INVESTMENT WATCH- The way to a foreign investor’s pocket book is through their stomach. Ours is a consumer-led economy, and Egyptian consumers love food above all else. Fitting, then, that we head off on our Eid holiday with news of new FDI in food and food-centered retail:

India’s LuLu Group is planning to invest USD 1 bn in Egypt over the next three years to build out its branch network, Internal Trade Development Authority (ITDA) head Ibrahim Ashmawy said, according to Al Mal. The Abu Dhabi-based, Indian-owned hypermarket operator inaugurated its second branch in Egypt — which cost EGP 180 mn — earlier this week. LuLu had said last year it plans to open two branches in Egypt in 1H2020, including one in Wadi Degla and another in the Fifth Settlement. The company said in summer 2019 that it would invest USD 500 mn in its expansion in Egypt.

Kraft Heinz will invest over EGP 920 mn in Egypt over the next five years to add 14 new production lines, Managing Director Hany Elmessiry said, according to the local press. The company plans to increase its output to cover domestic consumption and sell to export markets. The company exports nearly EGP 680 mn-worth of goods, or 20% of its annual output, to countries in the Gulf and Africa.

Hero Foods is planning to invest USD 5 mn by the end of 2020 to expand its jam factory in Qalyubia, Middle East and Africa (MEA) operations head Mahmoud Bazan tells the local press. The Swiss food manufacturer will use the investments to add capacity to what is already one of the largest jam factories in the MEA region. The company has spent over USD 70 mn in expansions and upgrades since it acquired the factory in the early 2000s.

INVESTMENT WATCH- The next step in our journey to an EV future will cost about EGP 500 mn: The plant that will eventually assemble 25k electric vehicles a year in partnership with China’s Dongfeng Motor Corporation will cost EGP 500 mn to get off the ground, Public Enterprises Minister Hisham Tawfik was quoted as saying by Al Mal. Under the MoU signed late last month between the Chinese firm and the Metallurgical Industries Holding Company, production is slated to begin in the last quarter of 2021 at facilities owned by El Nasr Automotive.

We’ll know more soon about the government’s plan to roll out EVs around the country: Tawfik recently handed documents to the presidency outlining a national incentives strategy for the production and ownership of EVs, he said, adding that the cabinet will issue a statement soon with more details. Incentives involve a set price for charging the vehicles, agreements with private mall operators to set up charging docks, and subsidies of around EGP 50k per vehicle. Tawfik first announced the subsidies, along with a three-year plan to build 1k fast charging stations, earlier this year. Alongside those measures, public authorities, economic bodies, and public sector companies will be required to replace 5% of their fleet every year with electric cars, Tawfik also said recently.

Background: We noted last year that the government is working on a new policy framework to encourage the use of EVs under instructions from President Abdel Fattah El Sisi. We also looked into whether Egypt is actually ready to embrace a market for EVs in a recent edition of Hardhat, our weekly infrastructure vertical.

Also in the pipeline — funding for electric taxis: The Public Enterprises Ministry is planning to roll out a program to provide financing for electric taxi purchases, Tawfik said. Details on the program are also due out soon, he added, hinting that there could similarly be a separate financing program for purchases of personal EVs.

In related news, Tawfik held talks yesterday with the Chinese ambassador in Cairo Liao Liqiang on collaboration in EV manufacturing. The two agreed to compile a shortlist of potential Chinese partners to work with the government on its EV development plan, according to Masrawy. They also discussed the MoU with Dongfeng, plans to concentrate Egypt’s EV efforts in facilities owned by El Nasr, as well as have the state-owned company act as an agent for Chinese EV makers, and cooperation in manufacturing key EV components through “multiple forms of partnership” with a Chinese company leading in the field. There was no mention of the latter company’s name nor specifics on the potential partnership.

Strong growth in automotive sales in 1H2020 despite pandemic: Automotive sales climbed 22% in the first six months of the year, despite the coronavirus pandemic weighing on the sector for much of the second quarter, industry data show. Figures released by the Automotive Marketing Information Council (AMIC) show that dealers sold 90.4k vehicles (including passenger cars and commercial vehicles) in 1H2020, up from 74.8k during the same period in 2019. The six-month figures are supported by a strong 1Q performance that saw sales grow 50% on an annualized basis, before the government’s partial lockdown of the economy between April and June which curbed imports and temporarily shuttered dealerships.

Crunching the numbers: Distributors sold almost 11k more passenger cars during the first six months of the year than they did in the equivalent period last year, with sales figures rising 22% to 62.2k vehicles. Bus sales surged 80% to 12.7k, while truck sales fell slightly to 15.6k vehicles. The report, which relies on self-reporting by member distributors, shows Chevrolet as the top-selling brand, capturing a market share of 20.4%. Toyota came second with a 12.3% market share, followed by Nissan at 8.9%.

Gov’t considers flight discounts to support tourism sector: The government is considering including domestic tourism in its recently launched consumer spending initiative by offering discounts on domestic flights and other means of transportation to support the country’s ailing tourism sector, Al Mal reports, citing unnamed sources. The report comes just days after the government pushed ahead with a new program that aims to catalyze bns in consumer spending to drive economic growth in this time of corona.

Background: The government launched its “Not Too Expensive for You (Ma Yeghlash Aleik)” program at the beginning of this week to stimulate some EGP 125 bn-worth of consumer spending. Citizens can obtain discounts of 15-25% on a range of goods including electronics, appliances, clothes and furniture, while ration cards will be topped up by EGP 200 per person up to a maximum of EGP 1k per family. The program is nominally supposed to run for the next three months but sources said this week that the discounts will remain in place until at least January 2021.

Shareholders look to sell 7% stake in Fawry: A group of shareholders are looking to sell a combined stake of c. 7% (50 mn shares) in EGX-listed e-payment company Fawry, a source with knowledge of the transaction told Enterprise. Selling shareholders include the Egyptian American Enterprise Fund (EAEF), the International Finance Corporation (IFC), a vehicle of private equity investor Helios, asset manager ResponsAbility, the National Bank of Egypt, Banque Misr, and a number of Fawry employees. The EAEF, IFC, and Helios vehicle Link were among 40 shareholders who earlier this year were transferred the ownership of a 63.99% stake in Fawry previously held by PSI Netherlands Holding. Fawry is Egypt’s largest financial payments business. EFG Hermes is managing the offering.

HHD extends contract to co-develop New Heliopolis land with Sodic: State-owned Heliopolis Housing and Development’s (HHD) board of directors agreed yesterday to extend the deadline by 11 months to develop a a 655-feddan plot in New Heliopolis under a 2016 agreement with upmarket real estate developer Sodic, according to a bourse disclosure (pdf). The new deadline is unclear. HHD also signed off on restructuring the EGP 5.01 bn minimum guaranteed revenues from the development, citing the current economic slowdown and its effect on the real estate market.

Background: Sodic and HHD had signed an agreement (pdf) back in 2016 to co-develop the land into a “fully integrated project” with retail, medical, educational, and sports facilities, in addition to 8,600 homes. Under the agreement, Sodic is entitled to 70% of the revenues from homes sold in the development, while the state-owned company will get the remaining 30%. Revenues from commercial and retail sales are split similarly.

DISPUTE WATCH- SMW Gold pledges to develop Al Fawakhir gold mine following withdrawal of arbitration case: Russian miner SMW Gold has reached an agreement with the government to renegotiate a gold exploration contract at the Al Fawakhir concession in the Eastern Desert, Al Mal says, citing an unnamed official. SMW has been the subject of a drawn-out arbitration dispute with the Egyptian government, filed in 2013 after the Egyptian Mineral Resources Authority (EMRA) accused it of failing to invest the agreed amount in the Al Fawakhir and Om Balad concessions, awarded back in 2006.

SMW recently withdrew the case after being acquired by Africa-focused Australian miner Allied Gold, according to a letter by the Cairo Regional Centre for International Commercial Arbitration (CRCICA) that the newspaper says it has seen. Following the acquisition, SMW handed over a USD 5 mn letter of guarantee to the government to return to Al Fawakhir and USD 8.5 mn to launch the exploration program, according to the official.

Al Fawakhir isn’t a name any of us heard of in a while: Al Fawakhir is an ancient gold mine located in the Eastern Desert and for which the Pharaohs drew up the first geological map in Egypt’s history. It was developed by the British in 1948, but then closed by Gamal Abdel Nasser following the 1952 Revolution.

Eni, BP, Total confirm gas discovery in North El Hammad concession: Eni, BP (pdf) and Total confirmed yesterday a gas discovery at the Bashrush well in the North El Hammad concession. Production tests yielded flow rates of up to 32 mn scf/d, which are expected to increase to 100 mn scf/d per well in the future along with a 800 barrels of condensate per day, the company said. Eni first announced the discovery earlier this month prior to testing the well for production. An official at the Egyptian state gas company EGAS claimed that reserves at the well could be as much as 250 bn cubic feet. Neither Total, Eni or BP have provided reserve estimates. Operator Eni and BP both hold 37.5% stakes in the concession while Total has a 25% stake.

El Sisi says Egypt will pursue GERD negotiations, denounces calls for military action: Egypt is still committed to breaking the deadlock on the Grand Ethiopian Renaissance Dam (GERD) through negotiations, President Abdel Fattah El Sisi said yesterday, according to MENA. Speaking during the inauguration of the Roubiki industrial zone, the president denounced calls in “the media” to resort to military action over the dam, saying that ongoing talks are aimed at reaching an agreement that doesn’t threaten Egypt’s water security. El Sisi made similar remarks last week in his speech commemorating the 23 July Revolution. Bloomberg also had the story.

Egypt is also investing around EGP 1 tn to cut down on water waste and improve the utilization of our resources, El Sisi said.

Kamel heads to Sudan: Egypt’s Intelligence chief Abbas Kamel was in Khartoum yesterday for talks with Sudan’s prime minister Abdalla Hamdok, Sudan’s state news agency SUNA reported. The report offered little details about the substance of the meeting, saying only that it came “within the framework of bilateral relations.” This came as the Sudanese cabinet held a meeting to discuss the potential effects of Ethiopia unilaterally filling the dam’s reservoir on the country’s water supply.

And Shoukry has been reaching out to US lawmakers: A Foreign Ministry statement said yesterday that Minister Sameh Shoukry had held talks with a number of senior lawmakers about the status of negotiations with Ethiopia as well as the situation in Libya.

Also from the president’s remarks yesterday :

• The president urged citizens against getting lax with social distancing and precautionary measures as covid-19 case and death counts drop, saying that the government could decide to re-impose the lockdown if numbers start to rise significantly again.
• Egypt wants to push its exports of locally manufactured goods to “at least” USD 100 bn within the next few years and will upgrade all spinning and weaving factories in El Mahalla within two years.

EARNINGS WATCH- Talaat Moustafa Group (TMG) reported a drop in net income to EGP 705 mn in 1H2020, compared to EGP 812 mn in the first half of last year, the real estate developer said in a regulatory filing (pdf). Revenues during the period came in at EGP 4.6 bn, down 7% from last year.

Credit Agricole Egypt has reported a net profit of EGP 701 mn in 1H2020, down 46% from EGP 1.3 bn in the same period last year, according to its earnings statement (pdf).