Egypt eyes investment with new package of business reforms

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What We're Tracking Today

It’s interest rate day in Egypt

Good morning ladies and gents: We’ve got quite an issue to wrap up the week, so grab yourselves a cup of coffee and settle in.

HAPPENING TODAY-

It’s interest rate day: The Central Bank of Egypt (CBE) is expected to maintain interest rates during today’s MPC meeting on the back of a minor decrease in April’s inflation figures, according to our interest rate poll. Seven of 10people we’ve spoken with think the central bank will keep rates where they are through to next month while three forecast the MPC to raise rates.

A Bloomberg poll agrees: Eight of 11 analysts polled by the business news outlet expect the CBE to keep rates on hold, while the remaining three predict a 100-bps increase.

It’s the third session of the National Dialogue: Four sessions are scheduled for the day, two sessions will focus on issues related to national identity, while the other two will discuss the issue of guardianship over money,Al Shorouk reports. The second session, held on Tuesday, discussed social protection programs and the tourism sector. All sessions will be shared on the dialogue’s Facebook and Youtube accounts.

Day one is still getting coverage: Discussions earlier this week about the electoral system for the upcoming parliamentary elections got heated, as supporters of closed lists — where voters pick political parties as a whole — and proportional lists — where voters can pick and choose candidates from various parties — voiced their disagreements, according to CNN.

It’s the final day of CDIS: The Egypt Cybersecurity & Defense Intelligence Systems (CDIS) expo concludes at the Egypt International Exhibition Center today. The three-day event will bring together experts from across the world to discuss the present and future of cybersecurity in Egypt and the world. Check out the agenda here (pdf).

HAPPENING THIS WEEK-

Arab League meets Friday: Arab leaders will meet in Saudi Arabia on Friday for the Arab League summit. Saudi Foreign Minister Prince Faisal bin Farhan was among the Arab officials to welcome Syria back into the organization yesterday during a meeting of foreign ministers ahead of the summit. The Arab League earlier this month voted to welcome Syria back into the organization, 12 years after it was kicked out for its crackdown on Arab Spring protesters.

Al Assad will be in attendance: Syrian President Bashar Al Assad will attend the meeting in Jeddah, the country’s foreign minister, Faisal Al Miqdad, told reporters yesterday, according to Sky News Arabia.

G7 summit at the weekend: Containing China and Russia is expected to dominate discussions among G7 leaders who are meeting in Hiroshima, Japan on 19-21 May.

HAPPENING NEXT WEEK-

Oman sultan in town next week: Oman’s Sultan Haitham bin Tarek Qaboos is landing in Egypt on Sunday for an official two-day visit on the invitation of President Abdel Fattah El Sisi, according to the Oman News Agency.

THE BIG STORIES ABROAD-

Last minute deal keeps Black Sea grain pact in play for another two months: The agreement allowing the safe export of Ukrainian grain through the Black Sea is set to be extended for two months after Russia agreed to remain in the pact, Turkish President Recep Tayyip Erdogan announced yesterday. With the agreement due to expire today, a last minute agreement yesterday will see Moscow continue to allow Ukrainian ships to travel through the Black Sea for another 60 days. The UN confirmed the news, with Secretary-General Antonio Guterres praising the agreement as “good news for the world.”

The sticking point: Russia has been threatening to withdrawfrom the agreement — brokeredby the UN and Turkey last year — saying that its own demands to facilitate Russian wheat and fertilizer exports under the pact have not been met.

The end of the pact would be bad news for Egypt: Egypt — the world’s largest importer of wheat — sourced more than 20% of its imported wheat from Ukraine prior to the war, leaving it scrambling to find new suppliers after Russia blockaded the nation’s ports. Should the grain pact collapse, the resulting supply shock would also cause international prices to spike, raising Egypt’s import bill at a time when it’s facing significant pressure on its external position.

It’s another morning with the US debt ceiling making headlines: US President Joe Biden yesterday voiced confidence that the US lawmakers will break the deadlock in debt ceiling negotiations and avoid the country plunging into default (watch, runtime: 5:39). (AP | Reuters| Financial Times | Washington Post | New York Times | CNN)

Deutsche Bank just paid off Epstein accuser: Deutsche Bank will pay USD 75 mn to settle a lawsuit brought by a woman who alleges that the bank made gains from human trafficking by choosing to keep Jeffrey Epstein as a client. (Wall STreet Journal | Bloomberg | Financial Times)

FYI-

Oil + gas tender deadlines pushed: The Egyptian General Petroleum Corporation (EGPC) and EGAS extended the deadlines for the mature oilfield and exploration bid rounds to 15 July from 15 June, according to EGPC’s statement. The ministry launched its first international tender for the development of eight mature oil fields in the Gulf of Suez and Eastern Desert in March. It’s unknown how many companies have submitted bids.

The reason: The flurry of holidays at the end of April, EGPC said.

CIRCLE YOUR CALENDAR-

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

COME WORK FOR OUR ADVISORY ARM-Enterprise Advisory (formerly known as Inktank Communications) is looking for smart, talented people to help us tell the stories of exciting companies. Enterprise Advisory is the region’s leading investor relations advisory company and works on investor and strategic communications issues that take you deep inside the c-suite. Our clients are in Egypt, Saudi Arabia, the UAE and beyond. Egyptian and foreign nationals alike are welcome to apply.

We’re running a four-month training program for fresh grads and career switchers and will hire every successful grad of the program.

Apply directly to jobs@enterprisemea.com and mention “advisory development program” in your subject line.

Miss Elite 2023 at Somabay Red Sea, 10-20 May: For the third time in Egypt and second year in a row at Somabay, Miss Elite will once again host its global-scale international beauty pageant that celebrates beauty and brains of women across the globe. Sponsored by Somabay Red Sea, The Cascades Golf Resort, Spa & Thalasso, Stayr by Somabay Holidays, the spectacular event will feature 33 contestants representing the beauty, culture and traditions of their countries.

Egypt eyes investment with new package of business reforms

Madbouly unveils reform package to boost investment: Prime Minister Moustafa Madbouly held a press conference yesterday to elaborate on each of the 22 decisions taken by the Supreme Investment Council during its first meeting on Tuesday. During an hour-long presser (watch, runtime: 54:57), Madbouly broke down the decisions and what they mean for the investment climate in Egypt.

The rationale: “Our goal is to speed up and facilitate the investment process with the aim to attract the largest number of investments,” Madbouly said, adding that “the circumstances the world witnessed — the covid-19 pandemic and the ongoing war on Ukraine — naturally made the private sector more wary of investing large sums.”

The goal: More investments + more exports. “Our focus as an investment council is how to make the private sector increase its investments until they’re on par with the government’s or even more,” the prime minister said. The council also wants to push more private-sector players towards exporting, as currently only 1% of private-sector players contribute to our exports. The government is hoping to raise total investments worth EGP 1.64 tn for the coming fiscal year.

REMEMBER- The government is aiming to increase exports to USD 100 bn a year by the middle of the decade, and attract USD 40 bn in private investment by 2026 as it looks to increase the private sector’s economic footprint.

THE DECISIONS-

Making it easier to set up a business: The government will respond to applications to establish new businesses in no more than 10 working days. If the process takes longer than the set amount, then the company is automatically approved. It will also consider amending the Investment Law to allow foreign investors to open accounts at local banks while they’re in the process of incorporation. Currently, foreigners can only work with banks after they’ve established a local unit.

Making it easier to do business…:

#1- Better licensing: A wider variety of projects will be able to apply for a fast-track license (a ‘golden’ license) after the council decided to expand eligibility. Currently, only projects of national or strategic importance are eligible for the licenses, but these will be expanded to include any sector the government considers “important,” Madbouly said, without elaborating. The council also wants to introduce five-year operation licenses for factories. At the moment the licenses are renewed annually.

#2- More privileges: The cabinet will draft legislative amendments to improve privileges in special economic zones, and allow foreign investors to be registered on the importers register. Meanwhile, land repayments for real estate, agriculture, industrial, and tourism projects will be charged a reduced 10% rate of interest rather than the central bank rate.

#3- Transparency and competition: Among the decisions are several aimed at leveling the playing field and improving transparency of state-owned enterprises. The cabinet will amend some as-yet undisclosed laws that hand preferential treatment to state companies, and a new cabinet department will be tasked with collecting data on state companies, though it has not been confirmed whether this data will be made publicly available. Meanwhile, the government will look into making regulators independent from their ministries, which has raised concerns about conflicts of interest when making decisions on ministry-affiliated companies.

#4- Faster dispute resolution: It will also look to improve contract enforceability by expanding the jurisdiction of economic and district courts to resolve commercial disputes. Under a draft legal amendment, economic courts will be able to take on cases worth more than EGP 100k, speeding up the dispute resolution process.

…and keeping it easy to do business: The council has decided to ban any state agency from imposing regulations that add financial or administrative burdens on projects subject to the Investment Law.

Opening up the real estate sector to foreign ownership: The council decided to lift controls on foreign ownership of real estate, and will now allow non-residents to buy as many properties as they want. Currently, foreigners are allowed to purchase a maximum of two properties.

Getting your money back: The Finance Ministry will roll out a clearing system making it easier to claim tax refunds while the Justice Ministry will issue a decision decreeing that investors who have their assets seized will be entitled to receive compensation within a maximum of three months.

**Some of these decisions aren’t set in stone and are subject to further approvals or studies by the relevant authorities before they're actually carried out.

What’s next? The council has ordered that the relevant government agencies carry out the decisions in full within time frames ranging between one week and six months. Ministers will hold periodic meetings to follow up on progress ahead of the investment council’s next meeting.

REMEMBER- The SIC was established to replace the investment council formed in 2016 as part of the state’s efforts to boost investment and stimulate economic growth. The council is chaired by the president and includes 22 ministers and state officials, including the prime minister and the central bank governor.

ALSO FROM MADBOULY-

Speeding up privatization: The council will set up a separate authority to remove decision-making about privatization from the shareholders of the state companies.
The real value of privatization: Privatization will bring in more than the EGP 70 bnwritten into the draft FY 2023-2024 budget because the proceeds from some asset sales will not be going to the state budget.
Tax strategy coming in three months: The government will unveil its tax policydocument for the next five years within three months.

The fundamentals of starting and growing an export business

Develop quality local products and build strong relationships abroad to kickstart your export business: That was among the key advice heads of major local exporters had to share at our panel at the Enterprise Exports and FDI Forum on Monday, featuring Mark Wyllie, CEO of Beyti, Karim Aboughali, chairman and CEO of Pasta Regina, and Hossam El Sallab, CEO and vice-chairman of Royal Ceramica.

All three companies have hefty export portfolios:

Royal Ceramica has expanded its export reach over the past 13 years to Europe, the US, East and West Africa, and Japan. The company has also scaled its product portfolio beyond ceramics to include porcelain, bathroom furniture, home furnishings, wood products and kitchens.
Beyti — 100% owned by Saudi dairy firm Almarai — has doubled its export volume to 10% of its businessin the past year. It exports products including juices, natural milk, flavored milk and yogurt to some 40 countries.
Pasta Regina has been exporting for over 20 years with an international presence in over 30 countries in Africa, Asia, and the Middle East.

SO, HOW DOES A LOCAL BUSINESS BUILD AN EXPORT STRATEGY?

Get comfortable in the local market first: “Egypt remains the backbone of our company,” said El Sallab, adding that “the local market is expanding tremendously, especially with all the new cities that are being built.” Before starting to export, companies should first aim to beat their competition here, he said. “This gives confidence from day one.” Aboughali also noted the importance of building a strong brand in the local market, pointing out that Pasta Regina’s focus at home is on its highest quality, flagship pasta brand.

Import less — where you can — and innovate more: Royal Ceramica focused on investing in manufacturing tech from the get-go, substituting as many imported inputs as possible and developing its products with the help of international partners, El Sallab said. Aboughali agreed: “As Egyptians, we should try as much as possible to have local components. Anything that we can produce locally [using] raw materials will have a huge benefit of the forex in our favor,” he said. Beyti’s Wyllie pointed to massive unfulfilled demand among local manufacturers including Beyti for high-quality, locally sourced inputs like packaging.

Build strong partnerships: Fostering close relationships with clients in export markets is key to creating long-term value, El Sallab said. “It becomes like a family — you have to be going there all the time,” he said. Good customer service and after-sales is key to maintaining those relationships, Aboughali noted. “Being committed to export customers means being available at all times, regardless of time zone differences,” he said. Businesses can seek out partners by going to trade shows and attending industry events, Wyllie added.

Buyers are not the only important partners: Would-be exporters also need to foster strong relationships with banks, logistics companies, and legal advisors to help mitigate risk factors, Aboughali said, adding that “the government is also a partner and its export subsidies program is crucial.”

Make exports the priority: “If you tell your teams there's an imperative to export and you've got the backup behind it, you'll get there,” Wyllie said. He explained how Beyti managed to more than double its exports to 10% of the business in the past year by shifting its production processes to make sure “every single export order goes first.”

No order too small? “Every single customer can turn into your biggest customer,” Wyllie said, urging businesses to be prepared to take on losses at first in order to gain new business. “If you put yourself into a box and say ‘I don’t do less than 20 containers’ or ‘I’m not going to turn my production line on unless it’s for a big [order]’ … you’ll die. You've gotta be prepared to take a few risks and some of them will pay off.”

Tailor your approach for each market: Aboughali stressed the importance of adaptability, since each market will have different needs in terms of quality, design, and price point. El Sallab agreed: “Every market has its needs and traditions, cultures, and design elements.” Wyllie noted that companies should consider offering a diverse portfolio for export — and accept potential losses on some products in that portfolio in return for getting a foot in the door and generating volume.

Economic uncertainty doesn’t have to be a drawback: Volatility in global markets can present an opportunity for those who are willing to take risks and adapt to changing circumstances, the panelists said. Being able to pivot between several markets is important in times of uncertainty, El Sallab said — noting that Royal Ceramica has made sure that at least 30-40% of its production company is directed to exports regardless of ups and downs in specific markets.

We could not have made the Enterprise Exports and FDI Forum without the support of…

Egypt needs lenders’ approvals before selling Siemens power plants -Asharq

The plan to sell the Siemens power plants is more complicated than we thought: Egypt has requested permission from German banks to sell shares in the three 4.8 GW Siemens-built power stations to investors, reports Asharq Business, citing three anonymous government officials. The government earmarked the Beni Suef plant for privatization earlier this year but the financial terms agreed with the project’s backers mean that it will need to get their sign-off before it can start marketing it to investors, according to the new outlet’s sources.

Banks provided bns of EUR for the plants: Germany development bank KfW, Deutsche Bank and HSBC lent EUR 4.1 bn of the EUR 6 bn needed to construct the plants, which were inaugurated in 2018.

Want to sell? There are strings attached: The contracts prevent the government from selling stakes in the plants until the loans are repaid in full, or unless they get permission from the lenders, according to Asharq’s sources.

It’s not clear how much has been repaid: The Egyptian Electricity Holding Company has made regular loan repayments since 2019, the business news outlet reports. It’s unclear how much has been paid back.

The government has talked about selling the plants for years: It began courting potential international investors soon after the plants’ inauguration, and in 2019 entered talks with private equity giants Blackstone and Actis, and Malaysian power company Edra. It was never publicly disclosed what happened to the offers.

The PM now wants to speed things up:Prime Minister Moustafa Madbouly has met with a number of Egyptian officials twice in 10 days to discuss taking steps to offer a stake in the Beni Suef station, Asharq’s sources said. The plant was reported to have been earmarked to be transferred to the Sovereign Fund of Egypt last year ahead of a sale.

The power plants aren’t the only infrastructure up for sale:A report in Asharq last week claimed that the government wants to sell off the country’s two largest wind farms before the end of the year. Infinity Power, ACWA Power, the UAE’s Alcazar Energy, and Hassan Allam Utilities are all interested in acquiring the plants.

BARCLAYS WORKING ON UNITED BANK SALE-

CI Capital has a partner on the United Bank sale: The Central Bank of Egypt has appointed Barclays to join CI Capital as the financial advisors working on the sale of United Bank, it said in a statement (pdf) yesterday.

REMEMBER- The CBE — which owns 99.99% of United Bank — was negotiating to sell the lender to Saudi Arabia’s sovereign wealth fund PIF before talks stalled, apparently due to a dispute over valuation amid uncertainty over the exchange rate.

Egypt details tax incentives aimed to boosting green hydrogen industry

Green hydrogen incentives get the greenlight: Ministers have approved a package of incentives aimed at stimulating Egypt’s nascent green hydrogen industry and increasing FX inflows, cabinet said following its weekly meeting yesterday. Under the draft decision, companies implementing green hydrogen projects within five years and deriving a certain percentage of their financing from foreign lenders will receive VAT and income tax breaks.

What’s on offer: Companies will receive tax breaks of between 33-55% on income earned from the plants, and will pay no VAT on raw materials, plant and machinery purchased for the projects. The facilities will be exempt from real estate tax, stamp tax, and a number of administrative fees. Companies will also be permitted to import and export without having their names in either of the registers.

To be eligible: Companies will need to have their projects up and running within five years and obtain at least 70% of their financing from foreign lenders. They will also be expected to source at least 20% of their inputs from local suppliers as part of the government’s push to increase localization and reduce reliance on imports.

Desalination projects and power stations are also eligible — if they link up with green hydrogen plants: The incentives also target water desalination projects that allocate a percentage of their production to green hydrogen projects, and green power plants that allocate no less than 95% of their production to green hydrogen.

ALSO GREENLIT BY CABINET-

A draft law that seeks to give squatters a six-month period — which may be extended upon cabinet’s approval — to submit requests to the government to legalize their stay.
A grant by USAID for advancing climate action, which was inked in an agreement between the government and USAID last September.

Infinity Power, Copelouzos could partner on renewable energy

Infinity Power and Greek infrastructure investor Coupelouzos could jointly produce renewable energy in Egypt that would be sent to Europe via a planned electricity link, the firms said in a joint statement (pdf) yesterday. Under a recently signed MoU, the firms will enter talks and exchange expertise about the development of new renewable projects that would be linked to the planned 3-GW Greece-Egypt Interconnector (GREGY).

Who’s involved: Infinity Power is a JV between UAE’s Masdar and homegrown renewable player Infinity, while Copelouzos is working through its subsidiary companies Damco Energy and Elica Mediterranean Interconnection.

We first heard of this last year: Egypt said last year that it was working with Greece on a plan to add 9.5 GW of renewable power generation capacity to export power to Greece. Both sides said at the time the electricity would be generated by wind and solar plants and would be shipped across the Mediterranean via subsea cables.

This is all to shore up Europe’s energy security following the war in Ukraine:The project — slated to be one of the largest green energy projects in the East Mediterranean — will help “support Europe in its efforts towards achieving energy diversification and security,” said Copelouzos Group chairman and CEO Christos Copelouzos.

And there are benefits for Egypt: Infinity Power Chairman Mohamed Ismail Mansour called the initiative a “remarkable opportunity” for the country to develop its economy. “By supplying renewable energy to Europe, we are not only bolstering our own economy but also positioning ourselves as a key player in the global energy market,” he said.

REMEMBER- Work on GREGY has accelerated in recent months as the EU steps up its search for new energy supplies following Russia’s invasion of Ukraine. Prior to the war in Ukraine, the EU imported 40% of its gas from Russia, forcing it to go in search of new suppliers in the eastern Mediterranean, Africa and the Middle East.

WIND FARM FAST-TRACKED-

Cabinet hands Red Sea wind farm a golden license: Cabinet yesterday approved a goldenlicense to fast track work on the 500-MW Gulf of Suez wind farm being built by Orascom Construction, France’s Engie, and Japan’s Toyota Tsusho and Eurus Energy, it said in a statement following its weekly meeting. Projects with golden licenses only need to receive a single approval for everything from establishing the project, land allocation and building licensing, through to operation and management

REFRESHER- The USD 680 mn project — which is slated to become Africa’s largest wind facility when it begins operating at full capacity in 3Q 2025 — reached financial close last month. It is being financed by a syndicate of Japanese and French banks alongside DFIs the European Bank for Reconstruction and Development (EBRD) and the Japan Bank for International Cooperation (JIBC).

A wind plant for Scatec and Maersk’s green projects: Cabinet also approved requests by Norwegian renewables producer Scatec and Danish shipping giant Maersk to allocate a piece of land in the Gulf of Suez for a 320-MW wind farm that will power their green projects: a green hydrogen plant and a USD 15-bn clean fuel project.

Egypt’s FX bureaus face strict capital requirements, tighter controls as central bank moves to curb black market

CBE introduces new regulations for FX bureaus: The Central Bank of Egypt (CBE) is imposing new regulations on foreign-exchange bureaus as it looks to get on top of a resurgent parallel market.

Exchanges have to up their issued capital to stay in the game: Under regulations (pdf) published earlier this week, FX bureaus will have to increase issued and paid-in capital to at least EGP 25 mn by 15 September. This is a 5x increase from the current EGP 5 mn requirement, sources from the industry told Enterprise yesterday. Companies have a one-year grace period to comply with the rest of the regulations starting from 14 May.

The rationale: Raising the minimum capital requirement for FX companies is part of the central bank’s push to “regulate the currency market and one way to do so is to allow only qualified and reliable companies to work in the sector,” CI Capital veteran Hany Aboul Fotouh told Enterprise yesterday. Industry sources told us this week that the industry is experiencing huge losses and that the new capital requirement will likely force some of them to shut down.

The industry is shrinking: The number of FX companies has declined from around 120 to less than 40 since the pandemic, in part due to the losses they’ve been incurring as a result of clients preferring to deal in the black market, the sources said.

Cracking down on the black market: The tightening of operational controls over these companies such as banning them carrying out business activities outside of their premises is “a significant blow to the black market,” Aboul Fotouh said, explaining that black market traders will have a harder time accessing equipment like counterfeit money detectors.

The black market rate has widened in recent months as speculation increases that the EGP could be further devalued against the USD. The official exchange rate is now at 30.95 to the USD but the EGP is currently trading at around 38.0 on the black market, down from a recent high of 42.0, according to Al Arabiya.

Keeping tabs on the FX sector is not new: The central bank cracked down on FX companies in the aftermath of the devaluation in 2016 when many of these companies acted as “a backdoor for the black market,” according to Aboul Fotouh. This was one of the ways through which the central bank was able to regulate the FX market to a huge extent, he explained.

A zero tolerance policy: Under the changes, FX companies that don’t obtain prior approval from the central bank before merging with other firms, closing any of their branches, or refusing to carry out their licensed business activities with clients, will be shut down immediately.

Industry players want breathing room: “We are looking to arrange a meeting with the CBE governor Hassan Abdallah to discuss the new regulations and their impact on the FX market,” Ali El Hariry, member of the coordination council of the FX companies told Enterprise yesterday.

Fitch downgrades credit ratings of four Egyptian banks

Fitch Ratings has downgraded the long-term deposit ratings of four Egyptian banks following its lowering of the country’s sovereign rating earlier this month. The National Bank of Egypt (NBE), Banque Misr, Banque du Caire, and CIB all saw their ratings drop from B+ to B “reflecting the sovereign's weaker ability to provide support, particularly in foreign currency,” the rating agency saidyesterday. Fitch kept its outlook for the banks unchanged at negative.

Why?

#1- The banks hold a lot of government debt: Fitch says the four banks have “significant exposure” to debt owed by the government and public-sector companies, which it estimates to be around 75% of their total assets.

#2- Liquidity conditions aren’t great: Egypt’s banking sector is currently sitting on record net foreign liabilities, recording USD 14 bn as of the end of March as banks struggle to secure foreign currency.

#3- More EGP pressure: Fitch expects pressure on the banks’ capital ratios to rise due to further EGP depreciation and market-to-market losses.”The latter losses are partly mitigated by banks typically holding securities to maturity,” the agency said.

REMEMBER- Fitch recently downgraded Egypt’s sovereign credit rating for the first time since 2013, lowering it to B from B+ on the back of “high external financing requirements, constrained external financing conditions and the sensitivity of Egypt's broader financing plan to investor sentiment.” The agency maintained its negative outlook.

Moody’s + S&P did it first:Earlier this year, Moody’s downgraded the long-term deposit ratings of five Egyptian banks after it downgraded the country’s sovereign credit rating, while S&P Global Ratings had cut its outlookon the NBE, Banque Misr, and CIB to negative shortly after doing the same to Egypt’s debt outlook.

Moody’s rating could soon get worse: The rating agency said in a note yesterday that it has placed the five Egyptian banks on review for downgrade, a week after doing the same to Egypt’s sovereign rating. Moody’s currently rates NBE, Banque Misr, Banque du Caire, and CIB at B3 and Alexbank at B2. Moody’s will look into how the government’s weaker credit rating will affect the country’s banks, as well as their FX liquidity, it said.

Orascom Construction sells chemicals subsidiary for EGP 1.8 bn

Orascom Construction has sold one of its construction chemicals subsidiaries for EGP 1.8 bn to Swiss chemicals firm Sika Group, it said in a statement (pdf). The transaction saw OC divest its entire 28.25% stake in the unnamed firm as it looks to invest in renewable energy and concessions, and increase shareholder payouts.

Sika now owns 100% of the divested company: OC’s shares in the divested subsidiary were held indirectly via its 56.5% stake in United Holding Company, which owned 50% of the chemicals company. The remaining 50% stake in the subsidiary is held by MBCC Group, which was acquired by Sika earlier this month. “This divestment to Sika was a subsequent transaction to the completion of Sika’s global acquisition of MBCC Group announced on 2 May,” Orascom said in the statement.

Talk shows discuss the future of the exchange rate

The economy topped talk show coverage last night following Prime Minister Moustafa Madbouly’s presser on the government’s latest package of measures aimed at boosting foreign direct investment.

More investments. More USDs. Better EGP value. “The offering program is important and bringing in USD inflows from the program over the coming period will significantly support the EGP,” cabinet spokesman Nader Saad told Yahduth Fi Masr’s Sherif Amer (watch, runtime: 4:49). Nader said that the EGP would have been better valued if current global economic conditions were more stable and if USD inflows in the local banking sector weren’t disturbed. “This state of fear and speculation affected the movement of the USD in the banking sector,” he said, pointing to people refusing to deposit their USDs and companies withholding some of their USD earnings.

“The USD presents a major burden on investors and one of the main issues the Egyptian economy is facing,” Egyptian Federation of Investors Associations head Moharam Helal told Amer (watch, runtime: 6:37), voicing optimism about the future of the currency. Madbouly’s press conference got coverage from Al Hayah Al Youm (watch, runtime: 4:55) and Masa’a DMC (watch, runtime: 2:04). We have all the details in this morning’s Investment Watch, above.

National Dialogue back in focus: Tuesday’s sessions focused on social protection programs and the tourism sector, which collectively saw 470 attendees. To weigh in on the tourism discussion Sherif Fayad, member of the leftist National Progressive Unionist Party, joined Al Youm (watch, runtime: 8:11). “We see that the revival of the tourism sector will not happen except with an economic plan. Our tourism capabilities are much higher than what we are aiming for economically,” he said, adding that the problem is the lack of investment.

Also on the dialogue: Masa’a DMC (watch, runtime: 3:11) proposed the National Dialogue holds discussions on the “old rent” law.

Egyptian fintech startup Axis launches following USD 8.3 mn funding round

STARTUPS-

A new digital payments player on the block: Fintech startup Axis has launched its AxisPay mobile wallet in the local market after gaining a digital banking license from the Central Bank of Egypt and partnering with Visa and Fawry on the product, according to a press release (pdf) and a report from TechCrunch. Axis is launching after raising USD 8.3 mn in seed funding 18 months ago, in a round co-led by Tiger Global, Sawari Ventures and Raba, with participation from Firstminute Capital, RaliCap, and several angel investors, according to TechCrunch. The firm is targeting offering payroll services to some 5k local SMEs with a combined 80-100k employees by the end of 2023 and also hopes to launch SME financing, co-founder and CEO Jacques Marco is quoted as telling the news outlet.

Too many zimmer frames = worse credit ratings

Aging populations are putting government’s credit ratings at risk, reports the Financial Times. Higher interest rates are exacerbating already increasing pension and healthcare costs in developing countries as populations age — leading all three major credit rating agencies to warn that without sweeping reforms, governments can expect downgrades. Moody’s, S&P and Fitch have all said that countries including the US, EU, and Japan are in danger of downgrades as the cost of borrowing rises — potentially putting them in a “vicious cycle” of borrowing more at higher rates.

S&P expects that roughly half of the world’s largest economies will have been downgraded to junk by 2060, up from a current level of around a third, if they can’t reduce the costs associated with aging demographics, the FT reported. The rating agency estimated that the typical government would run a deficit of 9.1% of GDP by 2060 — up from a projected 2.4% in 2025 — as spending on pensions and healthcare rises. “The longer governments defer action, then the more painful that action will be,” said Edward Parker, global head of research for sovereigns and supranationals at Fitch.

EGX30	16,844	-1.1% (YTD: +15.4%)
USD (CBE)	Buy 30.84	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	18.25% deposit	19.25% lending
Tadawul	11,278	+0.6% (YTD: +7.6%)
ADX	9,526	+0.5% (YTD: -6.7%)
DFM	3,566	+1.6% (YTD: +6.9%)
S&P 500	4,159	+1.2% (YTD: +8.3%)
FTSE 100	7,723	-0.4% (YTD: +3.6%)
Euro Stoxx 50	4,323	+0.2% (YTD: +14.0%)
Brent crude	USD 76.77	+2.5%
Natural gas (Nymex)	USD 2.38	0.0%
Gold	USD 1,984.90	-0.4%
BTC	USD 27,295	+1.2% (YTD: +65.1%)

THE CLOSING BELL-

The EGX30 fell 1.1% at yesterday’s close on turnover of EGP 1.92 bn. Foreign investors were net sellers. The index is up 15.4% YTD.

In the green: Taaleem Management Services (+2.1%), Orascom Construction (+1.3%) and Telecom Egypt (+1.2%).

In the red: Oriental Weavers (-6.8%), Sidi Kerir Petrochemicals (-6.8%) and Ezz Steel

Asian markets are up/down in early trading this morning and futures suggest xx

Egypt, US hold economic talks

The Egypt-US Joint Economic Commission held its first meeting in Cairo yesterday, according to a joint statement. The meeting discussed “promoting economic and commercial ties, facilitating investment and entrepreneurship, and encouraging private sector involvement in economic development,” the statement said. Cooperation in specific sectors including energy, IT and the environment was discussed. The commission was first announced in November 2021 with the aim of exploring ways to deepen economic and business ties.

Egypt, Italy talk military cooperation: President Abdel Fattah El Sisi discussed boosting Egyptian-Italian military and security ties during a meeting with Italian Defense Minister Guido Crosetto, according to an Ittihadiya statement. The two sides also agreed on the need for peaceful resolutions to the ongoing conflicts in Libya and Sudan.

Arab League reiterates need for ceasefire in Sudan: Foreign Minister Sameh Shoukry yesterday discussed the Sudan conflict with Saudi Foreign Minister Faisal bin Farhan and Arab League Secretary-General Ahmed Aboul Gheit in a meeting ahead of this week’s Arab League summit, the Foreign Ministry said.

CALENDAR

MAY

16-18 May (Tuesday-Thursday): Egypt Cybersecurity & Defense Intelligence Systems expo, Egypt International Exhibition Center.

17-31 May (Wednesday - Wednesday): Second round of applications for sixth phase of export subsidy program.

18 May (Thursday): National Dialogue session.

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

19 May (Friday): Arab League summit, Riyadh.

19-21 May (Friday-Sunday): G7 summit, Hiroshima, Japan.

20-21 May (Saturday-Sunday): eGlob Expo, St. Regis Almasa Hotel, Cairo.

21 May (Sunday): Senate to reconvene.

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

24 May (Wednesday): EFG Hermes will host its extraordinary general meeting.

28 May (Sunday): House to reconvene.

29 May (Monday): IEF-IGU Ministerial Gas Forum, Cairo.

30 May (Tuesday): Listed companies have until this date to report and publish their 1Q results.

JUNE

June: Indian representatives to discuss prospect investments in the Suez Canal.

June: Egyptian-Saudi business forum.

3-4 June (Saturday-Sunday): OPEC+ meeting, Vienna.

7-10 (Wednesday-Saturday): The second edition of Africa Health Excon.

10 June (Saturday): Thanaweya Amma examinations begin.

12 June - 15 July (Monday-Saturday): Thanaweya Amma exams.

13-14 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

19-20 June (Monday-Tuesday): The forum for insolvency reforms and corporate restructuring in the Middle East and North Africa.

19-21 June (Monday-Wednesday): Egypt Infrastructure and Water Expo debuts at the Egypt International Exhibition Center.

22 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

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

30 June (Friday): June 30 Revolution Day.

30 June (Friday): Egypt to exit Grains Trade Convention.

JULY

1 July: House of Representatives deadline to approve the FY 2023-2024 budget.

1 July: GAFI to launch the country’s first integrated electronic platform to facilitate setting up a business.

5 - 6 July (Monday - Tuesday): Gov’t to pay out subsidies to first wave of applicants under its sixth export subsidy program.

15 July (Saturday): Deadline for bids in EGPC’s mature oil fields tender.

18 July (Tuesday): Islamic New Year.

19 - 20 July (Wednesday - Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

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

23 July (Sunday): Revolution Day.

25-26 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

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

Late July-14 August: 2Q2023 earnings season.

AUGUST

August: Hassan Allam Utilities + Agility to open Yanmu East logistics park.

2 - 3 August (Wednesday - Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

3 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

10 August (Thursday): Shalateen Mineral Resources gold mining tender closes.

22-24 August (Tuesday-Thursday): BRICS summit, Johannesburg, South Africa.

SEPTEMBER

September: Sustainable Debt Coalition Initiative agreed at COP27 to launch.

9-10 September (Saturday-Sunday): G20 summit, New Delhi, India.

15 September (Friday): IMF to review USD 3 bn program.

19-20 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

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

21-23 September (Thursday-Saturday): Narrative PR Summit, Somabay.

25 September (Monday): Nasdaq deadline for Swvl Holdings Corp to increase its market value of publicly held shares to a minimum of USD 15 mn.

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

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

OCTOBER

October: Deadline for ins. providers to link their databases with the FRA.

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

6 October (Friday): Armed Forces Day.

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

Late October-14 November: 3Q2023 earnings season.

26 October (Thursday): Daylight saving time ends.

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

NOVEMBER

November: Cairo to hostIntra-African Trade Fair.

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

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

DECEMBER

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

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

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

Summer 2023: EGX to launch a shariah-compliant index.

1H 2023: GAFI roadshow set to launch to drum up foreign investment for golden licenses

1H 2023: Abu Dhabi Islamic Bank intends to launch a digital consumer finance company

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.

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

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

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

2Q 2025: Safaga Terminal 2 to initiate operations.

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