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Tuesday, 11 Jul 2023

What We're Tracking Today
Privatization
Economy
Ipo
M&a Watch
Legislation Watch
Development Finance
Moves
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Going Green
Calendar

PE giant Actis could snap up state-owned Red Sea Wind Farm

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Today at a glance

1

Privatization

…And he could announce the sale of the Gabal El Zeit wind farm to Actis.
2

Economy

At 35.7% in June, inflation has never been higher.
3

IPO

Taqa Arabia shares up sharply in second EGX debut.
4

M&A WATCH

Egytrans shareholders approve NOSCO acquisition.
5

LEGISLATION WATCH

MPs approve USD 400 mn rail infrastructure loan from WB — with a little backlash.
6

Development finance

EIB to pledge EUR 4 bn for NWFE, development projects by 2023 -Al Mashat.
7

LAST NIGHT’S TALK SHOWS

More tourists than ever visited us in 1H 2023.
8

Going Green

How far has ESG reporting come?

Tuesday, 11 Jul 2023

What We're Tracking Today
Privatization
Economy
Ipo
M&a Watch
Legislation Watch
Development Finance
Moves
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Going Green
Calendar
1

What We're Tracking Today

THIS MORNING: Madbouly’s big privatization presser is today + heatwave incoming

Good morning, wonderful people, and a very happy Tuesday. The news cycle is picking up pace today — and we’re not expecting any let up, given expectations that we’ll see important updates on the government’s privatization program.

THE BIG STORY here at home is today’s big privatization presser. Prime Minister Moustafa Madbouly is expected to hold a press conference today to announce the completion of a number of asset sales as part of the state privatization program.

One of those sales could be the Gabal El Zeit wind farm: The PM is expected to announce progress in the sale of state-owned 580-MW Gabal El Zeit wind farms, which a government source confirmed to us is likely to be bought by UK-based PE giant Actis.

AND- Inflation hit in Egypt an all time high in June on rising food and beverage prices in the Eid month.

A more auspicious record: More than 7 mn tourists visited Egypt in 1H 2023, the Tourism Ministry said yesterday — an all-time-high that puts us on track to hit the ambitious target of 15 mn arrivals this year.

^^ We have more on privatization and inflation in this morning’s news well, below, while the tourism story is part of Last Night’s Talk Shows.

DATA POINT- Net foreign liabilities widened in May: Egypt’s net foreign asset position deteriorated again in May, falling to negativeUSD 24.4 bn from negativeUSD 24.1 bn the month prior, according to Enterprise calculations of central bank figures out during Eid week. This is a record high in EGP terms but is slightly below the negative USD 24.5 bn recorded in March.

The decline in net foreign assets was driven by widening net liabilities at the central bank, which increased to almost USD 10 bn from USD 9.1 bn in April. Net foreign liabilities in the banking sector fell to less than USD 14.5 bn in May from almost USD 15 bn the month before.

TODAY IN THE HOUSE- It’s the last plenary session for MPs before the three-month summer break (barring a last-minute change of heart). The House is set discuss and vote on a bill eliminating preferential tax treatment. We’re hearing that they may also hold a final vote on the amendments to the 2017 Investment Law aimed at attracting more foreign direct investment.

PSA- You may want to stay indoors this weekend: The Egyptian Meteorological Authority (EMA) is warning of extreme heat Thursday through Sunday with the mercury jumping to highs of 38°C. Humidity will make it feel even warmer, the EMA said. Our favorite weather app is warning you can expect temperatures between 40°C and 42°C Thursday through next Tuesday.

THE REALIGNMENT-

More talk of an imminent El Sisi trip to Turkey: President Abdel Fattah El Sisi and his Turkish counterpart Recep Tayyip Erdogan will meet in Turkey after the St Petersburg Russia-Africa summit scheduled for July 27-28, the National reports, citing unnamed officials.

REMEMBER- The ten-year rift between Egypt and Turkey came a long way to an official close when the two countries last week reappointed ambassadors, restoring diplomatic ties. Officials from both countries have said publicly that they’re preparing a first meeting between El Sisi and Erdogan.

CIRCLE YOUR CALENDAR-

US Assistant Secretary of State for International Organization Affairs Michele Sison will be in town for a two-day visit between 22-24 July, as part of a regional visit that will also see her visit Kenya, Tanzania, Nigeria, South Africa, Tunisia, and Turkey. (State Department statement)

MEANWHILE- Back to the GERD negotiating table? Egypt and Ethiopia will resume talks on the filling and operation of the Grand Ethiopian Renaissance Dam (GERD) “over the coming months,” sources familiar with the process reportedly told the National yesterday. The two sides have “expressed a willingness to make concessions” to put an end to their yearslong dispute, according to the sources. This comes following months of mediation by Russia and South Africa.

Pre-negotiation talks? Ethiopian PM Abiy Ahmed is expected to be among the leaders heading to Egypt for the meeting of Sudan’s neighbors scheduled for Thursday.

Missing from the equation: Sudan. It’s not clear whether the third party in the GERD dispute — Sudan — will take part in any upcoming negotiations given its ongoing civil war.

THE BIG STORY ABROAD-

Nato is once again setting the global news agenda this morning as members ready for the kickoff of their two-day summit in Vilnius, Lithuania today. Top of the agenda: Whether

Ukraine will be let through the door while the conflict with Russia continues.

AND- Turkey’s Erdogan set aside his veto of Sweden joining Nato at the eleventh hour. Reuters, the Financial Times, Bloomberg, the New York Times, the Washington Post, the and the Wall Street Journal all have coverage.

ALSO- Threads has stolen ChatGPT’s crown as the fastest-growing online platform: Meta’s Twitter lookalike Threads has accumulated over 100 mn sign ups as of yesterday, five days after its launch, making it the fastest online platform to hit the record, Reuters reports. Compare that to Twitter’s 240 mn active users and you can see why Elon Musk took to his Twitter account to attack Meta CEO Mark Zuckerberg.

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.

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

ENTERPRISE IS LOOKING FOR SMART, TALENTED PEOPLE of all backgrounds to help us build some very cool new things. Enterprise — the essential morning read on all the important news shaping business and the economy in Egypt and the region — is looking for writers, reporters and editors to help us build out new publications.

NEVER WORKED IN A NEWSROOM BEFORE? We have the Enterprise Business Writing Development Program. Whether you are a recent graduate, an industry vet, or looking to switch careers, the Enterprise Business Writing Development Program will give you the tools you need to tell the most important stories to our audience of C-suite officials, government ministers, diplomats, financiers, investors and entrepreneurs.

Not an internship program — a career: The three-month program will see full-time, paid participants take part in workshops and lectures from veteran business journalists, while also working on and filing stories that will run on any of our publications. Those who have successfully completed the program, will then be given long-term job offers.

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

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: We take a look at the hurdles facing the implementation of ESG reporting for Egyptian businesses.

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2

Privatization

Actis favorite to acquire 580-MW Egyptian Red Sea wind farm

Actis to acquire Gabal El Zeit wind farms? Emerging-market private equity giant Actis is in line to acquire the state-owned 580-MW Gabal El Zeit wind farm, a government source confirmed to Enterprise following an earlier report by Asharq Business. An SFE-led committee including representatives from the finance, electricity, and planning ministries reviewed multiple initial offers, our source told us, with Actis getting top marks for both its financial offer and technical know-how.

What’s next: Due diligence + a final offer. The SFE will made full data on the wind farms available to the UK-based firm, which will inspect the facilities, and consult with experts ahead of making a final offer. The SFE’s advisors, together with the committee, will then evaluate the offer, the sources said.

We could get an official announcement today:Prime Minister Moustafa Madbouly will make an announcement about the wind farm at the press conference slated for today on the government’s privatization plans, according to Asharq’s sources.

REMEMBER- Gabal El Zeit, along with the state-owned 545-MW Zafarana wind farm, was included in the list of 32 companies and assets earmarked for privatization announced by the government earlier this year. The farms have attracted significant interest among investors, including Saudi Arabia’s ACWA Power, the UAE’s Alcazar Energy, and our friends at local renewables firm Infinity.

Actis is also eyeing the Siemens power plant: Actis, along with Malaysian power company Edra, was reported by Bloomberg last month to be interested in acquiring one of the three Siemens-built combined cycle power plants in Beni Suef. The sale of the plant, which has also been selected for privatization, could bring in as much as USD 2 bn. The two potential bidders plan to submit offers to acquire as much as 100% of the plant and operate it, the news outlet reported.

Actis has a long track record here: The firm is a major shareholder of London-listed consumer healthcarebusiness IDH and has previously invested in companies ranging from CIB to Edita. In May 2021, Actis pledged to double its energy investments in Egypt and other African countries to USD 2 bn within five years. The firm earlier this year sold its stake in Lekela Power, an Africa-focused wind power platform that owns the West Bakr wind farm.

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3

Economy

Egyptian inflation soars to record high in June

Inflation has never been higher: Inflation accelerated at its fastest-ever rate in June as the impact of multiple currency devaluations combined with higher seasonal demand to send food prices soaring. The annual urban rate of inflation rose to 35.7% y-o-y during the month, up from 32.7% in May, according to figures released on Monday by state statistics agency Capmas.

A ray of sunshine? Maybe? On a monthly basis, inflation slowed to 2.1% in June from 2.7% the month before.

The usual suspect: Food and beverage prices — the largest component of the basket of goods and services used to calculate inflation — accelerated to a record high of 65.9% y-o-y in June from 60.0% the month before.

This was above analysts’ expectations: Analysts we spoke to yesterday had forecast inflation to accelerate at a slower rate, with Prime Securities penciling it in at 33% and economist Mona Bedeir calling a 33.8% rise in prices.

Key drivers: The higher-than-expected surge was “driven mainly by the high demand for core items in the food sector during Eid season,” Bedeir told Enterprise yesterday. This was also due to “an unfavorable base effect coupled with the current underlying inflation pressures arising from the previous FX movements and the supply shortage in important commodities driven by the FX liquidity crisis,” she added.

Core inflation also moved higher: Core inflation — which strips out volatile items such as food and fuel — accelerated to 41.0% in June from 40.3% the month before, according to central bank figures. Monthly core inflation slowed to 1.7% from 2.9% in May. The central bank will publish its monthly note pointing at the causes behind the June inflation reading on Saturday, 15 July.

LOOKING AHEAD-

Analysts don’t see inflation slowing down in the coming months. Here’s why:

A fourth devaluation in September? “We are expecting an FX movement in September coinciding with the combined first and second review of the IMF program but the scale of this movement is dependent on the Central Bank of Egypt’s (CBE) ability to secure external buffers to smooth the potential fluctuation,” said Bedair.

REMEMBER- Speculation among economists is that our USD 3 bn loan program with the IMF will be at a turning pointin September. 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.

Electricity + fuel prices: An expected increase in the electricity tariff as well as the “catch up effect” of therecent increase in fuel prices could also drive up inflation in the coming months, she added.

Where’s the peak? “We are expecting inflation to peak in July at above 35% assuming that there will be an increase in the electricity tariff this month,” said Amr Elalfy, head of research at Prime Securities. Bedeir expects a peak in October following the review of the IMF program before inflation starts to subside.

What’s stopping us from raising interest rates to curb inflation? The CBE is likely to leave interest rates unchanged at its next meeting on 3 August, as it did in its June meeting, according to three analysts we talked to yesterday including Elalfy and CI Capital veteran Hany Aboul Fotouh. “Raising interest rates can effectively help in tamping inflation only when there’s clear projections about the future of FX movements, which can only happen when we have enough FX liquidity,” Bedeir said. Central bank governor Hassan Abdalla said earlier this year that additional rate hikes might not do much to slow inflation, which he said was being driven by supply-side factors.

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4

IPO

Taqa Arabia shares close more than 2x up on assessed value on second EGX debut

A less chaotic second EGX debut for Taqa: Taqa Arabia had a decidedly less chaotic second debut on the EGX yesterday, with the company’s shares avoiding the dramaticfluctuations seen on Sunday and only a few transactions reportedly being canceled by the exchange.

The company’s shares closed at EGP 20.00 — some 125% higher than the EGP 8.90 apiece price at which shares were valued ahead of the listing. Trading was moderate, with 801.3k of the company’s shares changing hands via 843 transactions for a combined EGP 15.7 mn, according to EGX data. Traders will now be watching to see how far shares fluctuate from the EGP 20.00 price on which the market landed during yesterday’s trading.

Circuit breakers come back into play today: The EGX usually only allows shares to rise or fall by 20% in a session before circuit breakers kick in and suspend trading. But in a decision announced last week and again yesterday, the bourse suspended the rules for the first and second days of dealing in Taqa shares to allow shares to rise to a realistic value from their nominal value of EGP 0.50. Shares rose 3,900% during the day’s trading from that starting value to hit the EGP 20.00 closing price.

The first debut:Taqa shares soared 83,000% on Sunday’s trading, which the EGX attributed to 75 transactions worth just EGP 395k that it said were executed by mistake. A number of local and regional outlets quoted traders saying that several trades were executed at between EGP 380 and EGP 500, which was confirmed later by EGX boss Ramy El Dokany on Amr Adib’s show, triggering the surge in the company’s share price.

REMEMBER- Taqa went public via a direct offering, rather than going the conventional IPO route.It listed its 1.35 bn shares on the exchange under the ticker TAQA and did not offer shares to the public. The technical listing simply allows existing shareholders to start buying and selling shares on the open market and should bring in new shareholders over time.

All transactions were canceled on Sunday, but one: A block transaction was executed on Monday involving the sale of EGP 3.7 bn worth of shares by the company’s largest shareholder Silverstone Capital Investments — an entity controlled by Taqa parent Qalaa Holdings — to existing shareholders including Financial Holdings Investments and Rimco EGT Investments, according to three separate disclosures to the EGX (here, here and here — pdfs).

Silverstone offloads 60% of its shares in Taqa Arabia: Silverstone’s ownership decreased to 49%, down from 80%, after selling 192.4 mn shares to Financial Holdings Investments whose ownership increased to 17.8%, up from 3.6%. Silverstone also sold 194 mn shares to Rimco whose ownership rose to 14.5%, up from 0.2%. Both transactions were executed at EGP 8.90 per-share.

Advisors: EFG Hermes quarterbacked the transaction, while Zulficar & Partners provided counsel. Baker Tilly was the independent financial advisor and PwC was the auditor.

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5

M&A WATCH

Egytrans shareholders approve NOSCO takeover

Egytrans approves acquisition of 99.9% of NOSCO: Egytrans’ general assembly has approved the acquisition of 99.9% of National Transport and Overseas Services Company (NOSCO) via a share swap, Egytrans said in a disclosure (pdf) yesterday. “The acquisition should be finalized in around two to three months,” Egytrans CEO Abir Leheta told us, adding that both companies' management teams will stay onboard.

The details: Egytrans will exchange one of its shares for every 0.0447 share of NOSCO’s capital. This will see the company acquire 2,999,971 of NOSCO’s shares and in return issue 67,112,933 new shares to NOSCO shareholders. A fair value study had valued NOSCO at EGP 58.033 per share and Egytrans at EGP 2.594.

Egytrans' fleet will triple in size upon completion of the acquisition, Leheta told us. “Currently, Egytrans operates 25 regular trucks, while NOSCO has 137 regular trucks, in addition to the specialized vehicles each company operates,” she added. “Integrating our fleets will provide us with a stronger operational base, enhancing our capacity,” she said. “There are a lot of synergies between both companies. By combining our market shares, we aim to create a stronger and more competitive entity.”

Background: EGX-listed Egytrans offers air, sea and land transport services as well as customs clearance and storage. NOSCO is a private trucking company which has seen several national projects in Egypt, including power stations and refineries, the Zohr natural gas field and the Cairo monorail. Egytrans’ board of directors approved the acquisition — which has been in the works since at least October— earlier this year.

Advisors: Egytrans hired Zaki Hashem and Partners as its counsel for the transaction, while NOSCO appointed Catalyst Partners as financial consultant and transaction manager. Archer Financial Advisors performed the fair value assessments.

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6

LEGISLATION WATCH

Egyptian House of Representatives approves World Bank freight rail loan, disability fund, NGO development alliance

Yesterday at the House of Representatives: MPs voted on an USD 400 mn loan for rail infrastructure, the establishment of an EGP 1 bn fund to support disabled people, and a draft bill setting up an organization that will work on development projects in collaboration with civil society groups. The votes came during what could be the next-to-last plenary session of the 2022-2023 legislative season.

CONSPICUOUSLY ABSENT- MPs pushed their scheduled discussion and vote on a bill eliminating preferential tax treatment for some state-owned organizations to today’s agenda.

Here’s the full rundown:

#1- World Bank freight rail money: MPs gave their final approval a USD 400 mn loan from the World Bank’s International Bank for Reconstruction and Development (IBRD) to finance the construction of a railway line between the Port of Alexandria and the Sixth of October dry port.

Background: The World Bank signed off on the loan back in October. The money will help finance the construction of a railway bypass that avoids the congested Greater Cairo-Sixth of October rail corridor. The bypass will allow freight trains to travel between the Port of Alexandria and the newly-built Sixth of October dry port via an alternative route to the west of Greater Cairo. It will be able to handle 15 container trains per day by 2030 and up to 50 trains by 2060.

Not everyone is onboard: Leftist National Progressive Unionist Party spokesman Atef Meghawry and independent MP Ahmed Farghali both characterized the loan as what they called another example of the Madbouly government’s excessive borrowing. “This agreement will only increase foreign debt, not to mention that it will not generate financial revenue for the state treasury,” Meghawry said.

El Wazir strikes back: Transport Minister Kamel El Wazir demanded that Meghawry and Farghali remain in the chamber to hear him rebut their critique, promising that he would tender his resignation if he wasn’t able to make the benefits of the project clear, Al Malreports.

#2-Differently-Abled Fund: MPs gave their preliminary approval to a draft bill setting up an EGP 1 bn fund to support people with disabilities.

REMEMBER- Financed entirely by various state organizations and funds, the Differently Abled Fund will finance training programs to help people with disabilities enter the job market and run SMEs among other forms of social and financial support. The fund received the go ahead from the House Social Solidarity Committee last week. President Abdel Fattah El Sisi directed the Madbouly government to set up the fund last year.

What they said: “Disabled people are part of society and they deserve all kinds of support, particularly financial assistance, to help them live a normal life,” said head of the Social Solidarity Committee Abdel Hadi Al Qasabi.

#3- MPs also gave preliminary approval to a draft bill setting up the National Alliance for Civilian and Development Action, which will work to establish development projects and social development initiatives in collaboration with NGOs and civil society organizations.

What’s next? The bills setting up the Differently Abled Fund and the National Alliance for Civilian and Development Action will be put to a final vote in an upcoming session.

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7

Development finance

Egypt is getting EUR 4 bn from the EIB for development projects including NWFE -Al Mashat

The European Investment Bank (EIB) plans to commit EUR 4 bn in financing to Egyptian development projects between now and 2030, including funding for the government’s flagship Nexus for Water, Food and Energy (NWFE) climate adaptation program, International Cooperation Minister Rania Al Mashat said yesterday during a virtual speech at the EIB MED Conference. Al Mashat did not name the specific projects that are set to receive funding.

NWFE? The International Cooperation Ministry’s program aims to raise blended finance for nine climate adaptation and renewables projects worth a combined USD 15 bn. These include a massive energy project worth US 10 bn, five projects in the field of agriculture and food security, and three in irrigation and water resources. The program was launched ahead of last year’s COP27 climate summit.

The EIB is already a “main development partner” for NWFE and on the sidelines of COP27 said it could commit some USD 1.5 bn in financing for Egyptian water treatment projects.

International have shown NWFE a lot of love: The African Development Bank (AfDB) earlier this year said it has mobilized USD 2.2 bn to improve our water security under the NWFE program. The European Bank for Reconstruction and Development — the lead partner on NWFE’s energy pillar — has allocated USD 200-300 mn to the energy track of the program. The money will help Egypt to decommission 5 GW of gas-fired power plants starting this year. The International Fund for Agricultural Development (IFAD) is committing USD 200 mn to the food track, while a number of other organizations partnering with IFAD are providing another USD 775 mn.

Lots of commitments from the EIB: The bank recently said it willinvest EUR 50 mn every year into Egypt-focused private equity and venture capital firms. In May it also inked an agreement to provide USD 15 mn to Alexbank for on-lending to green projects

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8

Moves

Qalaa Holdings appoints new CFO

Qalaa Holdings has appointed Tarek El Gammal (LinkedIn) as its new chief financial officer, replacing Moataz Farouk (LinkedIn), it said in an EGX disclosure (pdf) yesterday. The company’s shareholders approved the formation of the board for a new term, which saw Ahmed Heikal reappointed as chairman and Hisham El Khazindar as managing director, the company said. Mousheer Hadhoud (LinkedIn), a managing director at the firm, has also joined the board.

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9

LAST NIGHT’S TALK SHOWS

Talk shows cover 1H 2023 record tourism arrivals

Record tourism figures: The nation’s talking heads last night covered a record number of tourist arrivals in 1H 2023, as well as the latest from yesterday’s House session.

Egypt welcomed over 7 mn tourists in 1H 2023, putting us on track to achieve the Tourism Ministry’s goal of receiving a record 15 mn tourists this year, according to a ministry statement. That’s a more than 40% increase on the 4.9 mn visitors we saw in 1H 2022.

“This is the best first half we’ve ever recorded, surpassing 2010,” Tourism Promotion Board chief Amr El Kady told Kelma Akhira’s El Hadidi (watch, runtime: 12:59). “So we are hoping that the full year results mark a new record for Egyptian tourism.”

Moussa comes to El Wazir’s defense: Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 31:31) backed Transport Minister Kamel El Wazir in defending our 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. Some MPs yesterday criticized the loan, calling it another example of the government’s excessive borrowing. We have the full story in this morning’s Legislation Watch, above.

What’s the point of the new National Alliance for Civilian and Development Action? The alliance aims to maximize social and economic development, establishing its own development projects and supporting their implementation.“This alliance promotes the idea of volunteering, which is an idea that needs regulating … NGOs will have the option to join if they want to,” MP Mohamed Abou El Enein said in a clip shared by Ala Mas’ouleety (watch, runtime: 10:53). The House of Representatives gave its preliminary approval to setting up the new alliance in its session yesterday — also covered in our Legislation Watch section.

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10

EGYPT IN THE NEWS

Inflation in the foreign press

June’s record high inflation of 35.7% is grabbing international headlines this morning. We have the full story in our Economy section, above.Bloomberg | Reuters | Africanews |UK Independent

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11

ALSO ON OUR RADAR

Exits raises funding from Silicon Valley’s PVC. PLUS: Menthum closes pre-seed round + aiBank gets on Instapay

STARTUPS-

#1- Exits gets Silicon Valley money: Regional investment platform Exits has raised fresh funding from Silicon Valley-based Practical Venture Capital (PVC), it said in astatement (pdf) yesterday. The firm declined to disclose the value of the investment when we reached out today, saying only that it has raised a total of USD 1.25 mn to date. This includes the USD 1 mn in pre-seed funding raised in 2022.

About Exits: Founded last year by Ahella El Saban (LinkedIn), Mohamed Aboulnaga (LinkedIn), and Ayman El Tanbouly (LinkedIn), the company offers investment banking and M&A services for startups and SMEs across MENA, both through its online investment marketplace and offline. The firm obtained a securities promotion and underwriting license earlier this year, allowing it to advise companies looking to go public on the EGX. Since its launch, the company has closed six transactions worth more than USD 10 mn combined, the most recent of which was Saudi-based automotive services provider Morni Holding’s investment in Egyptian auto startup Helpoo.

#2- Menthum closes first pre-seed round: Egyptian digital money market fund Menthum has completed a pre-seed funding round, receiving investment from venture capital firms Acasia Ventures and A15 in addition to unnamed angel investors, according to a press release (pdf) out yesterday. Investors declined to comment on the value of their commitments to the pre-seed round or its total value when we reached out. This is the first funding round for the company, which is licensed by the Financial Regulatory Authority.

FINTECH-

aiBank onboarded on Instapay: aiBank has announced that its clients will have access to Instant Payment Network (IPN) services via Instapay, according to a press release(pdf). Instapay allows users to transfer money instantly between bank accounts and digital wallets.

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12

PLANET FINANCE

A record 1H for covered bonds + Does BTC have a bright future?

Covered bond bonanza:Banks sold a record EUR 175 bn of mortgage-backed debt — AKA covered bonds — in 1H 2023, the Financial Times writes citing S&P Global Ratings data. Lenders rushed to issue covered bonds as a cheap and safe form of fundraising amid global turmoil in the banking sector and rising rates on deposits.

Ultra-safe: Covered bonds are backed by a bank’s balance sheet assets — typically mortgages — making them particularly low-risk and low-yield, the FT explains. “Covered bonds are a very dull product but because they’re pretty safe they’re seen as a beacon of stability, a funding tool for banks made for rainy days,” said ABN Amro’s Joost Beaumont.

Good times coming for BTC investors? Standard Chartered is now expecting cryptocurrency BTC to reach USD 50k this year and USD 120k by the end of 2024 as the so-called crypto winter continues to thaw, according to a report picked up by Reuters. BTC is up more than 85% YTD to sit at around USD 30.7k — still down significantly from its peak of USD 69k in 2021. “Increased miner profitability per BTC mined means they can sell less while maintaining cash inflows, reducing net BTC supply and pushing BTC prices higher,” one of the bank’s analysts said in the report.

ALSO WORTH MENTIONING-

  • Grab your gold: A growing number of countries are transferring their gold reserves back home to safeguard them against the sort of sanctions imposed on Moscow by the West, which last year froze almost half of Russia’s gold and forex reserves. (Reuters | Invesco, pdf)
  • Big US banks are in for hefty loan losses: The six biggest banks in the US are expected to have written off some USD 5 bn in loans in 2Q 2023 — the largest loan losses since the pandemic — as rising interest rates hinder borrowers’ ability to repay. (Financial Times)
  • Iraq and TotalEnergies sign multi-bn energy deal: Iraq and French oil giant TotalEnergies yesterday signed off on the long-postponed USD 27 bn Gas Growth Integrated Project (Reuters)
  • BitOasis under review: Dubai’s Virtual Assets Regulatory Authority has put Middle East-focused crypto platform BitOasis under review for not meeting conditions. (Bloomberg)

EGX30

16,963

+2.5% (YTD: +16.2%)

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

11,587

-0.2% (YTD: +10.6%)

ADX

9,585

-0.2% (YTD: -6.1%)

DFM

3,977

+0.4% (YTD: +19.2%)

S&P 500

4,410

+0.2% (YTD: +14.9%)

FTSE 100

7,274

+0.2% (YTD: -2.4%)

Euro Stoxx 50

4,257

+0.5% (YTD: +12.2%)

Brent crude

USD 72.99

-1.2%

Natural gas (Nymex)

USD 2.67

+3.4%

Gold

USD 1,931

-0.1%

BTC

USD 30,683

+1.6% (YTD: +85.6%)

THE CLOSING BELL-

The EGX30 rose 2.5% at yesterday’s close on turnover of EGP 1.57 bn (about 31% below the trailing 90-day average). Local investors were net buyers. The index is up 16.2% YTD.

In the green: Mopco (+20.0%), Ezz Steel (+8.3%) and Qalaa Holdings (+7.8%).

In the red: Credit Agricole (-2.7%), Eastern Company (-2.4%) and Taaleem Management Services (-0.3%).

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Our weekly deep dive into the green economy and ESG issue in Egypt.

Published every Tuesday in EnterpriseAM.

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Going Green

ESG reporting isn’t a walk in the park for Egyptian firms (part 1 of 2)

How far has ESG reporting come? It’s been a little over two years since the Financial Regulatory Authority (FRA) announced that ESG reporting would become a legal requirement for listed companies. While some progress has been made on that front, the ESG sphere at home remains in its infancy and continues to be challenging to firms as they work to readapt their business models and organizational culture.

First things first: what is ESG reporting and why does it matter? ESG reports are disclosures of a company’s environmental, social, and corporate governance efforts — its approach to issues such as climate change, workforce diversity, and board independence. Because companies that fare better on the ESG front are seen as less risky and better prepared for long-term challenges, ESG reports can factor greatly into an investor or lender’s decision to commit funds to a company. In a 2022 survey of global institutional investors conducted by EY, 99% of respondents said they consider ESG disclosures in their investment decision-making. Of those, 74% carry out structured reviews — up from just 32% in 2018.

Companies in Egypt are taking questions from investors on ESG: A source in one prominent EGX-listed company tells us that the company has been getting questions from investors on its recent sustainability report. “Everyone is asking . . . so we’re improving our reporting mechanism to better capture our impact,” they say. The importance of ESG metrics has increased over the past two years and are “now just as important” as their financials, they add.

ICYMI- The reporting requirements in brief: EGX-listed companies and non-bank financial institutions with at least EGP 100 mn of capital need to submit annual ESG filings to the Financial Regulatory Authority (FRA). These reports require firms to answer 50 questions focused on everything from their environmental impact and diversity to health and safety. Larger companies with EGP 500 mn of capital also have to report on certain performance indicators from the Task Force on Climate Financial Disclosure. Companies were required to file their first report along with their FY 2022 financial statements, and over the previous year submitted quarterly updates on the steps they’re taking to comply with the rules. Banks are also required to submit annual sustainability reports under central bank rules.

These aren’t technically ESG reports: The questionnaire draws loosely from a number of international frameworks such as the Global Reporting Initiative, the Sustainability Accounting Standards Board, and the Integrated Reporting Framework but it’s not rigorous enough to abide by these reporting standards. And even though ESG disclosures are reviewed by the FRA and EGX, they are not formally audited by a third party like financial statements.

The extra mile: Firms are not required to issue full ESG reports that disclose information beyond what is asked in the FRA questionnaires. However, a slew of market leaders have been releasing detailed reports on their own accord for years (samples here: SODIC, El Sewedy Electric, Juhayna, and Edita).

NEXT WEEK: Challenges and playing catch-up.

Your top green economy stories for the week:

  • 5-GW wind farm in the works: Scatec signed a land allocation agreementwith the Electricity Ministry for a planned 5-GW wind farm in Sohag governorate.
  • CIB gets USD 100 mn loan from IFC for green projects: The International Finance Corporation is lending USD 100 mn to CIB to help it finance green lending activities.
  • New NDCs: Egypt has updated its Nationally Determined Contribution (NDC), ramping up its renewables target to 42% of the country’s energy mix by 2030 instead of 2035 and upgrading its emissions reduction goal from 70 mn tons to 80 mn tons by 2030.
  • More EV charging stations: Elsewedy Electric subsidiary Elsewedy Plug and Ikarus Electric have reportedly received one-year licenses to build EV charging stations.
  • El Niño is here: Global temperatures will likely surgein the coming weeks and months after the El Niño climate pattern developed in the tropical Pacific for the first time in seven years.
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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.

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.

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

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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