Devaluation unlikely to be inflationary, says Goldman Sachs

Wednesday, 28 Feb 2024

Devaluation unlikely to be inflationary, says Goldman Sachs

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Privatization

Qatar Islamic Bank, Kuwait Finance House wrap up due diligence on United Bank.

ECONOMY

Goldman Sachs’ five key takeaways on the Egyptian economy.

Startup watch

MoneyHash secures USD 4.5 mn in seed funding. PLUS: Acacia invests in Kenyan startup Tappi, Saudi’s CoreVision acquires VeFund.

LAST NIGHT’S TALK SHOWS

Ras El Hekma once again dominated the airwaves last night.

ALSO ON OUR RADAR

FRA approves B Investments’ acquisition of Orascom Financial.

WHAT WE’RE TRACKING TODAY

PM Madbouly assesses final Wataniya bids.

WHAT WE’RE TRACKING TODAY

IMF package “within weeks”, says IMF head.

PLANET FINANCE

Dubai will sell 25% of parking space unit Parkin on the DFM in March.

HARDHAT

In the wake of several large-scale cyber attacks, what's stopping Egypt’s business sector from adopting cybersecurity policies?

WHAT WE’RE TRACKING TODAY

Madbouly assesses final Wataniya bids

Good morning, everyone. What a week huh? First, the biggest direct investment ever in the country's history thanks to the USD 35 bn Ras El Hekma agreement, and now we’re hearing that the stake sale in Wataniya looks to be coming to a conclusion with Prime Minister Madbouly assessing the final bids. Today’s issue is brimming with stories, so let’s get right into it.

WATCH THIS SPACE-

#1-Get ready for Wataniya’s newest shareholder to be announced: Prime Minister Mostafa Madbouly held a meeting last night to look at offers submitted for the state-owned fuel retailer, according to a cabinet statement. Last we heard, there had been three final offers remaining on the table for a 30% stake in the company, according to unconfirmed local media reports earlier this month.

ICYMI: Taqa Arabia is the only firm to have publicly declared interest in the filling station operator, which has been on the market for the last four years, and Shell has reportedly also made a bid.

#2- More encouraging talk from the IMF: The IMF has resolved key issues with Egypt in a review of its previous USD 3 bn loan program from the Fund, setting the stage for an augmented financing package “within weeks,” IMF Chief Kristalina Georgieva told Reuters on Tuesday.

Dare to dream big? Georgieva said that talks with Egypt have been "very constructive," and indicated that the rumored augmented loan of USD 12 bn could be possible. “You know, there is nothing wrong in thinking big," she said in response to being questioned about the rumors.

EGP WATCH

#1- Ras El Hekma to the rescue?Oxford Economics Africa expects the EGP to trade hands at 45 against the greenback by the end of the year, revising a previous forecast of 55-60 made earlier in the month before the mammoth USD 35 bn announcement. “The Ras El Hekma agreement is a game changer for Egypt over the short-to-medium term,” Oxford Economics wrote in a briefing that was picked up by Zawya.

But we’re not out of the woods just yet: “We still need to see fiscal discipline, which we currently don’t, before we can say that the current economic crisis is a once-off and not something that will be a recurring issue in the future,” the report added.

#2- Steel prices keep falling as the EGP strengthens on the parallel market: Ezz Steel is cutting the price of local rebar by EGP 7k per ton to EGP 46.5k — inclusive of 14% VAT — as of today, a source at the company told Enterprise. Algioshy Steel introduced similar cuts yesterday, slashing prices by 7k per ton to EGP 45.5k, Al Mal reports.

HAPPENING TODAY-

#1- The EBRD’s board of directors are in town: The European Bank for Reconstruction and Development’s (EBRD) board of directors landed in Egypt on Sunday for a six-day trip where they will meet with Prime Minister Mostafa Madbouly, CBE Governor Hassan Abdalla and the ministers heading the international cooperation, electricity, energy, and transport ministries, according to a statement from the lender. The visit, which is part of a regular series of consultations, will also see the board meet with members of the local business community and civil society groups, and visit EBRD-funded projects.

#2- It’s day five of the African Airports Council International Conference and Exhibitionthat is being hosted at the Alamera Hall Air Forces House Center and Le Méridien at Cairo International Airport. Over 40 speakers and 250 delegates are coming together to hold discussions centered around this year’s theme — Airports: Levers of Socioeconomic and Sustainable Growth. The event runs until 1 March.

FROM THE NATIONAL DIALOGUE-

The National Dialogue got back down to business (and the economy): The dialoguefocussed in on the budget deficit, tax revenues, and the country’s external debt yesterday. The second day of the National Dialogue’s round two follows Monday’s sessions that worked on figuring out how to reel in soaring inflation, reduce prices for consumers, and tackle the FX shortage.

DATA POINTS-

#1- More Egyptians are banked than ever before: Egypt’s financial inclusion rate — thepercentage of citizens above the age of 16 who hold bank accounts, mobile wallets, or prepaid cards — jumped to 71% by the end of 2023 from 65% at the end of 2022, according to central bank data (pdf). Some 46.9 mn adults in Egypt were banked as of December 2023 — 43% of whom were women. Financial inclusion grew 174% between 2016 and 2023.

#2- Egypt’s renewables production capacity increased to 6.6 GW in 2023, 33% ofwhich is coming from the private sector, according to figures from the Renewable Energy Authority. Hydroelectric power made up the biggest chunk of the country’s total renewables capacity, accounting for 42%, while wind power came in second with 28%.

WAR WATCH-

Egypt, Qatar could help form a new Palestinian technocratic government: A new Palestinian technocratic government following the resignation of Palestinian Prime Minister Mohammad Shtayyeh’s resignation on Monday would be aided by both Egypt and Qatar, Palestinian Ambassador to the UK Husam Zomlot said, reports the Guardian. Although the new government to run Palestine once Israel’s war on Gaza is over will not contain any Hamas members, the group and all other Palestinian parties and factions will take part in the consultations to set up the new entity, Zomlot added.

Over one quarter of Gazans are on the verge of famine, warned a senior UN aid official at the UN Security Council yesterday.It is “almost inevitable” that a widespread famine will occur if action is not taken, he continued.

A joint aid mission has airlifted tons of humanitarian supplies to Gaza, coordinatedby Egypt, Jordan, the UAE, Qatar, and France, according to a statement from an Egyptian military spokesperson.

THE BIG STORY ABROAD-

It’s all Apple, all the time this morning in the international business press with a trifecta of stories casting Tim Cook and his crew into the spotlight.

#1- Apple is ending its secretive, decade-long effort to build an electric car. The company made the announcement internally yesterday. Bloomberg, which broke the news, says “many” of the 2k staff working on the car will be transferred to its AI unit, where they’ll work on generative AI projects. Technical challenges and signs that the market for EVs may be cooling factored into the decision, Bloomberg’s Mark Gurman writes.

The story is getting ink everywhere:Financial Times | Wall Street Journal | Reuters.

(Sound smart: Gurman started breaking news about Apple as a teenage blogger at Apple news outlet 9to5Mac and has remained a perennial thorn in Apple’s side ever since.)

#2- The US Department of Justice may be on the verge of hitting Apple with an antitrust suit, and California has separately told Bloomberg that it may be “very interested” to join the case if it materializes. Reuters has also picked up the story while the Wall Street Journal has a former US attorney general asking in its opinion pages, “Siri, Does Apple Violate Antitrust Law?” (he thinks the answer is, “Yes.”)

#3- Big Apple shareholders Norges Bank Investment Management and Legal & General want Apple to be more transparent about its guidelines for the ethical use of AI, the Financial Times writes.

Apple investors don’t seem bothered by it all: The tech giant’s shares closed up nearly 1% yesterday.

MEANWHILE- Goldman Sachs CEO David Solomon isn’t so sure the global economy is headed for a soft landing, saying that while “the world is set up for a soft landing” there’s a “higher level uncertainty” thanks to inflation and geopolitical risks. “The market is way weighted to a very soft landing. [But] when you look at the pattern of facts the last three or four years, it’s hard for me to see it’s going to be that simple,” the Financial Times quotes him as having said.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We take a look at what is stopping Egyptian businesses from adopting cybersecurity policies and upgrading their cybersecurity infrastructure, especially as the number of cyber attacks increases globally.

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WHAT WE’RE TRACKING TODAY

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Privatization

Qatar Islamic Bank, Kuwait Finance House wrap up due diligence on Egypt’s United Bank

New investors in the running for United Bank:Qatar Islamic Bank (QIB) and Kuwait Finance House completed their due diligence for United Bank in December, Asharq Business reports, citing sources it says are in the know. QIB seems to be better poised to acquire the central bank-owned lender as it seeks to enter the Egyptian market, according to one source.

Exchange rate discrepancy is still a sticking point: One of the potential bidders remains onthe fence about the acquisition due to difficulty calculating the exchange rate at which the transaction will be made, one of the sources said, pointing to the gap between the official and parallel market prices for the USD. The transaction could reportedly reel in the USD equivalent of EGP 22 bn, the source added, which is currently worth USD 712 mn at official exchange rates.

The sale has been brewing for years: The Central Bank of Egypt — which owns almost 100%of the bank — said it intended to sell the bank back in 2017, and it had appointed advisors for the sale before the COVID-19 pandemic put it on ice. The bank was listed in the lineup of state companies and assets earmarked for privatization in February 2023.

ICYMI: Talks with Saudi Arabia’s Public Investment Fund to acquire the bank — reportedlyfor USD 600 mn — fell through last year due to disagreements about how to value the lender amid exchange rate volatility, according to local media reports. The European Bank for Reconstruction and Development also voiced interest in acquiring stakes in the United Bank in addition to Banque du Caire.

Remember: Separate from Ras El Hekma’s USD 35 bn agreement, the government aims to raise some USD 6.5 bn through the privatization of state-owned companies and assets over the course of this year.

Advisors: The CBE last year tapped Barclays to join CI Capital as thefinancial advisors working on the sale.

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ECONOMY

Goldman Sachs’ five key takeaways on the Egyptian economy

Goldman Sachs offers its two cents on the economy: Goldman Sachs wrapped its investor trip to Egypt earlier this week to meet with analysts, market participants, and policy makers with five “key takeaways” on where they think the Egyptian economy is going in a note seen by Enterprise.

#1- Devaluation ahead of IMF staff-level agreement “unlikely to be inflationary”: It was “made clear” from discussion with officials that a staff-level agreement (SLA) by the IMF will follow Egypt establishing a more flexible exchange rate, Goldman Sachs’ Farouk Soussa wrote. Although FX demand volatility complicates any forecasts, Soussa notes that the strengthening of the EGP in the parallel market indicated the EGP could trade between 45-50 against the greenback in the event of a devaluation. A devaluation “of this magnitude is unlikely to be inflationary,” Soussa added, pointing to the EGP strengthening on the parallel market and an uptick in FX liquidity.

#2- And we may hear about an IMF agreement in the “next week or two”: Officials told the Goldman Sachs group that they’re working for an increased package that they think will be announced in “the coming days.” Soussa says that the government has done a lot already to strengthen fiscal sustainability, work towards a more flexible exchange rate, and promote the private sector’s role in the economy in line with the IMF’s action plan, but that any upcoming IMF announcement will come with “more such measures, including new, more stringent fiscal targets.”

#3- Ras El Hekma agreement was an “inflection point”: “We expect the scale and speed of the investment in Ras El Hekma to provide ample FX liquidity to meet Egypt’s financing needs in the near/medium term and allow the CBE to clear the FX backlog,” Soussa noted. In addition to representing a “clear inflection point for Egyptian risk assets,” in terms of FX pressures, Soussa wrote that the expected easing of FX supply pressures “is likely to sharply reduce speculative/hedging demand for FX, driving the parallel rate lower.” There’s good news too for external credit, as the “developments greatly reduce investor concerns regarding the medium-term external financing outlook,” and have already led to a rally in the country’s external debt.

#4- FX is set to flow back into the official banking system: New-found confidence that two-way liquidity is back in the official market “should see FX inflows pick up” from inside and outside the country. External sources of FX are expected to ramp up from inflows into the local debt market, remittances coming back through official channels, and large real estate project investments.

#5- But be warned, “medium-term uncertainties [are] likely to persist”: Although the Goldman Sachs group saw “no current indication of such policy slippage” from the government and that they remained committed to reform, “concerns” were raised that fresh inflows of FX — like from Ras El Hekma — could be used to finance additional government spending or other real estate projects. Soussa wrote that they heard concerns that the recent calming of external financing pressures could persuade the government to relax its commitment to reform, and that because of this, the IMF program “will act as an important external anchor for the reform process going forwards.”

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devaluation economy Goldman Sachs IMF Ras El Hekma

Startup watch

MoneyHash secures USD 4.5 mn in seed funding. PLUS: Acacia invests in Kenyan startup Tappi, Saudi’s CoreVision acquires VeFund

Fintech and e-commerce startups are still hot property for VCs in the Middle East and Africa and — no surprises here — local startups are still banging the drum on regional expansion plans in almost every startup press release we get coming our way.

MONEYHASH SECURES SEED INVESTMENT-

MoneyHash attracts USD 4.5 mn in seed funding from mostly Gulf VCs : The local fintech startup raised USD 4.5 mn in a seed round led by the UAE’s COTU Ventures and Saudi’s Sukna Ventures, the company said in a statement. Saudi’s RZM Investment and the UAE’s Dubai Future District Fund also participated in the funding round, alongside Greece’s VentureFriends and other investors.

The game plan for the funds: MoneyHash plans to use the proceeds to invest in its technology and to expand its growth across the region.

MoneyHash? Founded by Egyptians Nader Abdelrazik and Mustafa Eid and American Anisha Sekar in 2020, the US-based company’s unified platform allows companies to offer payment and fintech services at checkout as well as collect data and track analytics through a single dashboard. MoneyHash launched its payments aggregator platform in February 2022, after it raised USD 3 mn in pre-seed funding.

ACASIA INVESTS IN KENYA’S TAPPI-

Acasia taps Kenyan startup Tappi: Egyptian venture capital firm Acasia Ventures tookpart in a USD 1.5 mn pre-seed round for Kenyan e-commerce startup Tappi, the VC said in a statement (pdf). The round was led by US-based Mercy Corps Ventures and Africa-focused VC firm Chui Ventures, with support from international VC firms and angel investors.

Where the money will go: The funding will support Tappi’s expansion of its sales force team and establishing strategic partnerships across Africa, the statement said.

Tappi? The startup supports the digitization of micro, small, and medium-sized enterprises helping them find customers and build their business reputation through its mobile app.

What they said: “Tappi has gained substantial momentum since it launched just over a yearago, because they offer a compelling digital solution to the critical challenges of MSMEs across the continent,” Acasia Ventures Managing Partner Aly El Shalakany said.

COREVISION ACQUIRES VEFUND

CoreVision announces acquisition of VeFund: Saudi-based venture capital firm CoreVision has acquired a strategic stake in startup evaluation and investor connections platform VeFund, CoreVision announced in a statement (pdf). CoreVision CEO Faisal Al Abdulsalam will take the helm as CEO of VeFund following the acquisition, according to the statement. The acquisition will see VeFund expand into a secondary market for startups in Saudi Arabia, offering a platform for investors to trade safe notes.

VeFund? VeFund is a software as a service (SaaS) that helps investors and startup founders connect and fundraise using AI and financial evaluation tools. The platform has 1.4k+ registered startups and a network of over 400 angel investors from Egypt, Saudi Arabia, the UAE, and other countries.

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Acasia Ventures CoreVision Fintech investment watch Startup watch startups tappi VeFund

Moves

JLL appoints head of project and developments in Egypt

JLL names new project and development services head for Egypt: Global real estate investment consulting firm JLL has named Ahmed Hemmat (LinkedIn) as its new head of project and developments services in Egypt, the company said in a statement (pdf). Hemmat’s CV contains over 20 years of experience in the construction and mixed-use development sector at firms including Majid Al Futtaim as senior project manager and Emaar Misr as the director of Uptown Cairo.

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Ahmed Hemmat JLL Mastercard moves real estate

LAST NIGHT’S TALK SHOWS

Ras El Hekma once again dominated the airwaves last night

Ras El Hekma once again received the most coverage on the airwaves last night, as the nation’s talking heads focused on the impact of the agreement on Egypt’s USD bonds, the parallel market, and commodity prices. President Abdel Fattah El Sisi’s meetings with the leaders of the armed forces yesterday also received airtime.

“There have been tangible improvements in the performance of Egypt’s USD bonds following the Ras El Hekma agreement,” Kelma Akhira’s Lamees El Hadidi said on her program (watch, runtime: 7:02). These improvements show confidence from the market and foreign investors, but the market is still waiting for the agreement to be finalized and for the CBE to devalue the EGP, El Hadidi added.

Car prices see noticeable drop following news of the agreement: Prices of cars have gone down by between EGP 50-60k, with some going down by EGP 100k, Egyptian Automotive Dealers Association head Osama Abo El Magd told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 36:20). A member of the Electrical Appliances Division also told Moussa that there will be a gradual decline in the prices of electrical appliances during the next three months.

House Budget Committee head Fakhry El Feky expects the exchange rate to continue fluctuating in the short- to medium-term before reaching somewhere between EGP 40-45 by the end of the year, and then dropping to EGP 35-40 next year, he told Yahduth Fi Misr’s Sherif Amer (watch, runtime: 20:52). El Feky also pointed out that converting UAE deposits at the CBE into EGP would reduce a third of the budget deficit for the current year — which amounts to EGP 848 bn — bringing down “the interest on loans that the government would have borrowed to cover the gap in the budget” .

President Abdel Fattah El Sisi’s meeting with senior military officials got extensive coverage: The meeting focused on multiple topics related to the activity carried out by the Egyptian military to protect the state and its strategic interests, as well as the current regional and international developments and their repercussions on Egypt’s national security. The meeting also delved into Egypt’s efforts in supporting the Palestinian people and alleviating the deteriorating humanitarian conditions in the Gaza Strip. The meeting received coverage from Kelma Akhira (watch, runtime 1:05), Ala Mas’ouleety (watch, runtime: 2:28), Al Hayah Al Youm (watch, runtime: 2:03), and Masaa DMC (watch, runtime: 2:25).

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exchange rate LAST NIGHT’S TALK SHOWS Ras El Hekma USD bonds

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EGYPT IN THE NEWS

Foreign press take note of tragic ferry sinking

In a downbeat morning in Egypt coverage from the international press, the death of ten day laborers just outside of Cairo while the ferry they were commuting to work sank while crossing the Nile. (Associated Press | Fox News | Xinhua | Deutsche Welle)

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transport

ALSO ON OUR RADAR

FRA approves B Investments’ acquisition of Orascom Financial. PLUS: Synergy Capital, Ras El Hekma, Egyptian Healthcare Authority, Qalaa Holdings, green hydrogen

M&A-

#1- FRA approves B Investments’ acquisition of Orascom Financial: The FinancialRegulatory Authority has approved B Investments’ mandatory tender offer to acquire up to 90% of Orascom Financial Holding (OFH) via a share swap, according to an EGX disclosure (pdf). B Investment' board in December agreed to an MTO swap ratio of one B Investments share to 56.76 OFH shares. We can expect the timeline of the MTO to be made public before the end of this week.

#2- Synergy Capital completes EGP 79.5 mn acquisition of Misr Financial Investments: Financial advisory firm Synergy Capital has purchased Misr Financial Investments for EGP 79.5 mn after submitting the highest offer in a tender for the company, Al Borsa reports, citing what it says are informed sources. Synergy Capital is looking to expand through acquiring multiple companies operating in the financial investment sector, the company’s managing director Mohamed Seddiek told Al Borsa.

CONSTRUCTION

The wheels are turning on the Ras El Hekma project: The ownership of 171 mn sqm in Matrouh governorate transferred to the New Urban Communities Authority to establish the new city of Ras El Hekma, according to a presidential decree published in the Official Gazette yesterday.

HEALTHCARE-

Egyptian Healthcare Authority looks to revolutionize healthcare with US healthtech firm: US-based healthtech company IQVIA and the Egypt Healthcare Authority will set up a clinical coding academy and a digital research platform focused on disease protection and health mapping solutions, alongside other initiatives utilizing AI in healthcare, under an MoU inked between the two sides, according to an authority statement. Egyptian Healthcare Authority Chairman Ahmed Al Sabki said that agreements like these with healthtech companies will help “restore Egypt’s role as a regional center for health technology.”

DEBT-

Qalaa subsidiary reduces its debt via settlement agreements: Qalaa Holdings’cement subsidiary National Development and Trading Company has inked agreements with three of its creditors to settle EGP 1.4 bn worth of outstanding debt in addition to a restructuring agreement with another lender for an EGP 536 mn debt, according to an EGX disclosure (pdf) from Qalaa.

ENERGY-

#1- Green hydrogen strategy receives approval: The Supreme Council of Energy has approved the national strategy for green hydrogen in the works since 2021, according to a cabinet statement.

Remember, there’s big green hydrogen plans for El Sisi’s third term: The government has said that it aims to transform Egypt into a regional hub for green hydrogen production by 2026 and a global hub by 2030, with plans to produce 3.2 mn tons of green hydrogen a year by the end of the decade and 9.2 mn tons a year by 2040.

LEGISLATION-

Budget Committee approves amendments to Unified Budget Act The House’s Budget Committee has approved amendments to the Unified Budget Act that will see the budgets of all 59 of the state’s economic bodies and the state budget be presented in a new consolidated budget — dubbed the Public Government Budget — over a five-year period starting the fiscal year 2024-2025. The amendments will be voted on when the House reconvenes on 9 March.

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ALSO ON OUR RADAR cement energy healthcare healthtech legislation logistics New Urban Communities private equity Qalaa Holdings Ras El Hekma Suez Canal Economic Zone Synergy Capital Unified Budget Act

PLANET FINANCE

Dubai will sell 25% of parking space unit Parkin on the DFM in March

Dubai is offering up to a 25% stake in recently launched Parkin — Dubai’s public parking operator — in an IPO on the Dubai Financial Market in March, according to a Dubai Media Office statement. The Dubai Investment Fund will be selling 745 mn shares, according to a prospectus (pdf) published yesterday.

ICYMI-Dubai’s Road and Transport Authority launched Parkin in January, just a few months after saying it would go public with its taxi and parking assets. The company takes care of the design and management of public and private parking spaces in the emirate and issuing parking permits.

The book building process starts next Tuesday and will conclude on 12 March for retailinvestors and a day later for institutional investors. Shares are expected to begin trading on 21 March.

Advisors: Rothschild & Co’s Middle East division was tapped as independent financial advisor.Emirates NBD, HSBC Middle East, First Abu Dhabi Bank, Abu Dhabi Commercial Bank, and our friends at EFG Hermes UAE are joint lead managers.

ALSO WORTH NOTING-

Shein mulls London IPO amid scrutiny from NYC regulator: Ultra-fastfashion retailer giant Shein is looking into ditching its New York listing plans — in what was set to be the city’s largest IPO of the decade — in favor of a London IPO if US regulators refuse to give the IPO the go-ahead over ties to China. (Financial Times)

EGX30	29,205	+0.9% (YTD: +17.3%)
USD (CBE)	Buy 30.83	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	21.25% deposit	22.25% lending
Tadawul	12,602	+0.6% (YTD: +5.3%)
ADX	9,289	+0.3% (YTD: -3.0%)
DFM	4,273	+1.2% (YTD: +5.2%)
S&P 500	5,078	+0.2% (YTD: +6.5%)
FTSE 100	7,683	0.0% (YTD: -0.7%)
Euro Stoxx 50	4,886	+0.4% (YTD: +8.1%)
Brent crude	USD 83.28	+0.9%
Natural gas (Nymex)	USD 1.62	-2.7%
Gold	USD 2,044.10	+0.3%
BTC	USD 56,905.97	+4.2% (YTD: +34.1%)

THE CLOSING BELL-

The EGX30 rose 0.9% at yesterday’s close on turnover of EGP 8.9 bn (112.2% above the 90-day average). Foreign investors were net sellers. The index is up 17.3% YTD.

In the green: Orascom Construction (+12.8%), Elsewedy (+9.8%), and Fawry (+8.1%).

In the red: Oriental Weavers (-5.7%), Juhayna (-4.0%), and Ezz Steel (-4.0%).

Asian markets are mixed but were trending mostly lower in early trading this morning. Futures once again point to a soft open for stocks in New York, London, Frankfurt, and Toronto later today.

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Financial Markets IPO watch MENA IPOs Planet Finance UAE

HARDHAT

In the wake of several large-scale cyber attacks, what's stopping Egypt’s business sector from adopting cybersecurity policies?

Egypt under (cyber) attack: In recent years, Egypt’s public and private sectors havewitnessed a considerable increase in high-profile cyber attacks, from claims that hackers have obtained and sold online the WhatsApp numbers of 45 mn Egyptians to unconfirmed reports alleging that two Egyptian blue chip companies were hacked by LockBit — the world’s most successful ransomware gang at the time — compromising personal and financial data. The attacks suggest that cybercriminals have turned their sights on Egypt and other emerging markets, banking on companies here taking a less-sophisticated approach to cybersecurity and having a less than efficient cybersecurity infrastructure.

** Enterprise sat down with Fawry CEO Ashraf Sabryto discuss the nitty gritty of what happened when the company was hacked and the steps they’re taking to prevent this from happening again.

Cybercrime is a global issue, but one that is especially prevalent in the Middle East:Global data breaches increased 20% y-o-y in 2023, writes the Harvard Business Review, with ransomware gang activity in the Middle East surging a whopping 77%.

Egypt’s business environment makes it vulnerable: In the past year, more than 50% ofglobal cyber attacks have been carried out on SMEs, vice chair of ins. brokerage Medmark Ins. Brokerage’ Walid Auf said during a BEBA cybersecurity-focused breakfast meeting attended by Enterprise. SMEs account for over 90% of all enterprises active in Egypt, according to figures collected by HSBC.

To add fuel to the fire: Historically, banks and telecom firms have been the mainstay clients of cybersecurity solution providers, yet the landscape has changed over the past few years. “Covid shifted a lot of businesses online, exposing them to various threats that they previously were not exposed to. Egypt saw the emergence of a number of fintech startups that build their services and customer offerings around cloud technologies,” cybersecurity consultancy Liquid C2’s Regional Manager Sherif Shaltout told Enterprise.

High cost makes cybersecurity services a little inaccessible: Outsourced cybersecurityservices in some areas across the globe start at USD 2k-3.5k a month and can increase depending on the size of the business and how many users or clients it has. “Many companies are trying to bring that cost down, but the fact is that there are very few cybersecurity experts compared to the demand, which tends to keep the price of the services on the higher end,” Shaltout told us. “Given that [cybersecurity investments] are not revenue-generating spending, but more of an ins. policy, it’s also not always easy to explain the return on investment, especially for smaller companies looking to grow.”

It shouldn’t be a barrier to access: Services and prices can be tailored to the customer,Shaltout said. “We can have contracts as low as USD 5k, all the way to multi-mn USD agreements, depending on the customer’s requirements and size. We are trying to democratize

access to cybersecurity by offering a lot to customers and leveraging technology and cloud services to make it accessible.”

Firms have the responsibility of protecting their customers: Firms that fail to implementpolicies to secure their networks and customers' data will face considerable damage to their reputations in the event that an attack does take place. “We now have more startups, more e-wallets, more online banking and shopping, meaning that the life of our customers is online. It also means that network providers, like Vodafone, have a liability towards their customers,” Vodafone Egypt’s Head of Cybersecurity Samah Khamis told BEBA.

ON THE REGULATORY FRONT-

Cybersecurity regulation, legislation is nascent: In the past decade, Egypt has begun todevelop its cybersecurity strategy, establishing the Supreme Cybersecurity Council, passing personal data protection and anti-cybercrime laws, and creating the Egyptian Computer Emergency Readiness Team, which has cooperation agreements with the US, South Korea, and Malaysia and is a member of the Organisation of Islamic Cooperation Computer Emergency Response Team. Yet, while there is relative regulatory maturity in Egyptian banks, financial institutions and telecommunication firms have a lot further to go, thinks Shaltout.

Basic regulation will help push more firms on the cyber-bandwagon: “What Egypt lacks issome form of a national security baseline, an essential eight or ten controls that every company needs to have as a minimum. It doesn’t need to be super complex or advanced,” Shaltout told us. In the future, Egypt could consider the addition of cybersecurity accreditation, with hierarchical levels granting companies the right to do business with certain sectors. “It could create a pathway for companies to enter particular markets and grow their operations,” Shaltout said.

Slowly, slowly: Creating a set of localized cybersecurity standards that consider the level of technical competencies in Egypt and the specific risks facing the country will ensure that smaller firms have a guide to implement effective strategies. Regulators must be mindful that cybersecurity is a costly journey with many firms in Egypt starting from scratch under a tough economic situation where the threat of fines will lead non-compliant companies, Shaltout said.

It’s a different story for data-heavy organizations: Heftier regulations are needed forcompanies or organizations with access to certain sets of customer data — such as healthcare entities — or at a certain level in terms of revenue and market capitalization, added Shaltout.

The world needs more cyber professionals: The global shortage of cybersecurity experts hashit Egypt, where the current economic circumstances have created brain drain as young graduates look for work in the Gulf, Europe, or US. The National Telecom Regulatory Authority (NTRA) has plans to build two cybersecurity facilities at the Arab Academy for Science, Technology and Maritime Transport in Alamein, NTRA’s vice president for cybersecurity affairs Ahmed Abdel Hafez said at the BEBA conference.

Could Egypt be a cybersecurity export hub? Given its large, young pool of talent equippedwith strong technical skills, Egypt has the potential to become a cybersecurity hub and export its services globally, Mazars partner Omar Shawki said at the BEBA breakfast.

Your top infrastructure stories for the week:

New Cairo will soon be home to a new EGP 60 bn development: UDC Real Estate Development will build an EGP 60 bn mixed-use development in New Cairo’s Al Andalus, spanning 665k sqm with residential, administrative, entertainment, commercial, and hospitality units.
A USD 300 mn medical-educational complex is being built in Shorouk: The New Urban Communities Authority has awarded NHMC Egypt a plot of land in Shorouk City to set up a USD 300 mn medical and educational complex alongside a residential and commercial project.
Telecom Egypt and Chinese tech giant Huawei have announced a strategic partnership for the deployment of 5G networks in Egypt.

Tags:

cybersecurity Fawry Hardhat

CALENDAR

2024

FEBRUARY

24 February-1 March (Saturday-Friday): Egypt hosts the 71st African Airports Council International (ACI) Conference and Exhibition at the Alamera Hall Air Forces House Center and Le Méridien, Cairo Airport.

MARCH

1 March (Friday): New public-sector minimum wage goes into effect.

2-3 March (Saturday-Sunday): The Emigration Ministry’s International Health Tourism Conference at the St Regis Almasa Hotel, New Administrative Capital.

7 March (Thursday): Deadline to apply to Shalateen Mining Company’s international gold exploration tender.

10 March (Sunday): First day of Ramadan (TBC).

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

28 March (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

28 March (Thursday): Industrial Development Authority to close applications for 1 mn sqm of land in 10 different governorates.

29 March (Friday): Egypt removed from JPMorgan Chase’s Emerging Local Markets Index Plus.

APRIL

1 April (Monday): Deadline to bid for 23 blocks in an international oil and gas tender.

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

15-21 April (Monday-Sunday): The IMF / World Bank Spring Meetings.

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

28 April (Sunday): Grace period to ins. brokerage firms to comply with Law 215 for 2023 expires.

28-29 April (Sunday-Monday): Saudi Arabia hosts a World Economic Forum (WEF) meeting on ‘global collaboration, growth, and energy.’

29 April (Monday): The government’s car export scheme expires.

MAY

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

5 May (Sunday): Coptic Easter.

6 May (Monday): Sham El Nessim (national holiday).

20 May (Monday): Malaysian Palm Oil Forum in Cairo, with attendance from Malaysian Plantation and Commodities Minister Johari Abdul Ghani.

23 May (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

29 May (Wednesday): Virtual launch of Chicago Booth Executive Program.

JUNE

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

30 June (Sunday): June 30 Revolution Day (national holiday).

JULY

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

18 July (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

23 July (Tuesday): Revolution Day (national holiday).

SEPTEMBER

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

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

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

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

OCTOBER

6 October (Sunday): Armed Forces Day.

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

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

NOVEMBER

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

DECEMBER

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

EVENTS WITH NO SET DATE

January 2024: The Red Sea Ports Authority is set to finalize an agreement with the Abu Dhabi Ports Group for the operation and maintenance of the tourist passenger terminal in the Sharm El Sheikh Sea Port.

February 2024: Egypt will sign a USD 1.5 bn financing agreement with the International Islamic Trade Finance Corporation (ITFC).

February 2024: Funds from the Islamic Development Bank for the high speed electric railway will get the sign off.

April 2024: President Abdel Fattah El Sisi will visit Turkey.

1Q 2024: Egyptian-Qatari Joint Supreme Committee.

1Q 2024: Opening of the newly developed Pyramids Plateau in Giza.

1Q 2024: The government is set to finalize the sale of the Gabal El Zeit wind farm.

February-May: The Grand Egyptian Museum could officially open to visitors.

March 2024: The USD 2.7 bn MIDOR Refinery is set to begin full operations.

May 2024: Arab Finance Ministers’ meeting at Egypt’s administrative capital.

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.

1H 2024: The European Union is set to hold an investment conference in Egypt during spring.

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

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.

2025

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

EVENTS WITH NO SET DATE

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

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