-0.7% (YTD: +15.4%)
FTSE 100	8,156	-0.6% (YTD: +5.5%)
Euro Stoxx 50	4,827	-0.9% (YTD: +6.8%)
Brent crude	USD 82.63	-2.9%
Natural gas (Nymex)	USD 2.13	+0.1%
Gold	USD 2,447	-2.3%
BTC	USD 67,061	+0.2% (YTD: +59.2%)

THE CLOSING BELL-

The EGX30 rose 1.1% at Thursday’s close on turnover of EGP 4.0 bn (equal to the 90-day average). Regional investors were the sole net sellers. The index is up 15.1% YTD.

In the green: Eastern Company (+5.7%), Elsewedy Electric (+5.3%), and GB Corp (+5.2%).

In the red: Palm Hills Development (-3.1%), Juhayna (-2.8%), and EFG Holding (-1.4%).

CORPORATE ACTIONS-

Qalaa’s debt buyback program comes to an end: Shareholders who subscribed to Qalaa Holdings’ debt buyback program will start receiving their debt notes — through authorized brokerage firms — starting 1 August and until 15 August, the company said in an EGX disclosure (pdf).

Remember: The debt buyback program is part of a wider plan to retire some USD 430 mn in foreign-currency debt. The company raised over EGP 2.6 bn from shareholders in the two-phase program.

CALENDAR

2024

JULY

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

25 July (Thursday): National holiday in observance of the 23 July revolution.

AUGUST

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

SEPTEMBER

3-5 September (Tuesday-Thursday): Egypt International Airshow, El Alamein International Airport.

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

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

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

25-28 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo.

OCTOBER

6 October (Sunday): Armed Forces Day.

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

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

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

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

NOVEMBER

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

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

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

DECEMBER

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

EVENTS WITH NO SET DATE

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

3Q 2024: Egyptian-Armenian Joint Committee.

September 2024: Turkish-Egyptian Business Council meeting in Turkey.

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

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

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

2025

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

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

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

EVENTS WITH NO SET DATE

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

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