Goldman on Egypt: Our problem isn’t “excessive imports” — it’s that we’re not exporting

Wednesday, 5 Apr 2023

Goldman on Egypt: Our problem isn’t “excessive imports” — it’s that we’re not exporting

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Today at a glance

ECONOMY

Private sector activity falls again in March — but inflation could be easing for businesses.

ECONOMY

Goldman Sachs says Egypt must choose between economic reform and get serious about exports — or face “painful adjustment.”

Privatization

The SFE is fielding offers for the new state-owned hotels company -Soliman.

GREEN ENERGY

Renergy-led consortium signs to build USD 120 mn Abu Rawash waste-to-energy plant.

EARNINGS WATCH

B Investments’ earnings up 8x in 2022 on Giza Systems exit.

ALSO ON OUR RADAR

Acacia Angels invests in Greek retail swap startup Swaplanet.

PLANET FINANCE

EVs could get cheaper as lithium prices cool from a two-year rally.

HARDHAT

Gov’t wants the private sector to help develop river transport.

WHAT WE’RE TRACKING TODAY

THIS MORNING: Savers pour EGP 41 bn into Banque Misr’s high-yield CDs. PLUS: Net foreign liabilities deepened in February

Good morning, friends, and welcome to another packed news day.

It’s all about the macro picture this morning. The non-oil economy contracted for a 28th month running in March — and Goldman Sachs is sounding the alarm on our external financing gap. The problem, it says, isn’t that we’re importing too much — it’s that we’re not exporting enough.

The ray of sunshine: Sovereign wealth fund boss Ayman Soliman brings positive updates on the privatization program as offers roll in for the state-owned hotels company and the pre-IPO fund looks to onboard another four state-owned firms.

** SO, WHEN DO WE EAT? We’ll be breaking our fasts at 6:16pm CLT today. You have until 4:11am tomorrow morning to hydrate and grab a bite to eat.

BUT FIRST-

Net foreign liabilities deepen again in February: Egypt’s net foreign liabilities rose by USD 1.3 bn in February as continued pressure on the EGP pushed net assets further into the red, according to calculations based on central bank figures. Net foreign assets slipped to a negative USD 23.02 bn from negative USD 21.70 bn in January. It’s the second month in a row that net foreign liabilities deteriorated. Commercial banks were responsible for most of the decline, seeing their liabilities grow by USD 787 mn to stand at USD 13.8 bn.

Two years can make a big difference: Net foreign assets stood at USD 20.39 bn in February 2021 before they began to decline. The outbreak of war in Ukraine in February 2022 accelerated the process as investors pulled bns of USD from our debt market and our import bill shot up, heaping pressure on the EGP and precipitating three devaluations. The currency has lost almost half of its value since last March.

Robust appetite for high-yield CDs: Savers have so far poured some EGP 41 bn into Banque Misr’s new fixed and declining-rate certificates of deposit, Hapi Journal quotes bank chairman Mohamed El Etreby as saying. The NBE and Banque Misr introduced the 22% CDs in the wake of the central bank’s 200-basis-point rate hike last week.

aiBank launches new CDs: aiBank, a unit of EFG Hermes, introduced a new three-year certificate with a fixed interest rate of 17.25% for monthly payouts, 17.5% for quarterly payouts, and 18.0% for annual payouts, according to its website. The minimum deposit is EGP 10k. CIB earlier this week said it was taking to market a 22%, three-year CD. The moves come after the central bank raised interest rates last Thursday by 200 bps.

The FY 2023-2024 budget is with the House: The cabinet on Monday forwarded next year’s budget to the House’s Budget Committee after approving it last week. The committee will hold off discussing the document until after Finance Minister Mohamed Maait and Planning Minister Hala El Said deliver their budget statements on Tuesday.

What we know about the budget: The draft FY 2023-2024 budget puts social spending front and center amid a crunch on Egyptian households, with a 28% increase for social safety programs and significant rises for food and fuel subsidies.

It’s business as usual in the Suez Canal: Traffic along the Suez Canal was not disrupted by a minor scrape between two passing tankers yesterday, the Suez Canal Authority said.

HAPPENING TOMORROW-

The World Bank will release its latest MENA Economic Update: Ominously titled “Altered Destinies,” the multilateral lender’s latest regional growth report will look “in depth at how even temporary increases in the price of food can have lasting impacts across generations in terms of education, health and future income prospects.” The World Bank downgraded its economic growth forecast for Egypt in the current fiscal year by 0.2 percentage points to 4.8% in its most recent update in October.

THE BIG STORY ABROAD-

The int’l press can’t look away from the Trump indictment: Donald Trump pleaded not guilty to 34 felony counts in a Manhattan court, becoming the first former US president to be booked and charged with a crime. The Donald faces charges of falsifying business records to hide hush money he paid to two women to keep extramarital affairs out of the press ahead of the 2016 election.

AND- Finland is officially a NATO member: Finland became NATO’s 31st memberyesterday after all 30 member states voted to ratify the country’s membership, doubling the length of the military alliance’s border with Russia. “Joining NATO is good for Finland, it is good for Nordic security and it is good for NATO as a whole,” Secretary General Jens Stoltenberg said. Finland applied to join NATO in May 2022 in hopes of bolstering its security following Russia’s invasion of Ukraine.

Sweden is still knocking at NATO’s door: Sweden’s aspirations to join NATO are in the hands of Hungary and Turkey, the two member countries yet to greenlight the move. (Reuters | CNN| BBC| DW| AP| CNBC| NPR | FT)

MARKET WATCH-

The eye of the storm? Traders are concerned that the calm that has followed the recent market turmoil isn’t here to stay and are preparing for further bouts of turbulence in the coming weeks, Bloomberg reports. Last month’s banking crisis that saw the collapse of three US lenders and emergency takeover of Credit Suisse didn’t produce the kind of turmoil seen in the lead-up to the 2008 meltdown but the wild swings have market watchers worried about what might be coming down the line amid uncertainty about interest rates and inflation.

“We expect to see notable market swings also going forward, as investors ponder where central bank rates will end up, what will it take to bring inflation back to target, what will the costs be to the economy — and yes, also who will be the next casualties of higher rates,” said a senior analyst at Nordea Bank.

CORRECTION- In yesterday’s story on DPI and Amethis’ acquisition of a stake in Marcyrl we incorrectly stated that DPI owns a 33% stake in MNT Investments. The firm’s ADP II fund has fully exited its 25% stake in the company, while ADP III has reduced its ownership from 8% to 5%. The story has since been updated on our website.

CIRCLE YOUR CALENDAR-

It’s a brand new month. Here are some economic indicators to look out for:

Foreign reserves: Expect the central bank to publish March’s foreign reserves figures before the end of this week;
Inflation: The CBE and Capmas will be out with March inflation data on Monday, 10 April.

New and emerging fund managers have until 1 May to apply to the VC Grow accelerator program by GIZ Egypt, AfricaGrow and Dutch development bank FMO. The six-month program offers fundraising support, introductions to potential partners and investors, and workshops, and culminates in a regional summit. To be eligible, funds must have a minimum 25% allocation to Egypt, investing equity or venture debt between the seed to Series A stages.

We are delighted to share with you that the Enterprise Exports & FDI Forum will be taking place on Monday, 15 May at the Four Seasons Hotel at Nile Plaza.

DO YOU WANT TO ATTEND? The first wave of invites is going out soon. If you’re a C-suite exec, exporter, investor, official, banker, or someone who should be part of the conversation, please TAP OR CLICK HEREto request a spot at this exclusive event.

WANT TO BECOME A COMMERCIAL PARTNER? Ping a note to Moustafa, our head of commercial, here.

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

*** 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 follow up on government efforts to onboard the private sector in the development of Egypt’s river transport infrastructure.

Tags:

banking budget watch debt economy House of Representatives Suez Canal WHAT WE’RE TRACKING TODAY

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ECONOMY

Egypt’s private-sector slump continues for 28th month amid soaring inflation

Private-sector activity in contraction again in March: The contraction in Egypt’s non-oil private sector deepened in March as the depreciation of the EGP, high inflation, and import restrictions continued to weigh on demand, according to S&P Global’s purchasing managers’ index (pdf). The PMI reading inched down to 46.7 from 46.9 in February, making March the 28th consecutive month that private-sector activity has been in contraction.

Remember: Anything below the 50.0 mark indicates contraction.

What they said: “The headline PMI signaled a further solid deterioration in the performance of non-oil companies, driven by steep falls in activity and new business volumes,” said David Owen, senior economist at S&P Global Market Intelligence. “Inventories and employment levels also decreased, with purchasing once again impacted by customs restrictions.”

Businesses continued to feel the impact of soaring prices, which resulted in a “sharp” fall in new orders, S&P Global said. Falling demand accelerated from February though this was partially offset by a milder decline in export sales. Headline inflation hit a five-and-a-half-year high of 31.9% in February, while food prices and core inflation both rose at their fastest rates ever. Import controls were also cited as being a key cause for weaker demand, and resulted in a fifth consecutive monthly decline in vendor performance

Light at the end of the tunnel? The rate of inflation faced by businesses was “much softer” than at the beginning of the year, and companies raised their prices by the lowest amount in five months as they looked to reinvigorate demand, Owen said. “In addition to a slightly stabler currency market, the data provides some hope that the peak of inflation could be near,” he added.

Manufacturing, construction + retail hard hit: The manufacturing, construction, and wholesale and retail industries experienced further heavy falls in output and demand during the month.

But the services sector sees growth: Activity in the services sector rose for the time since August 2021 as sales picked up.

More job losses: Companies reduced their headcount for the fourth month in a row, often leaving positions vacant due to a lack of new work, S&P Global said.

Businesses are slightly less pessimistic than they were last month: Sentiment remained near series lows despite picking up slightly to its highest level in three months.

The reading got coverage overseas:Reuters.

FROM THE REGION-

The Saudi non-oil private sector is still in rapid expansion despite pulling back from February’s near eight-year high: Saudi Arabia’s PMI (pdf) dipped to 58.7 in March from 59.8 in February. Growth came on the back of a strong demand from foreign customers and increased development spending.

Tags:

economy foreign exchange inflation PMI

ECONOMY

Egypt must implement reform or risk “depreciation-inflation cycle” -Goldman

Egypt faces a “stark choice”: Accelerate economic reforms or face further “painful adjustment” in the form of more currency depreciation and a further drop in imports that could fuel inflation and stymie growth, Goldman Sachs’ Farouk Soussa and Sara Grut write in a new report to clients yesterday.

The problem: The “sharp external adjustment” we’ve seen in the past year hasn’t been enough to alleviate our payments imbalance. The EGP has depreciated by more than 50% since last March, imports are down, inflation and interest rates are up, and growth has slowed — but all that hasn’t been enough to alleviate balance of payments pressures on the economy, Goldman says. That means FX demand is still outstripping supply and the USD-EGP exchange rate in the parallel market is still rising — with potentially detrimental effects on the economy.

The key: Exports. Authorities face a stark choice: “Either carry out reforms aimed at increasing exports and improving the financing mix, or move towards further painful adjustment.”

Why hasn’t the depreciation been enough to right the imbalance so far? Even though the EGP is now “significantly undervalued,” FX scarcity persists and investors have not returned to the country in a significant way, Goldman reports. The bank cites several possible reasons for that: It’s hard to suppress demand for key staples like food which make up a large chunk of our imports; exports and remittances remain weak; the FX demand backlog is yet to be cleared; dollarization persists as people hoard USD; and government spending remains high.

The key danger, according to Goldman: Egypt enters a “vicious circle” of depreciation and inflation. That could impact the country’s capacity to service its external debt, damaging investor confidence. It would also pressure growth as a lack of imports and higher prices trigger demand destruction in the domestic economy.

SO, WHAT DO WE DO? “Addressing Egypt’s external imbalances means tackling the structural trade deficit which, at 10% of GDP, is one of the largest among major emerging markets,” Goldman writes. To do so, the bank thinks the country needs to double down on its move to a more flexible exchange rate, ramp up exports, lower state spending by slowing down the implementation of national mega-projects, and follow through on its program of asset sales in state-owned companies.

We’re not doing well on the export front: Total exports including hydrocarbons came in at just 10% of GDP in the five years up to covid, well below the 37% rate in Goldman’s emerging markets sample. “The trade deficit is due to low exports, not excessive imports,” they write.

Goldman lays out two potential scenarios for our economic future:

#1- The best case: The government doubles down on its ambitious reform agenda, “boosting FDI inflows and gradually bringing down the current account deficit by supporting greater export growth in the medium term.” In its “optimistic scenario for asset sales and market access,” Goldman sees:

FDI rising sharply to USD 14 bn annually on average over the next three years (double the historic average);
Capital market financing increasing to USD 6 bn annually over the next three years, split between portfolio inflows and sovereign issuances;
The current account deficit narrowing to c. 2.6% by FY 2025-2026 from a current 3.5%.

#2- The not-so-great case: If economic reforms are not followed through, Goldman sees:

FDI hitting just USD 9 bn annually over the next three years;
Capital market financing of USD 3 bn annually over the next three years;
A sharp drop in foreign reserves to less than USD 13 bn by FY 2025-2026.

BEHIND THE FORECAST-

Our external financing needs have “more than doubled in recent years” to some USD 20-30 bn annually, the investment bank writes. Egypt’s widening current account deficit and a lack of FDI growth — which has on average brought in less than USD 10 bn annually — has led the country to rely increasingly on external borrowing to fill the gap. External debt stock now stands at some 49% of GDP, according to Goldman estimates, up from 17% in 2016. Taken altogether, this external imbalance has left Egypt “highly exposed to a potential disruption to its ability to borrow from abroad.”

We’re still effectively shut out of the capital markets: Russia’s invasion of Ukraine saw investors flee risky emerging markets including, triggering a “sudden stop” — USD 20 bn in portfolio money left the country, marking the “sharpest and most sustained reversal of capital flows in Egypt’s history.” Since then, the country’s USD bonds have continued to underperform. Wide spreads on Egyptian bonds suggest investors continue to view our debt as risky.

And alternative financing options — think the IMF and the GCC — may not be an option: The lenders who have traditionally jumped to our aid in times of crisis are now putting greater emphasis on the need for economic reform, Goldman notes. The IMF has ponied up relatively little money, and much larger pledges from the GCC have been “slow in materializing.”

News of stalled privatization talks isn’t helping: The reported stalling of negotiations with Gulf investors to sell state-owned assets —including in United Bank and Telecom Egypt — “may have undermined investor confidence somewhat in the prospects of success for Egypt’s asset sale program,” Goldman writes.

ON A RELATED NOTE- Egypt placed just 0.04% of EGP 3 bn worth of local currency bonds on Monday, Bloomberg reports. The government accepted only one offer to buy EGP 1.1 mn worth of the three-year bonds at 21.7% rate, after investors demanded yields of up to 28%. Demand for EGP-denominated debt has been severely impacted as investors wager on further depreciation of the currency, the business newswire reports.

Twelve-month non-deliverable forwards this week have the EGP hitting 41 to the USD for the first time, according to Bloomberg.

Tags:

debt economy FDI Goldman Sachs trade

Privatization

Investors offer to purchase stakes in Egypt’s new state-owned hotel company

Offers roll in for the new hotels company: Investors have started submitting offers for the state’s newly-established hotels company, our friend Sovereign Fund of Egypt (SFE) CEO Ayman Soliman told Al Arabiya yesterday (watch, runtime: 4:05). The SFE is filtering the offers before sending them to Prime Minister Moustafa Madbouly and the relevant authorities to make a final choice, Soliman said.

The sale will be carried out through a capital increase rather than by existing shareholders selling out, Soliman said, confirming our expectations. A capital increase will help the company secure new funds to deploy as part of a growth and turnaround plan, while a sale of existing shares would benefit the selling parties, not the new company.

“We want to increase the efficiency of our hotels by pouring more investment into them and making them more profitable, to eventually have them listed on the EGX,” Soliman said.

REMEMBER- The government is looking to place a 20% stake in the hotels company with strategics, before offering another 5% on the bourse, according to earlier statements by Public Enterprises Minister Mahmoud Esmat. The company holds seven five-star propertiesnationwide — including the Cairo Marriott Hotel in Zamalek and Marriott Mena House next to the pyramids complex. .

Safi and Wataniya yet to receive offers

Military-owned bottled drinks firm Safi and fuel retailer Wataniya will “soon” start receiving offers from strategic investors, Soliman said. Shortlisted candidates will be invited to conduct due diligence prior to final negotiations, he said, adding that he expects the whole process to wrap up “within months.”

REMEMBER- The SFE is reportedly looking to sell at least 10% — and potentially up to 100% — of the two firms to strategics, depending on market appetite. CI Capital started marketing the two companies in a roadshow last month.

Four more companies to join SFE’s pre-IPO fund

The pre-IPO fund will welcome an additional four companies on top of the eight currently on board, Soliman said.

Who’s in? We still don’t know exactly which eight firms in the Madbouly government’s privatization program have so far been added to the fund, which was set up last year to ready state-owned companies for strategic stake sales ahead of public listings. Local media reports have named Egyptian Linear Alkyl Benzene (Elab), Banque du Caire, Misr Life Ins., and Salhia Investment and Development Company as part of the fund. Safi and Wataniya are not part of the fund.

No disputes with investors on valuations: Al Arabiya quotes Soliman as saying that there have been no disputes on how to value state assets following the EGP devaluation. Companies with USD revenue streams are valued in USD terms, he is quoted as saying. Reuters and Bloomberg in February reported that Saudi wealth fund PIF had paused negotiations for the acquisition of state-owned United Bank over a valuation dispute, with PIF wanting to value the lender in local-currency terms while the central bank was arguing for a USD-based valuation.

Tags:

Ayman Soliman pre-IPO fund privatization watch Sovereign Fund of Egypt

GREEN ENERGY

Renergy-led consortium signs to build USD 120 mn waste-to-energy project in Egypt’s Abu Rawash

Gov’t puts pen to paper on its Abu Rawash waste-to-energy project: The Madbouly government has inked a USD 120 mn agreement with a consortium led by Renergy Egypt to design, build, own, and operate its new waste-to-energy factory in Abu Rawash city, the Environment Ministry saidyesterday.

The players: Joining Renergy in the project are the National Organization of Military Production, Green Tech Egypt and Bahrain-headquartered Oak Group Holdings.

About the project: The plant will convert some 1.2k tons of municipal solid waste per day to 30 MWh of electricity. The consortium will handle the entire project for a 25-year period before transferring ownership to Giza governorate.

The plant is being fast tracked: The project is expected to receive a golden license. The new single approval licenses cover everything from establishing the project, land allocation and building licensing, through to operation and management. No timeline was given for when the facility is expected to come online.

We have a lot of waste to spare: Egypt produces up to 5 mn tons of municipal solid waste a year, Environment Minister Yasmine Fouad said. Waste is the second largest source of greenhouse gas emissions in the country, making up some 13% of total emissions, she added.

More to come: The state has eight waste-to-energy projects worth EGP 10 bn in the pipeline, Finance Minister Mohamed Maait said. The projects will be located in Alexandria, Fayoum, Giza, Gharbia, Beheira, Damietta, Menoufia, and Sharqiya and will be carried out by eight local companies.

Tags:

Climate green energy Green Tech Egypt National Organization of Military Production Oak Group Holdings waste-to-energy

EARNINGS WATCH

B Investments’ earnings surge in 2022

B Investments’ net income grew eightfold year-on-year to EGP 846 mn in 2022, according to its earnings release (pdf). The private equity firm’s revenues jumped more than ninefold to EGP 1.5 bn, driven by an EGP 1.4 bn capital gain from its Giza Systems exit, the release says.

Two big exits in four months bring capital gains: The EGX-listed firm divested its 44.7% in Giza Systems in October at a company valuation of USD 128 mn, according to head of investor relations Omar El Labban. The exit drive has continued in 2023: The company sold its 6.4% stake in Total EnergiesEgypt for USD 27.6 mn in February. The transaction yielded an additional USD 2.2 mn for B Investments when Adnoc acquired a 50% stake in Total Energies in February, El Labban told us, adding that the combined net proceeds of the exits have amounted to c. EGP 1.6 bn. More than half of the proceeds will be allocated to cash and stock dividends, and the remainder to fresh investments, he said.

What they said: “2022 was an exceptional year given our exit from Giza Systems,” El Labban said. “We believe that 2023 will be another excellent year, given that the TotalEnergies Egypt exit will buoy 1Q 2023 earnings.”

Looking ahead: “Our future plan is making more investments, building our portfolio and creating value for our existing portfolio companies,” El Labban said, explaining that the firm is targeting companies in consumer-driven sectors — such as healthcare, pharma, education, and FMCGs — as well as exporters. The company’s board in March signed off on investing up to EGP 500 mn in the Sovereign Fund of Egypt’s (SFE) healthcare and pharma sub-fund. Company chairman Hazem Barakat said earlier this year that B Investments is working on acquisitions in the pharma and food sectors, and will invest EGP 2 bn.

Tags:

B Investments earnings watch private equity

Moves

Egypt’s prime minister appoints two new deputies at GAFI

Madbouly appoints two deputy heads for GAFI: Prime Minister Moustafa Madbouly yesterday appointed Justice Tamer El Batanouni as GAFI’s deputy head for legal affairs, and Amr Noureldin as its deputy head for technical affairs, according to a cabinet statement. El Batanouni was previously advisor to the technical secretariat of the ministerial committee for settlement of investment disputes at GAFI and held several posts at the Justice Ministry. Since serving as advisor to GAFI’s head for investment promotion since 2016, Noureldin has been Egypt’s official point of contact for the Organization for Economic Co-operation and Development (OECD) and has held posts at an Islamic Development Bank subsidiary and Kuwait International Bank.

Tags:

Amr Noureldin GAFI moves Tamer El Batanouni

LAST NIGHT’S TALK SHOWS

Egyptian talk shows cover Trump’s arrest + Finland joining NATO

The talk shows that aren’t off for Ramadan last night took us to the US, where former president Donald Trump is facing 34 felony counts over hush money he allegedly paid to cover up an affair. Yahduth Fi Masr (watch, runtime: 3:38) and Ala Mas’ouleety (watch, runtime: 3:14) had coverage.

NATO’s newest member, Finland, also got some airtime on Ala Mas’ouleety (watch, runtime: 2:54).

We have coverage of both stories in this morning’s What We’re Tracking Today.

Tags:

LAST NIGHT’S TALK SHOWS NATO politics

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ALSO ON OUR RADAR

Egypt’s Acasia Angels invests in Greek retail swap startup Swaplanet

Acasia Angels joins Greek VCs to invest in Swaplanet: Egypt-based Acasia Angels is co-investing EUR 485k in eco-friendly Athens-based startup Swaplanet, it said in a press release yesterday. The angel investment group participated in the company’s pre-seed round alongside investors including Genesis Ventures, Zeno Capital, and Hellenic Business Angels Network.

What is Swaplanet? Established in 2021, the startup is a retail apparel swap platform thatencourages parents to recycle and reuse clothes for babies and children.

Tags:

Acasia Angels Acasia Ventures ALSO ON OUR RADAR Fintech Swaplanet

PLANET FINANCE

Lithium price slide could mean cheaper electric vehicles. PLUS: Germany sanctions EY over Wirecard fraud

Good news for EV makers: Lithium prices have fallen more than 30% this year, on the back of slowing demand in China and market volatility, the Wall Street Journal reports. Lithium prices surged more than 12x to record highs over the past two years as the transition to renewable energy and electric cars gains traction around the world. The slide could lead to cheaper electric vehicles hitting the market — but it will take months for that to materialize, with supply of lithium to battery-makers remaining tight for now.

AND- EY sanctioned in Germany for role in Wirecard fraud: German regulators have banned Ernst & Young from taking on new listed clients for audit work for two years over “violations” in connection with its work for the disgraced German payment processor Wirecard, which collapsed in 2020, reports the Financial Times.

ALSO WORTH NOTING-

Euro manufacturing contraction deepens in March: Manufacturing activity in the eurozone continued to decline in March as inflation, rising borrowing costs and falling consumer confidence continued to hit demand. (PMI, pdf)
Japan just left the Russia oil price cap: Japan has split from its G7 allies and will now purchase Russian crude at prices higher than the USD 60 per barrel cap.(Wall Street Journal)
Virgin Orbit plummets to earth: The satellite launch company yesterday filed for bankruptcy after failing to secure funding. (CNBC)

EGX30	16,998	-0.3% (YTD: +16.4%)
USD (CBE)	Buy 30.84	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	16.25% deposit	17.25% lending
Tadawul	10,949	+1.3% (YTD: +4.5%)
ADX	9,504	+0.03% (YTD: -6.9%)
DFM	3,455	+0.5% (YTD: +3.6%)
S&P 500	4,100	-0.6% (YTD: +6.8%)
FTSE 100	7,635	-0.5% (YTD: +2.5%)
Euro Stoxx 50	4,315	+0.1% (YTD: +13.8%)
Brent crude	USD 84.94	+0.0%
Natural gas (Nymex)	USD 2.09	-0.7%
Gold	USD 2,037	-0.0%
BTC	USD 28,250	+1.7% (YTD: +70.9%)

THE CLOSING BELL-

The EGX30 fell 0.3% at yesterday’s close on turnover of EGP 2.10 bn (9% ahead of the trailing 90-day average). Foreign investors were net sellers. The index is up 16.4% YTD.

In the green: Madinet Nasr Housing (+6.5%), Rameda Pharma (+4.8%) and Credit Agricole Egypt (+4.6%).

In the red: Sidi Kerir Petrochemicals (-2.8%), Eastern Company (-2.7%) and AMOC (-2.5%).

Tags:

commodities EY Financial Markets Planet Finance

Diplomacy

British Middle East Minister Tariq Ahmad talks investment with Egyptian Foreign Minister Sameh Shoukry. PLUS: El Sisi invited to COP28 in UAE + 13 new ambassadors

Investment tops discussions between Shoukry and British Minister of State for Middle East: Foreign Minister Sameh Shoukry yesterday talked about upping trade and investment with the UK with Tariq Ahmad, the country’s minister for the Middle East, according to a Foreign Ministry statement.

El Sisi gets an invite to COP28: UAE President Sheikh Mohammed bin Zayed Al Nahyan sent President Abdel Fattah El Sisi an official invitation to attend the December climate summit in Dubai, Ittihadiyasaid yesterday.

Thirteen new ambassadors to Egypt: El Sisi received the credentials of 13 new ambassadors yesterday, marking the official start of their tenures, Ittihadiya said. They are:

Ireland — Nuala O’Brian
Peru — José Jesús Guillermo Betancourt Rivera
Brunei — Penjiran Haji Mohd. Salimin
Azerbaijan — Elkhan Polukhov
Greece — Νikolaos Papageorgiou
New Zealand — Amy Laurenson
Argentina — Gonzalo Urriolabeitia
Portugal — Rui Tereno
Ecuador — Denys Toscano Amores
Cuba — Manuel Javier Rubido Diaz
Congo — Kasingo Musinga
Guinea-Bissay — Dino Seidi
Seychelles — Conrad Mederic

Tags:

Abdel Fattah El Sisi COP28 DIPLOMACY

HARDHAT

Gov’t wants the private sector to get in on developing Egypt’s river transport

The government is once again prioritizing the development of Egypt’s river transport infrastructure — and it wants the private sector on board, with Transport Minister Kamel El Wazir showcasing last month the projects on which the ministry is planning to work in partnership with our community. The ministry created a comprehensive strategy detailing the different areas in river transport it’s looking to develop, including building a network of river ports, expanding the use of waterways to transport cargo and individuals, and setting up a digital river information services database to guide and manage inland transport. This plan comes as legislative amendments on river transport have come into effect and the executive regulations for the amendments are set to be issued soon.

REFRESHER- Last year, the River Transport Act, which aims to attract more investment into the country’s inland waterways, was signed into law after receiving approval from the House of Representatives. The new law will simplify the process of approval for river transport projects and is widely expected to draw private sector investment interest.

What does the Transport Ministry envision for the development of the network? The ministry’s plan entails creating a network of river ports for the movement of cargo and containers; providing passenger and cargo transport services along the Nile, with ports spread across all governorates; constructing new canal navigation locks that meet modern engineering standards to increase the capacity of the lock system; and clearing, dredging, and maintaining navigational channels to ensure a safe navigation path to facilitate navigation for Nile cruises, tourist ships, and commercial traffic.

A lay of the (proverbial) land: Egypt’s river transport network consists of four primary waterways — Cairo-Damietta, Cairo-Alexandria, Cairo-Aswan, and Cairo-Wadi Halfa. Altogether, the four waterways span 1,770 km. Additionally, there are several secondary waterways in the country’s overall river transport network, which together span another 1.7k km. The majority of the network (3,136 km) can be used for inland water transport, but a smaller proportion (2,192 km) is classified as first-class navigable waterways. This classification is based on the width and depth of the waterway, how far above water level bridges are, and the dimensions of navigation locks.

There currently exist a handful of river shipping players, but these do not operate at their full capacity as a result of the dearth of river-based cargo transport in Egypt. The most recent River Transport Authority data indicates that around 500 mn tons of goods circulate via the country’s river network each year, comprising only 0.8% of the total transport of goods. Land-based transport accounts for the lion’s share (95.7%) of cargo movement, followed by railways, which account for 3.5% of total cargo movement. The data also indicates that the most important goods transported via waterways are petroleum products, cement, limestone, coal, and phosphates.

The River Act is widely expected to be a turning point for the development of Egypt’s river transport sector, and will resolve investor issues in river transport to make the sector primed for private sector investments, Atter Hannoura, the director of the Finance Ministry’s PPP unit, told Enterprise. There are no fresh projects that have been offered to private sector players as of yet, with the government currently working on the executive regulations to the River Act, Hannoura told us.

There are projects in the pipeline: The ministry’s PPP unit has projects it is planning to pitch to investors when the regulatory framework for the sector is complete, including a project for a river bus and three river ports in Upper Egypt catering to industrial players, Hannoura said. Another potential project that will be open for the private sector will connect the Damietta Port with the Nile, with the connection geared towards retail and industrial activity, an official source who requested to remain anonymous told Enterprise.

The first PPP project to go through since the River Act was passed: The government has tapped Gharably Integrated Engineering Company (GIEC) and 3A International for a planned line between Aswan and Sudan, our source tells us. There are additional projects that will be announced soon to develop the Athar El Nabi station in Upper Egypt and the Al Maleh lock in Alexandria, the source said.

More private sector players are keen to get in on the sector — but have some sticking points that need to be addressed: Several players in the sector Enterprise spoke with indicated that the government needs to provide more incentives, including slashing fees and operating costs. Nile Taxi Chairman Magdi Ghali, for one, pointed to what he said are prohibitively high licensing fees for river boats, which have increased to EGP 10k per boat, from a previous EGP 300-400. These high costs affect the sector’s allure to private sector investments, particularly when it comes to passenger transport, which is not as lucrative as cargo transport. Ghali also stressed that these fees need to be reassessed in light of the current macroeconomic environment, which has already put players in the sector under financial strain due to the devaluation of the EGP and accelerating inflation.

Addressing these issues can clear the way to unlock the development of a sector with massive potential: Investing in river infrastructure, including docks and ports, is a costly endeavor, which makes this sector ripe for PPP projects, advisor to the National Nile Company for River Transport Ahmed El Shamy tells Enterprise. Modernizing and developing river transport could have a significant positive impact on industries and for the economy as a whole, as river transport is a cheap method to move goods, which could help companies cut costs and, by extension, reduce prices for consumers, El Shamy said. The government is hoping to raise riverways’ share of cargo movements to 10% within 15 years, El Shamy said, which is an ambitious but attainable goal if we double down on upgrading the sector’s infrastructure and modify waterways to deepen riverbeds and address other traffic chokeholds.

Your top infrastructure stories for the week:

FinMin to announce the names of the qualifying bidders for desalination tender: The Finance Ministry is expected to announce next week the names of the qualifying bidders for desalination projects the government is tendering to the private sector.
Rosatom can get started on Dabaa’s third sector: The Egyptian Nuclear and Radiological Regulatory Authority has given Russian state nuclear company Rosatom a construction permit for the third reactor at the 4.8 GW Dabaa nuclear plant.

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Hardhat

CALENDAR

APRIL

April: GAFIto launch the country’s first integrated electronic platform to facilitate setting up a business.

April: SCZone roadshow in China.

April: SCZone to begin providing ship bunkering services in the Suez Canal’s ports.

6 April (Thursday): Al Ansari Financial Services shares to start trading in Dubai.

9 April (Sunday): Senate to reconvene.

11 April (Tuesday): House to reconvene.

10-16 April (Monday-Sunday): IMF / World Bank Spring Meetings, Marrakesh, Morocco.

11 April (Tuesday): Deadline for NGOs to reconcile their status.

12 April (Wednesday): National Paints Holding’s and Eagle Chemicals’ MTOs for Pachin ends.

15 April: Lamees El Hadidi’s startup competition show, El Forsa, closes applications.

16 April (Sunday): Coptic Easter

17 April (Monday): Sham El Nessim.

21 April (Friday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

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

28 April (Friday): First day of daylight saving time.

30 April (Sunday): Tenth of Ramadan dry port tender deadline.

30 April (Sunday): Deadline for self-employed to register for e-invoicing.

30 April (Sunday): Deadline for corporate tax returns.

30 April (Sunday): End of Mediterranean, Nile Delta oil + gas exploration tender.

Late April – 15 May: 1Q2023 earnings season.

MAY

1 May (Monday): Labor Day.

1 May (Monday): Deadline to applyto VC funds program by GIZ Egypt, AfricaGrow and Dutch development bank FMO.

2-3 May (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 May (Wednesday): National Dialogue begins.

4 May (Thursday): National holiday in observance of Labor Day (TBC).

4 May (Thursday): IEF-IGU Ministerial Gas Forum, Cairo.

9-11 May (Tuesday-Thursday): First edition of the Arab Actuarial Conference, Cairo.

12-15 May (Friday-Monday): Egypt Fashion Week.

14 May (Sunday): Expat car import scheme ends.

15 May (Monday): Enterprise Exports & FDI Forum, Four Seasons Hotel Cairo at Nile Plaza.

16-18 May (Tuesday-Thursday): Egypt will host its first conferenceon cybersecurity and defense intelligence systems (CDIS-Egypt).

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

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

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

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

JUNE

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

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.

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

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.

18 July (Tuesday): Islamic New Year.

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.

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

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

SEPTEMBER

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.

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

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

OCTOBER

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.

1Q 2023: Egypt + Qatar to launch joint business forum.

1Q 2023: FRA to introduce new rules for short selling.

1Q 2023: Internal trade database to launch.

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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