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Wednesday, 12 Jul 2023

What We're Tracking Today
Privatization
Privatization
Economy
Legislation Watch
Cabinet Watch
Investment Watch
Last Night’s Talk Shows
Also On Our Radar
Planet Finance
Hardhat
Calendar

Madbouly gov’t announces USD 1.9 bn in asset sales under privatization program

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Today at a glance

1

Privatization

Egypt has signed contracts worth USD 1.9 bn under privatization program.
2

Privatization

Al Ezz Dekheila will delist from the EGX as the gov’t sells its stake.
3

Economy

FinMin wants to issue USD 3 bn in international debt in 2023.
4

LEGISLATION WATCH

House breaks for summer after signing off on bills to boost FDI, private investment.
5

Cabinet watch

Some 300k families will be added to the Takaful and Karama social security program.
6

Investment Watch

EFG Hermes plans to invest EGP 4 bn in Egyptian firms this year.
7

PLANET FINANCE

 Saudi Arabia deposits USD 2 bn to help indebted Pakistan amid IMF bailout.
8

HARDHAT

Where Egypt stands in global + regional infrastructure PPP trends.

Wednesday, 12 Jul 2023

What We're Tracking Today
Privatization
Privatization
Economy
Legislation Watch
Cabinet Watch
Investment Watch
Last Night’s Talk Shows
Also On Our Radar
Planet Finance
Hardhat
Calendar
1

What We're Tracking Today

Export subsidies to be paid out today + Apple to start charging 14% VAT on Egypt App Store purchases

Good morning, wonderful people, and happy almost-THURSDAY. There’s no shortage of news this morning after a Tuesday in which policymakers were firing on all cylinders. Let’s dive straight in.

It’s a largely good-news day on the policy front, with yesterday having seen

  • A big update from cabinet on the privatization program;
  • positive macro updates from the Finance Ministry on fiscal targets,
  • a promise from Cabinet to expand the social-safety net,
  • approval in the House of Representatives of bills aimed at improving the business climate.

THE BIG STORY here at home this morning: The Madbouly cabinet’s big privatization presser did not disappoint. The government has already signed agreements worth USD 1.9 bn to sell state-owned assets, Prime Minister Moustafa Madbouly said at the press conference.

The state has sold stakes in three oil and petrochemicals firms, its hotels holding company, and Ezz Dekheila Steel. Named buyers include Abu Dhabi sovereign wealth fund ADQ and Talaat Moustafa Group subsidiary Icon Investments. We have the full rundown — including details of further transactions in the pipeline — in this morning’s news well, below.

And there’s at least USD 1 bn more to come “soon,” the PM said, with a deep pipeline to follow.

Overall: It’s a good start, and the keys now are to both pick up the pace and draw in big names. We’re particularly interested in seeing larger transactions on major infrastructure projects by actors such as Actis (reportedly eying wind farms and conventional power plants here) and other “brand name” global investors. Also important is to remember that while asset sales are important (representing, we hope, the state’s retreat from key sectors of the economy), there is no substitute for an unrelenting focus on attracting durable FDI into businesses that are focused on exports.

ALSO- MPs are now officially on summer vacation. The House has recessed and will come back in session this fall. Still, not all MPs will be chilling in Sahel full-time: committee work will continue over the coming months, even if it is at a slightly more leisurely pace.

HAPPENING TODAY-

The Finance Ministry is set to pay out a first batch of export subsidies under the sixth phase of its subsidies program today and tomorrow.

TOMORROW-

Regional Sudan peace summit: Egypt is hosting a meeting of Sudan’s neighbors to look into ways to put an end to the ongoing civil war in Sudan.

THIS WEEK-

OECD parties debate tax plan targeting multinationals: Representatives from over 130 nations are at the OECD’s Paris headquarters for three days of talks to settle disagreements on a landmark tax plan targeting multinational companies, the Financial Timesreports. Backers of the plan want to see the world’s largest 100 companies — including tech giants Google, Facebook, and Amazon — pay taxes in countries where they make sales without having a physical presence. While the plan is backed by the world’s biggest economies, it has been held back by delays and opposition from emerging markets.

The opposition: Some developing countries, including India and Sri Lanka, worry that the arrangement will discourage foreign direct investment — and favor richer countries where many global firms derive more of their sales. The plan also faces opposition in the US: any tax treaty changes require a two-thirds majority vote in the Senate, which is currently controlled by the Republicans, who oppose the measures.

SPEAKING OF TAXING MULTINATIONALS-

Apple will start charging 14% VAT on apps and in-app purchases made in Egypt through the App Store starting 25 July, it said in a news update. The measure will apply to apps produced by developers whose “base storefont,” Apple said, is not Egypt. It is also enforcing the measure in Turkey and Tanzania.

Following in Google’s footsteps: Google was the first international e-services provider to comply with the Finance Ministry’s regulatory amendments to the VAT Law first announced in March. The amendments subject non-resident service providers to VAT and mean that international streaming platforms such as Netflix, Disney Plus, OSN+, Amazon Prime, Apple TV+ and Spotify, will soon start charging VAT on their subscription fees.

THE BIG STORY ABROAD-

The Nato summit in Vilnius is still dominating the global front pages as it enters its second day. Members of the defense alliance yesterday said Ukraine would be allowed to join when “conditions are met ” — with many still insisting the country cannot join while the conflict with Russia continues. The bloc’s refusal to lay down a timeline for Ukraine’s entry drew frustration from Ukrainian President Volodymyr Zelensky, who is set to meet with Nato leaders today. (Reuters | FT| WSJ| WaPo| Bloomberg)

Dude, where’s my recession? Meanwhile, there’s plenty of chatter in the US of A about the Recession That Never Was. US President Joe Biden is now aggressively campaigning for reelection on his economic record, Goldman Sachs and JPMorgan Chase are stepping back from calls that a recession is imminent, and the op-ed columnists are now weighing in (here and here).

SETTING THE RECORD STRAIGHT- We oversimplified in our description of the Court of Cassation as the nation’s highest appeals court in our Moves coverage earlier this week. H/t to reader Mohamed Talaat for reaching out:

  • The Court of Cassation is the highest court in the land on both criminal and civil matters;
  • The Supreme Administrative Court trumps all when it comes to matters of administrative law;
  • And judgements of the Supreme Constitutional Court are binding on all other courts.

CIRCLE YOUR CALENDARS- The Enterprise Finance Forum is taking place on 18-19 September at the St. Regis Hotel in Cairo. This flagship forum is the latest in our must-attend series of invitation-only, C-suite-level gatherings that allow senior members of our community to openly and frankly discuss critical issues in key sectors of the economy.

TAP OR CLICK HERE if you want to express interest in attending. We’ll be sending out the first batch of invitations soon.

Do you want to become a commercial partner? Ping a note to Moustafa Taalab, our head of commercial, or fill out this form and we’ll be in touch.

MEANWHILE- The Hydrogen Egypt Summit will take place on 13-14 September at the Nile Ritz Carlton. The event will bring together policymakers and business leaders from local and international green hydrogen companies.

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: As the PPP model for infrastructure models gains popularity, how is Egypt comparing to the MENA region and beyond? A new report by the World Bank maps out the landscape of committed PPP investments globally and in the region, including a breakdown by sector and value.

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2

Privatization

Egypt has signed contracts worth USD 1.9 bn under privatization program

The privatization program is well and truly underway: The government has signed agreements worth USD 1.9 bn to sell state-owned assets under its privatization programaimed at ending the ongoing FX crunch and increasing the private sector’s role in the economy. At a press conference (watch, runtime:1:10:15) aimed at bolstering investors’ confidence in the government’s reform agenda, Prime Minister Moustafa Madbouly and Planning Minister Hala El Said announced the sale of stakes in five companies to investors — and pledged more to come.

Remember: The government had aimed to snag some USD 2 bn in proceeds from asset sales by the end of June as part of a reform agenda agreed last year with the IMF for its USD 3 bn loan.

Most of the receipts are in hard currency: The state has raised USD 1.65 bn through the stake sales and received the remainder in EGP, Madbouly said.

WHO BOUGHT WHAT?

#1- ADQ takes stakes in three oil, petchem firms: Abu Dhabi sovereign wealth fund ADQ acquired 25-30% stakes in Egyptian Ethylene and Derivatives Company (Ethydco), Egyptian Linear Alkyl Benzene (Elab), and Egyptian Drilling Company (EDC) for USD 800 mn, El Said said. Each of the companies had been warehoused in the Sovereign Fund of Egypt’s pre-IPO fund.

#2- Hotel company: A group of Talaat Moustafa Group subsidiary Icon Investments together with unnamed foreign investors has invested USD 700 mn in a government holding company for hotels via a capital increase, handing them a 37% stake. The holding company owns seven high-profile hotels in tourist hotspots, and was rumored to have attracted the interest of a Qatari investor. The public enterprises minister suggested earlier this year that the government could sell a 20% stake in the entity.

#3- Al Ezz Dekheila: The government divested its entire 31% stake in Ezz Steel subsidiary Al Ezz Dekheila for USD 241 mn in a move that will lead to the company delisting from the EGX. Some 60% of this amount was raised in USD, with the remainder carried out in EGP. The stake, previously held by state institutions, was acquired by parent company Ezz Steel.We have more on this below.

That brings the total number of privatization transactions in 2023 to seven: The government raised some USD 153 mn — mostly denominated in EGP — by selling stakes in Telecom Egypt and Pachin in May.

IN THE PIPELINE-

There’s more where that came from: The government will soon announce additional transactions worth another USD 1 bn, the prime minister said. And the International Finance Corporation (IFC) is helping onboard more companies to the program to reach 50 in total, he said, adding that the state has so far completed a quarter of the first phase.

Transactions in the pipeline and where they stand:

#1-Gabal El Zeit wind farm: The government is looking to secure more than USD 300 mn by selling the 580-MW Gabal El Zeit wind farm, El Said said, adding that it accepted the highest bid in June after receiving a number of non-binding offers. The buyer will be given 60 days to conduct due diligence on the asset, which the government expects will see the sale wrap up by October.

It’s going to Actis: A government source confirmed to us on Monday that a bid submitted by emerging market-focused private-equity firm Actis has been selected. The UK-based EM giant will be given full access to the data and the asset ahead of making a final offer.

#2- Wataniya: The state has qualified three companies to conduct due diligence on military-owned fuel retailer Wataniya after receiving six non-binding offers. The transaction is expected to close in October or November. The company — whose sale has been in the pipeline for a few years — was reported earlier this year to have attracted the interest of Emirati energy firm Adnoc.

#3- A Siemens power plant: The sale of one of the three Siemens-built power plants in Beni Suef is expected to be finalized in 1Q 2024, the minister said, without providing further details. Actis and Malaysian power company Edra have been rumored to be interested in acquiring the asset.

#4- Water desalination plants: The Housing Ministry has set a five-year plan to sell stakes in21 desalination plants that have a combined capacity of 3.3 mn cubic meters per day. The government expects the first phase of the plan, which ends in 2025, to attract USD 3 bn in investments. The government expects to offload stakes in four plants in 4Q 2023, El Said said.

All in the name of boosting hard currency inflows: The government aims to ramp up annual hard currency inflows to USD 191 bn by 2026, increasing them by USD 70 bn over the next three years, Madbouly said. The plan entails a 20% annual increase in revenues from exports and tourism, as well as a 10% increase in remittances, FDI, Suez Canal receipts, and CIT outsourcing revenues.

SMART POLICY- Don’t expect the state to exit assets by IPO anytime soon given current market conditions, El Said is quoted by CNBC Arabia as saying.

The story got international ink:Reuters | Bloomberg | AP News.

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3

Privatization

Al Ezz Dekheila to delist from EGX as government sells its stake

The government is out of Al Ezz Dekheila: The government has sold its entire 31%stake in Ezz Steel subsidiary Al Ezz Dekheila for USD 241 mn, Planning Minister Hala El Said said yesterday (watch, runtime: 10:17). El Said made the announcement at a press conference to announce a string of asset sales under its IMF-backed privatization program (read the full rundown above.)

Al Ezz Dekheila to delist: Al Ezz Dekheila announced (pdf) earlier in the day that it would be voluntarily delisting from the EGX within three months and offered to buy back the shares from objecting shareholders for EGP 1,250 per share, 52.4% above the stock’s closing price on 9 July and 38.6% above the three-month average up to 10 July. The company said it will finance the buyout through foreign-currency loans, primarily from foreign banks. Representatives of Al Ezz Dekheila didn’t respond to our phone calls when we reached out for comment yesterday.

We had an idea this was coming: In a letter to the Sovereign Fund of Egypt leaked by Cairo24last month, Al Ezz Dekheila said that a number of state-owned shareholders — which include the National Investment Bank and the National Bank of Egypt — had signaled they would divest their stakes and sell them back to the company. This came in the wake of a report from Asharq Business, which claimed that two state institutions were in talks with Ezz Steel to sell down a combined 14% stake in Al Ezz Dekheila.

Remember: Government ownership of the company is spread among a number of institutions. NIB and NBE are the largest single shareholders, owning 8.15% and 5.78% respectively, according to a company document (pdf). Stakes are also held by Misr Ins., Misr Life Ins. and Banque Misr, as well as a number of state funds.

Why the voluntary delisting? Buying back 30% of its shares from the state-owned entities would have put the company in breach of listing rules, which require companies to have at least 10% of their share capital in freefloat. “When the company buys out these stakes, its status as a listed company will violate the EGX rules, which will obligate them to delist from the EGX,” Omar Taha, an equity analyst at Prime Research, told us. “A voluntary delisting would be the best method to preserve the share’s value.”

Why the exit? “These state-owned companies want to divest their shares because they need liquidity given the country's FX crunch, and in light of the government's efforts to bring more foreign-currency into the public purse,” Taha told us.

Market reax: Al Ezz Dekheila’s share price surged 20% during trading yesterday to close at EGP 978.87.

What’s next: Shareholders will convene on 5 August to vote on the decisions to delist and buy-out the remaining shareholders.

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4

Economy

Egyptian Finance Ministry wants to issue USD 3 bn in debt by end-2023. PLUS: Budget deficit widened less than expected in FY 2022-23

The Madbouly government is looking to secure some USD 3 bn in financing from bond issuances through the end of the year, Finance Minister Mohamed Maait said yesterday during Prime Minister Moustafa Madbouly’s privatization presser (more on that in Privatization Watch, above).

REMEMBER- Egypt has only tapped the international debt markets once in the past 15 monthsafter the knock-on effects of the war in Ukraine and tighter global financial conditions all but locked us out of the international debt markets and raised concerns in some quarters about Egyptian debt. That sole issuance was the Finance Ministry’s maiden sukuk issuance in February of this year, which was c.4x oversubscribed.

Samurai bonds next? Maait said that the government is working on a plan to move forward with its second JPY-denominated bond issuance, without providing further information. We made our maiden samurai bond debut in March 2022, when the government sold USD 500 mn of the JPY-denominated bonds.

More fresh paper in the pipeline: The African Development Bank and Asian InfrastructureInvestment Bank are set to provide ins. coverage for our maiden USD 500 mn CNY-denominated panda bond issuance, which will be used to fund sustainable development projects.The green panda bonds may not go to market until early next fiscal year, a Finance Ministry official previously said.

OUR FIRST LOOK AT FY 2022-2023 RESULTS-

Maait also gave an overview of some preliminary economic figures for the 2022-2023 fiscal year, which ended on 30 June.

The budget deficit came in lower than targeted: The country’s budget deficit widened to 6.2% by the end of the fiscal year 2022-2023, up from 6.1% a year before. The Finance Ministry had been expecting the deficit to come in at 6.4%.

The better-than-expected deficit figure is “proof that the ministry can control public finances despite economic shocks,” Maait said, pointing to the interest rate hikes and exchange rate fluctuations seen last fiscal year as well as government interventions to offer more social support.

And our primary surplus came in higher than expected: The country recorded a primary surplus of 1.6% (EGP 157 bn) during last fiscal year, up from 1.3% a year earlier, Maait said (watch, runtime: 5:19). The government had been expecting the primary surplus to inch up to 1.5% in FY 2022-2023.

Higher tax revenues + higher spending: Tax revenues recorded EGP 1.2 tn during the last fiscal year, up 23% y-o-y in what Maait called an “unprecedented” increase. Spending rose 16.3% y-o-y to record EGP 2.1 tn.

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5

LEGISLATION WATCH

Egypt’s House of Representatives signs off on two bills to boost FDI, private investment

House signs off on bills to boost FDI in final session before summer recess: In their last session before the three-month summer break, MPs gave their final approval to two key pieces of legislation in the government’s efforts to level the playing field for the private sector and attract more foreign investment.

REFRESHER- What bills to boost FDI? The two bills are listed as part of 22 moves to reform the business climate proposed by the Supreme Investment Council in its first ever meeting back in May. They were greenlit by House committees last week. They are:

#1- Amendments to the Investment Law that expand the incentives made available to private sector companies. The bill will allow projects that predate the 2017 law to benefit from incentives and expand eligibility for “golden licenses.” The amendments got MPs’ preliminary approval earlier in the week.

#2- A bill that will eliminate tax exemptions currently granted to state-owned entities. While we don’t have the details yet, MPs have said that will include scrapping customs and real estate tax exemptions that were previously granted to certain state entities. The bill is not set to impact projects that are subject to international agreements, that are defense- or national-security-related, or basic infrastructure projects.

Details still TK: Both bills are welcome, but the devil is in the details, particularly when it comes to the thorny questions of which exemptions will be phased out for which companies on what schedule. We expect to know more when the executive regulations for the laws hit the street — a process that can take up to six months from the moment they’re signed into law by President Abdel Fattah El Sisi.

ALSO APPROVED BY THE HOUSE YESTERDAY- MPs put their last session to good use, also signing off on bills setting up three new national entities, and on for foreign agreements:

New public bodies signed off on by MPs:

  • The Intellectual Property Authority will merge institutions currently responsible for regulating intellectual property rights in Egypt into a single entity. The new body would be responsible for advancing technological innovation, scientific research, and cultural development and comes as part of a wider five-year intellectual property strategy.
  • The EGP 1 bn Differently Abled Fund will support people with disabilities to enter the job market and run SMEs, among other forms of social and financial support.
  • The National Alliance for Civilian And Development Action will work to establish development projects and social development initiatives in collaboration with NGOs and civil society organizations.

Foreign agreements that got the final greenlight:

What’s next? The House is now out for summer and won’t reconvene until October. Stay tuned for our customary rundown of all the bills that were discussed, voted on, or got stuck in legislative limbo this session — and what to expect when MPs come back from the break.

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6

Cabinet watch

More families to benefit from Takaful and Karama social security program

Cabinet signs off on social support, development and investment measures:Ministers approved several decisions covering social support, education, waste management, and food security during their weekly meeting yesterday, the Madbouly cabinet said in a statement.

More families added to Takaful and Karama: Around 300k families will be added to the Takaful and Karama social security program after cabinet signed off on proposals to amend some of the rules for disbursing financial support. The families already receive financial assistance under a different program but will now be made eligible for Takaful and Karama under government efforts to unify welfare schemes.

Who’s now eligible? The introduction of two new eligibility categories mean that female breadwinners with children over the age of 18 will now be eligible for the program, as will young people over the age of 18 who are enrolled in education and no longer receive the support of their parents.

Also among the decisions:

  • New private tech uni gets the greenlight: A draft decision to establish the Elsewedy University of Technology in Tenth of Ramadan City.
  • Siemens x Life Care Tech: A contract for the German company Siemens and medical equipment company Life Care Technology to supply medical devices for the first phase of the establishment of the Dr Magdi Yacoub Center in Rwanda.
  • Recycling contract extension approved: A Finance Ministry study to extend the contract handed to Zahra South Sinai Company to operate the Khanasir waste recycling and landfill plant in Sharm El Sheikh by five years.
  • Improving food security, nutrition: A decision by the prime minister to set up a committee tasked with creating a system to track national nutrition and food security indicators in line with the country’s 2030 sustainable development goals.
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7

Investment Watch

EFG Holding’s private equity arm to invest EGP 4 bn in Egypt-focused vehicles this year

Our friends at EFG Holding plan to invest EGP 4 bn in Egypt this year, Samer Yassa, private equity director at the company’s investment banking firm EFG Hermes, is quoted as telling Asharq Business. The company plans to invest EGP 2 bn in a new SME-focused fund and EGP 2 bn in healthcare and education, a company representative clarified to us yesterday.

More details on the fund:The firm plans to launch the SME fund in 4Q this year and is currently fundraising from local and international financial institutions. It will invest in companies operating in the import and export industries, food, tech, healthcare, and education.

Acquisitions on the way: EFG Hermes’ private equity arm is close to closing two transactions in the healthcare and education sectors, Yassa said, without disclosing further information.

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8

LAST NIGHT’S TALK SHOWS

Talk shows cover PM Madbouly’s privatization presser

Privatization stations: The nation’s talking heads were laser-focused on the latest on privatization, courtesy of Prime Minister Moustafa Madbouly’s big presser. Kelma Akhira’s Lamees El Hadidi (watch, runtime: 4:26) dissected the PM’s comments, while Ala Maso’uleety’s Ahmed Moussa held a 40-minute phone call with Cabinet Spokesperson Nader Saad (watch, runtime: 40:58) to understand the ins and outs of Madbouly’s announcements. We have our own coverage in this morning’s Privatization Watch, above.

Could credit rating agencies have a change of heart? “A lot of international publications were saying that we had an exchange rate crisis on the back of high demand for FX but with the implementation of the privatization program, I believe that their outlooks will change in future reports,” EGX board member Rania Yacoub told Masa’a DMC (watch, runtime: 6:21). She is expecting to see a major change in how international firms view the Egyptian economy by 1Q 2024.

Yes, but… It’s going to take a lot more than (not quite) USD 2 bn in proceeds to move the needle — and frankly, asset sales are no substitute for lasting inflows of FDI into export-oriented industries.

REMEMBER- Over the past few months, Fitch Ratings, Moody’s, and S&P GlobalRatings all cut or downgraded their outlook on Egypt’s credit rating, citing strained external financing conditions.

This is not the end: We still have a long way to go to boost foreign reserves and rebalance the books, Yacoub said. “We have a lot of obligations, between debt payments and purchases of basic needs,” Yacoub said. Our foreign reserves inched up to USD 34.81 bn in June from USD 34.66 bn in May, marking the ninth consecutive month that foreign reserves have increased, albeit very modestly each time.

Checking in on our IMF program: Negotiations are still ongoing with the IMF to set up a date for the first review of our USD 3 bn loan program, Saad told Ala Mas’ouleety (watch, runtime: 3:58). “The second we agree on a date, an IMF delegation will head to Egypt to carry out the review,” he added. A first review of the program has been on hold since mid-March after we fell short on meeting several key conditions of the loan agreement. Some economists are expecting the review to come in September.

Why is the state selling stakes in hotels as we sit on the verge of a tourism boom? Some of these hotels have not been renovated since 2007 and the government doesn't have the resources to carry out the renovations, Saad told Yahduth Fi Masr (watch, runtime: 6:00). “We have other priorities that are more pressing than spending great sums renovating these hotels,” he said, adding that the new shareholders will inject the capital to revamp and manage the hotels. The state remains the majority shareholder, he added.

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9

Also on our Radar

SODIC has partnered with Al Safy Group on new North Coast development

REAL ESTATE-

SODIC to develop new North Coast project: Real estate developer SODIC has entered into a revenue-sharing partnership with local investment firm Al Safy Group that will see it develop a 440-feddan land plot on the North Coast, it said in an EGX disclosure (pdf) yesterday. Under the agreement, SODIC will take 73% of the revenues from the planned residential-tourist project and Safy will receive the remaining 27%. The project is expected to generate around EGP 80 bn of sales over a period of 11 years, according to a separate disclosure (pdf). The land plot is situated 1 km from SODIC’s Caesar project.

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10

PLANET FINANCE

KSA deposits USD 2 bn at Pakistan’s central bank ahead of IMF bailout

Pakistan secures Saudi aid: Indebted Pakistan has received USD 2 bn in financial support from Saudi Arabia, the country’s finance minister, Ishaq Dar, is quoted as saying by Reuters. Saudi promised the money back in April but was waiting for Pakistan to reach its USD 3 bn IMF agreement before depositing it at Pakistan’s central bank. The IMF is expected to approve the staff-level agreement with Pakistan today.

The country is in desperate need of aid: Prior to the Saudi deposit, Pakistan’s foreign reserves were barely sufficient to cover a month of controlled imports, the newswire quotes Dar as saying.

ALSO WORTH MENTIONING-

  • Microsoft is one step closer to closing its Activision Blizzard merger after a US judge denied the Federal Trade Commission’s injunction to halt the USD 69 bn acquisition on antitrust concerns. (Financial Times)
  • Saudi’s sovereign wealth fund made a loss on its investments last year:The Public Investment Fund reported a USD 11 bn investment loss in 2022 — a significant drop from 2021’s USD 19 bn in earnings — on the back of the global market rout. (Bloomberg)

EGX30

17,155

+1.1% (YTD: +17.5%)

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

11,665

+0.7% (YTD: +11.3%)

ADX

9,589

+0.1% (YTD: -6.1%)

DFM

3,985

+0.2% (YTD: +19.5%)

S&P 500

4,439

+0.7% (YTD: +15.6%)

FTSE 100

7,270

-0.1% (YTD: -2.5%)

Euro Stoxx 50

4,284

+0.7% (YTD: +13.3%)

Brent crude

USD 79.35

+2.1%

Natural gas (Nymex)

USD 2.73

+2.3%

Gold

USD 1,937.10

+0.3%

BTC

USD 30,525

-0.5% (YTD: +84.9%)

THE CLOSING BELL-

The EGX30 rose 1.1% at yesterday’s close on turnover of EGP 1.98 bn (about 13% below the trailing 90-day average). Regional investors were net buyers. The index is up 17.5% YTD.

In the green: Ezz Steel (+5.5%), Heliopolis Housing (+4.1%) and EFG Holding (+3.6%).

In the red: Eastern Company (-2.7%), Ibnsina Pharma (-1.8%) and Orascom Construction (-1.6%).

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Our weekly deep-dive into infrastructure in Egypt.

Published every Wednesday in EnterpriseAM.

Read Hardhat
11

HARDHAT

How Egypt compared to global + regional infrastructure PPP trends in 2022

The global overview of public private partnerships in infrastructure in 2022: Investment commitments to public private partnership (PPP) projects in infrastructure continued to accelerate in 2022, with investment commitments growing 23% y-o-y last year to USD 91.7 bn, according to a recent World Bank report (pdf). PPPs involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects.

Still leading the pack globally: East Asia and the Pacific, which saw USD 43.4 bn of investment commitments last year, rising 54% y-o-y and 17% from the average amount over the past five years. South Asia saw USD 13.9 bn earmarked during 2022, marking its highest number of PPI investment over the past decade, according to the report.

In MENA, PPP investments for the year continued to account for the smallest share of the global total, despite more than tripling from the year prior. Investment commitments to infrastructure PPPs in the MENA region hit USD 2.0 bn, rising 214% y-o-y, although this figure “was still lower than the region’s average of USD 3.1 bn over the past five years,” the report says. In terms of regional GDP, MENA fared slightly better than last year, with PPP investments accounting for 0.13% of the region’s national GDPs. That’s 0.6 percentage points higher than last year’s ratio, but still remains among the lowest percentages globally.

Egypt accounted for the lion’s share (85%) of the region’s infrastructure PPPs in 2022, followed by Morocco with 9% and Tunisia with 5%.

REMEMBER- The Madbouly government has been working to increase the volume of PPPs in Egypt, passing legislative amendments last year designed to make it easier for companies to bid for government contracts. The government sees PPPs as forming a key part of its privatization strategy, which will attempt to double the private sector’s role in the economy over the next three years.

Our biggest infrastructure PPP project of the year: The 500 MW wind farm in Ras Ghareb that will be built by Amunet, a local special purpose vehicle in which Al Nowais subsidiary AMEA Power holds a 60% stake and Japan’s Sumitomo Corporation holds the remaining balance. AMEA Power is set to build, manage, and operate the plant, for which it received debt and equity funding in December.

Overall, the energy sector was the largest recipient of investment commitments for infrastructure PPPs in Egypt last year, with four out of the total five infrastructure projects that reached financial close last year in the energy sector, according to country-specific data from the World Bank. The fifth project in Egypt fell under the municipal solid waste sector.

Globally, however, the transport sector once again took the lead as the largest recipient of infrastructure PPP investments, “outpacing other sectors significantly,” the report notes. The sector — which covers everything from roads and airports to railways and ports — recorded USD 66.2 bn-worth of investments in 2022, accounting for 68% of total infrastructure PPP investments for the year. That’s a c.51% y-o-y increase from 2021 figures, which “can be explained by a huge increase in the roads sub-sector,” which is “historically the largest sub-sector in transport commitments,” according to the report.

Investments in global water and sewage PPPs last year fell 76% y-o-y, coming in at USD 2.3 bn across 25 projects in nine countries. That’s also a 48% drop from the average figures of the past five years, the report notes.

Egypt is expected to see an uptick in water PPP projects this year, with the Sovereign Fund of Egypt’s (SFE) tender of renewables-powered desalination projects, for which the fund prequalified 17 consortiums earlier this year. The tender is part of the government’s water desalination program, which aims to add 8.85 mn cbm / d of capacity by 2050. The SFE is planning to have three or four of these plants tendered by 3Q 2023, with contracts for the remaining plants in the program’s first phase expected to be signed in the next 16-22 months, an SFE spokesperson previously told Enterprise.

On the global scale, the majority of financing came from the private sector — although its share shrank y-o-y: Around 35% of financing came from public sources, 15% came from development and export finance institution (DEFI) sources, and the remaining 50% came from private sector sources. The figures show a 15 percentage point y-o-y drop in private sources of financing in 2022, while public sources of financing rose 17 percentage points compared to the previous year, which “was largely due to the larger role played by public banks and a rise in government subsidies,” the report explains.

MENA, however, continued to be largely reliant on DEFI investment, which accounted for 77% of the total commitments in 2022 compared to 55% in 2021. “MENA also saw an increase in international commercial debt, with three projects receiving investment from commercial lenders,” including the Amunet wind farm in Egypt, the report says.

Your top infrastructure stories for the week:

  • Freight rail money: MPs finally approved a USD 400 mn loan from the World Bank to finance the construction of a railway line between the Port of Alexandria and the Sixth of October dry port.
  • Port terminal money: MPs also gave final approval to two bills allowing for the USD 565 mn redevelopment of the East Port Said port.
  • Scatec wind farm progresses: Norway’s Scatecsigned a land allocation agreement with the Electricity Ministry for a planned 5-GW wind farm in Sohag.
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CALENDAR

JULY

12-13 July (Wednesday-Thursday): Finance Ministry to pay out first batch of export subsidies under sixth phase of subsidies program.

15 July (Saturday): Deadline for EGAS + EGPC bid rounds for gas exploration and development of mature oil fields.

15 July (Saturday): Rollout of the fourth phase of the Egyptian Tax Authority’s e-receipt system.

18 July (Tuesday): Islamic New Year.

18-19 July (Tuesday-Wednesday): Egypt Mining Forum, Nile Ritz-Carlton, Cairo.

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).

22 - 24 July (Saturday - Monday): US Assistant Secretary of State for International Organization Affairs Michele Sison in Egypt.

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.

31 July (Monday): Application deadline for the Smart Green Projects initiative.

31 July (Monday): Emigration Ministry’s Egyptians Abroad conference.

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.

September: IDH to open first branch in Saudi Arabia.

September: The Egypt-Germany trade and investment joint conference in Cairo.

September: JETRO’s second delegation arrives in Cairo.

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

10-12 September (Sunday-Tuesday): The International Agricultural Exhibition for Africa and the Middle East, Sahara.

13-14 September (Wednesday-Thursday): Hydrogen Egypt Summit, Nile Ritz Carlton, Cairo.

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

15 September (Friday): Deadline for FX bureaus to comply with new capital requirements.

17-18 September (Sunday-Monday): Arab Security Conference and Exhibition, Nile Ritz Carlton, Cairo.

17-19 September (Sunday-Tuesday): Sharm Rendezvous, Rixos Premium Seagate, Sharm ElSheikh.

18-19 September (Monday-Tuesday): Enterprise Finance Forum, St. Regis Hotel, Cairo.

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.

25-26 September (Monday-Tuesday): Egypt to host the Asian Infrastructure Investment Bank’s annual board meeting, Sharm El Sheikh.

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

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

28-29 September (Thursday-Friday) Medical Tourism Conference, Sharm ElSheikh.

OCTOBER

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

2-4 October (Monday-Wednesday): Sharm Rendezvous - Ins. Market, Rixos Premium Seagate, Sharm ElSheikh.

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

6 October (Friday): Armed Forces Day.

9 October (Monday): The Narrative PR Summit, Somabay Red Sea.

9-11 October (Monday-Wednesday): Arabs Savings and Financial Literacy Conference, Four Seasons Hotel.

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

Late October-14 November: 3Q2023 earnings season.

15-17 October (Sunday-Tuesday): Egypt Automotive Aftermarket Exhibition, Cairo International Convention Center.

26 October (Thursday): Daylight saving time ends.

29-31 October (Sunday-Tuesday): Egypt Energy, Egypt International Exhibition Center.

29 October - 2 November (Sunday- Thursday): Cairo Water Week.

30-31 October (Monday-Tuesday): Intelligent Cities Exhibition and Conference, Dusit Thani LakeView, Cairo.

30-31 October (Monday-Tuesday): Global Business School Network (GBSN), American University of Cairo.

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

NOVEMBER

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

9-15 November (Thursday-Wednesday): Intra-African Trade Fair, Cairo.

14-15 November (Tuesday-Wednesday): Destination Africa, Royal Maxim Palace Kempinski Hotel.

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

19-22 November (Sunday-Wednesday): Cairo ICT, Egypt International Exhibition Center.

23 November (Thursday): Worldview Education Fair, Cairo. (Register here)

30 November-12 December (Thursday-Tuesday): COP28, Dubai.

DECEMBER

10-11 December (Sunday-Monday): eGlobe Expo, St. Regis Almasa Hotel, Cairo.

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

12-14 December (Tuesday-Thursday): Food Africa Expo, Egypt International Exhibition Center.

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.

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.

3Q 2023: E-Finance to launch in Saudi Arabia.

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

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

2024: Standard Chartered Bank to open a branch in Egypt.

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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