Annual headline inflation accelerated to 4.6% in October from 3.7% inSeptember, according to Capmas figures (pdf) released yesterday. October’s inflation figure is the highest since July’s 4.2%. Reuters and Bloomberg also had the story.

The delayed start to the academic year was the main driver, with the prices of educational services seeing a 29.7% m-o-m increase and the price of a high school education rising 55.6% m-o-m. The annual 1% increase seen during the back-to-school season shifted to October this year as the pandemic forced the academic year to begin a month later. School-related supplies also drove up inflation, with books and stationery supplies increasing 4.2% on a monthly basis.

The uptick in education price increases outpaced the 0.8% y-o-y decline in food and beverage prices, which are typically responsible for driving the headline rate in Egypt.

Annual core inflation — which strips out volatile items such as food and fuel — rose to 3.9% from 3.3% in September, according to central bank figures (pdf). On a monthly basis, the core rate increased to 1.7% from 0.1% in September

Will we close out the year with inflation within the central bank’s target range? It’s unlikely, but we’ll probably get close, Pharos Holding and Beltone Financial said in research notes yesterday. “We expect inflation to pick up again around 5-5.8% y-o-y during the last two months of 2020, despite a weak monthly growth in prices, as both these months had monthly price declines last year which created an unfavorable base effect,” Pharos analyst Sandy Eskaros wrote in a note. Average inflation for the year will likely come in at 5%, which is slightly below the lower end of the Central Bank of Egypt’s 6-12% target range, she said. Beltone’s Alia Mamdouh also expects inflation to “hover closer to the lower bound” of the target range by the end of the year.

Reminder: Under the terms of USD 5.2 bn stand-by facility agreed with the IMF, authoritiesare expected to consult with IMF technical experts should the inflation rate fall below 6% by the end of September, and with the executive board if it dips below 4%. If inflation does fall outside targets, the CBE is expected to take measures to support price growth and bring it within the target range.

The outlook for tomorrow’s Monetary Policy Committee meeting is unchanged: Beltone Financial and EFG Hermes still expect a hold, while Pharos maintains its position that a small 50 bps rate cut could be in the cards. Six out of eight economists we spoke to earlier this month expect the CBE to leave interest rates unchanged. A number of national banks have already scrapped their high interest fixed-rate savings certificates in September, in a move that is expected to support growth and boost inflation.

Job creation, productivity key as Egypt exits covid crisis -World Bank: Egypt needs to double down on reforms to stimulate job creation and private sector activity as the impact of the coronavirus pandemic on the economy begins to abate, the World Bank has said in its latest Egypt Economic Monitor report (pdf).

Egypt has largely withstood the covid shock: Thanks to the fiscal, monetary and energy sector reforms implemented in recent years, and the government’s emergency measures, Egypt has managed to hold out reasonably well against its covid-19 epidemic. Real growth remained positive over the last fiscal year and foreign reserves are intact.

But serious challenges remain: Business activity in the private sector has remained sluggish for months, low tax receipts have prevented further investment in social programs, foreign direct investment remains weak, and non-oil exports are underperforming. And while recent purchasing manager indexes have an uptick in employment, many in the workforce reported not having a contract or health insurance.

A focus on job creation is the answer: The loss of jobs in the wake of the crisis has exacerbated the long-term problem of job creation, especially in the private sector. The World Bank says that scaling up employment has been sluggish — and limited to low valued-added sectors, or to industries in decline. “The Egyptian economy has not been able to generate high-earning jobs, at scale,” the report stresses.

The World Bank is offering us a three-pronged strategy:

#1- Keeping the ship steady: If the government is going to stimulate sustainable job creation in the private sector, it is going to have to ensure the economy remains on an even keel by pushing ahead with fiscal consolidation after the crisis is over. Maintaining a flexible exchange rate and keeping inflation low is also key, the bank says.

#- Be nice to business: Although progress has been made, Egypt continues to lag behind other emerging economies that have pushed ahead with pro-business reform. Overbearing bureaucratic procedures remain problematic for businesses, and interventions made in the industrial sector, while supportive of development, need to be more coherent and targeted to improve the investment climate and better stimulate job creation.

#3 Investing in knowledge: The government needs to put more energy into upskilling the labor force, giving businesses access to talent they need if they’re going to grow in higher value-added industries. This means more PPP in K-12 education and more emphasis on tech in the the education system.

Egyptian SMEs who want to go green could be in line for a piece of EUR 220 mn in financing through two on-lending programs from the European Bank for Reconstruction and Development (EBRD), the EU and the Green Climate Fund (GCF), the EBRD said in a press release yesterday. The Green Value Chain program will provide EUR 70 mn to SMEs to invest in “climate mitigation and adaptation solutions,” while the EUR 150 mn extension of the Green Economy Financing Facility (GEFF) will finance businesses in agriculture, construction and manufacturing.The GEFF has channelled EUR 140 mn to businesses through the National Bank of Egypt, Alexbank, Arab African International Bank, and QNB Al Ahli since its launch in 2014. The bank did not disclose which banks it would work with to disburse the latest round of financing.

Bank to finalize two more green projects this year: The EBRD plans to ink agreements by the end of the year to fund two green projects worth EUR 100 mn, one in Kom Ombo in Aswan and the other in El Reyah in Menoufia, EBRD Deputy Regional Director Khaled Hamza tells Masrawy. Building a greener economy has been a policy priority for the EBRD, saying in its latest Transition Report that transitions to a green economy in the post-covid-19 recovery must be a priority for its regions.

Sawiris-backed Endeavour Mining continues quest to become West Africa’s gold king: Canada’s Endeavour Mining is in talks over a merger with West Africa-based miner Teranga Gold, the companies said in separate statements (here and here) yesterday, without providing further details. Endeavour and Teranga are discussing a “merger of equals style” acquisition, which would see Endeavour add another mine to its portfolio in Burkina Faso and establish a footprint in Senegal. It is also mulling an all-stock agreement and could offer a lower premium for the company, sources told Bloomberg. Both companies said that the talks will not necessarily lead to an agreement.

A major play for West Africa: Endeavour, 24.12% owned by the Sawiris family, purchased Burkina Faso’s largest gold producer Semafo for USD 690.7 mn in March to create West Africa’s largest gold mining company. Post-Semafo, Endeavour is now one of the 15 largest gold miners in the world, producing 1 mn ounces each year. “The combination of Endeavour and Teranga would further solidify Endeavour as West Africa’s leading gold producer,” Raymond James analyst Craig Stanley told Reuters.

Calls for consolidation: The CEO of Barrick Gold has recently reiterated his calls for increased consolidation in the sector so companies can increase spend on exploration amid declining reserves. The surge in gold prices this year has pushed up company valuations, resulting in a slowdown in M&A activity after a flurry of agreements in 2018.

Property owners are getting a one-month reprieve from late payment fines for properties developed by the New Urban Communities Authority (NUCA), the Housing Ministry said in a statement. The grace period, which applies to homes, offices, retail space and plots of undeveloped land of all sizes, will be granted to those who pay all their installments in full, the ministry said. Individuals whose ownership deeds have been scrapped due to late payment but are still in possession of the property are also eligible for the waiver, but must agree to forego any legal action against the NUCA.

Who it doesn’t apply to: Owners of land or property that has been repossessed by NUCA, land that is jointly owned, or people who made payments before the decision was issued. NUCA had previously granted grace periods, as well as waivers of usufruct fees, to help individuals make payments on time in light of the economic downturn caused by covid-19.

EARNINGS WATCH- Rameda profits soar in 3Q2020: Rameda Pharma reported 134% bottom line growth during 3Q2020, with net profits rising to EGP 24.9 mn from EGP 10.7 mn last year, according to a company earnings release (pdf). Revenues remained flat during the three-month period, coming in at EGP 235.4 mn, marginally higher than EGP 235.1 mn reported in 3Q2019. Net profit rose by 117% y-o-y during 9M2020 to EGP 68.7 mn while revenues increased by 9% to EGP 627.9 mn despite the volume of private sales falling 22.4%. The easing of covid-19 restrictions helped to drive Rameda’s recovery, although export volumes still dropped 14.1% y-o-y during the first nine months of the year as a result of the general slowdown in global trade from the pandemic, said CEO Amr Morsy.

The 4Q outlook: Rameda’s outlook for the rest of 2020 “looks promising” as consumer behavior continues to normalize and covid-19 restrictions are eased, said Morsy. The company expects to increase production of freeze-dried products and hopes to up its participation in public sector contracts following improvements made to the Unified Medical Procurement Authority’s digital tender platform.

Edita’s net profit rose 0.8% to EGP 107.5 mn in 3Q2020, from EGP 106.6 mn last year, according to the company’s earnings release (pdf) on Tuesday. The snack food producer’s revenues slipped 2.7% during the quarter to EGP 1.06 bn from EGP 1.09 bn in 3Q2019. Declines during the quarter were mitigated by the company’s decision to raise prices, which increased by 10.2% on average across its product range, the statement said.

The company is staying the course on the strategy outlined at the beginning of the year and is focusing on diversifying sales revenue by expanding into new segments. It is looking to increase its share in the biscuits market in the near-term by launching new products, and will increase its range of more expensive products.

Sarwa’s net profit eased more than 30% to EGP 194 mn in the first nine months of 2020 from EGP 280 mn in the same period last year, the company said in a press statement (pdf) yesterday. Profit for the period would have been down just 2% in the period setting aside the company’s new insurance business and adjusting for ESOP amortization, the new tax treatment of interest income from t-bills, and expenses incurred from applying the IFRS 9 reporting standard. Sarwa’s total financing portfolio grew by 14% y-o-y to reach EGP 7.3 bn, driven by a 24% increase in auto financing and a recovery in consumer goods, which had declined 14% during the lockdown in 2Q. Gross premiums written by the company’s insurance ventures were up by 264% to EGP 202 mn during the period. Operating costs, meanwhile, rose 41% as the company ramped up investment in expanding its branch count, AI systems, digital platforms for clients and brokers, and marketing.

Looking ahead: “We have also prepared fully for the application of new accounting and regulatory rules, and with an array of new funding sources being finalized, our strong balance sheet further supports the strong growth potential ahead,” Sarwa said in a statement to Enterprise.

CI Capital reported a 15% drop in net profit after tax and minority interest in 9M2020, closing the period with profits of EGP 287 mn as revenues declined 11% to EGP 1.6 bn compared with the same period last year, according the company’s earnings release (pdf).

Amer Group’s net profits fell to EGP 9.98 mn in 9M2020 from EGP 39.36 mn during the same period last year, according to an EGX disclosure (pdf). Poor performance in 9M2020 came as the group’s hotels, restaurants and mall businesses were hit by reduced footfall thanks to covid-19, according to a statement (pdf).

CORRECTION- We made a rookie mistake yesterday writing that the Egyptian-American Enterprise Fund had invested in Al Tayseer Healthcare alongside Ebtikar, rather than Ezdehar. The story has since been amended on our website.