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Wednesday, 6 Sep 2023

What We're Tracking Today
Economy
M&a Watch
Capital Markets
Moves
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Diplomacy
Hardhat
Calendar

PMI stable in August — but still in contraction territory

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Today at a glance

1

Economy

Non-oil private sector activity holds steady in August, but is still in contraction territory, PMI shows.
2

M&A WATCH

Sanlam-Allianz Africa merger gets the greenlight from regulators.
3

Also on our Radar

Hassan Allam + Agility score EGP 1.5 bn CIB loan for Yanmu logistics park.
4

Also on our Radar

Volvo is going to assemble electric buses in Egypt with MCV.
5

What We're Tracking Today

EGX30 surpasses 19k for first time ever as inflation-fuelled bull run continues.
6

What We're Tracking Today

These are some of the businesses in line for tax exemptions.
7

LAST NIGHT’S TALK SHOWS

Sisi on “catastrophic” population growth, wants annual birth rate reduced by 80%.
8

What We're Tracking Today

Oil prices just hit their highest levels since November as KSA + Russia extend supply curbs.
9

HARDHAT

Telecoms + tech firms are doing well despite macro headwinds — but have a challenging road ahead.

Wednesday, 6 Sep 2023

What We're Tracking Today
Economy
M&a Watch
Capital Markets
Moves
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Diplomacy
Hardhat
Calendar
1

What We're Tracking Today

EGX30 surpasses 19k for first time ever as inflation-fuelled bull run continues

Good morning, wonderful people. No single story captures the imagination this morning, though we take heart that PMI data out yesterday reinforces our belief that we’re all starting to adapt to (and found workarounds for) our current high-inflation, no-FX reality.

Other glimmers of sunshine this morning: Hassan Allam Utilities and friends have lined up financing from CIB for a new logistics park, Volvo will assemble electric buses here with MCV, Zooba takes its amazing hawashi on the road as its Gulf expansion drive gathers steam, and we have more details on who could benefit from sweeping investment incentives the Sisi administration recently ordered.

^^ We have more on all of these stories below and in today’s news well.

But first: If you haven’t already, it’s time to let us know you’re interested in attending the Enterprise Finance Forum.

COUNTDOWN- There are just 12 days until the Enterprise Finance Forum, which takes place 18-19 September (Monday and Tuesday) at the St. Regis Hotel on the Nile Corniche. This flagship forum is the latest in our must-attend series of invitation-only events, where CEOs, bankers, investors, founders, and corporate leaders will meet to discuss the trends shaping the future of banking, finance, NBFIs, and fintech — and of their clients.

You won’t want to miss this one: Join Basel El Hini (chairman, Housing and Development Bank), Hazem Hegazy (CEO and vice chairman, Al Baraka Bank), Ibrahim El Missiri (CEO, Somabay), Lamyaa Gadelhak (partner, Baker McKenzie), Ashraf Sabry (founder and CEO, Fawry), Dalia Wahba (CEO, Hassan Allam Utilities) and many others for talks on everything from how banks are transforming, to calling the future giants in fintech. Stay tuned for the unveiling of our full list of speakers in the coming days.

Tap or click here to REQUEST AN INVITATION or view the FULL AGENDA.

We are honored to count some of the region’s most important financial institutions as our partners for this special event. The Enterprise Finance Forum could not take place without the support of our partners including Banque Misr, Al Baraka Bank, FAB Misr, HSBC, Mashreq, CI Capital, Global Corp, Visa, Hassan Allam Utilities, and the IFC.

Another milestone for the EGX: The benchmark EGX30 closed above 19k forthe first time ever yesterday, notching a new record high as the unprecedented bull run on the back of the weaker EGP and soaring inflation continues. The index gained 0.7% during trading yesterday to close at 19,044, up 30.5% YTD.

Driving the rally: Local investors continued to dominate the market yesterday, accounting for more than 87% of trading. Locals have poured into the market over the past 12 months looking to hedge against currency weakness and record inflation. That has sent the EGX30 soaring 120% in EGP terms since July 2022.

UPDATE-

Where’s that extra USD 150 mn for Eastern Company coming from? Global Investment Holding, the UAE-based firm on course to acquire 30% of Eastern Company, will not themselves provide the additional USD 150 mn for manufacturing inputs as the original statement from the Madbouly cabinet suggested on Monday. Rather, the company will arrange financing with a syndicate of international banks, which will then be paid back by Eastern. That’s according to Eastern CEO Hani Aman, who sat down with CNBC Arabia yesterday to discuss the agreement (watch, runtime: 10:39).

WATCH THIS SPACE-

#1- Zooba is cooking in Kuwait and Bahrain: Our friends at Zooba have signed franchise agreements with Kuwait’s Zan Kuwaitiah restaurant management company and Bahrain’s A Holding Company to open 12 branches in the two Gulf countries, the company said (pdf) yesterday.

Coming, 1Q 2024: The company will open its first locations in the countries — the Al Khairan Mall in Kuwait’s Al Khairan Pearl City, and Al Liwan Mall in Manama — in the first quarter of next year. Over the coming five years, the company will open eight restaurants in Kuwait and four in Bahrain.

AND- Next stop UAE? It looks like the Emiratis will soon get a taste of Zooba, according to the company, which teased another announcement in the coming months. The provider of our morning hawashi now has nine restaurants in Cairo, three in Saudi Arabia (with two more in the construction phase), and one in New York City.

#2- These are some of the businesses in line for tax exemptions: The government has identified the petrochemicals, green hydrogen, solar energy, EVs, mining, textiles and electronics industries as priority sectors that will benefit from the sweeping package of tax exemptions and other sweeteners recently ordered by President El Sisi. That’s according to Asharq Business, which reported the news yesterday citing an unnamed official source.

ICYMI- The president last week instructed the government to exempt priority sectors from all taxes (except for VAT) for five years and to grant them financial and administrative incentives for delivering industrial projects quickly. Expect an abundance of golden licenses and cut-price land for speedy developers.

More sectors to be added to the list: The government will complete a full list of all the eligible sectors before the end of the year, the source said.

HAPPENING TODAY-

It’s the final day of the Africa Climate Summit in Nairobi: Prime Minister Moustafa Madbouly, Environment Minister Yasmine Fouad, and Egypt’s UN high-level climate champion, Mahmoud Mohieldin, are among the Egyptian delegation attending the summit, which wraps tomorrow.

On Day 2 in Nairobi:

  • The local angle: Madbouly gave a speech calling on African nations to sign up to Egypt’s Sustainable Debt Alliance and reiterating the need for greater amounts of climate finance from international lenders.
  • The global angle: Kenyan president William Ruto called for a global carbon tax to be levied on polluters + COP28 host the UAE pledged to invest USD 4.5 bn in clean-energy projects in Africa.

HAPPENING THIS WEEK-

#1- Foreign reserves figures will be out any day now. Expect the central bank to release figures for August before the week is out.

#2- The National Dialogue will hold its final session of the week tomorrow, with a round of discussions on social topics including the film industry and student unions.

#3- G20 summit: G20 leaders (sans Xi and Putin) will gather in New Delhi for the 2023 G20 summit on Saturday and Sunday.

Remember: Egypt has an invite. Egypt is among the non-G20 countries India has invited to the events this year, though it’s unclear who will be attending this summit. Anonymous sources told Bloomberg yesterday that a “leader” from Egypt will be among those attending an Africa-EU meeting on the sidelines of the gathering, though it didn’t specify a name.

An economic warning ahead of the summit: Developed economies will face “further challenges and shocks” as high interest rates continue to weigh on economic activity, the Financial Times reports the head of the Financial Stability Board as saying. “The global economic recovery is losing momentum and the effects of the rise in interest rates in major economies are increasingly being felt,” said Klaas Knot, chair of the Basel-based financial regulator ahead of the weekend’s summit. “There will certainly be further challenges and shocks facing the global financial system in the months and years to come.”

FURTHER AFIELD-

Other local news triggers to keep your eyes on as we move through September:

  • Inflation: Capmas and the CBE will publish the latest inflation data on Sunday, 10 September.
  • Interest rates: The CBE’s Monetary Policy Committee will gather to discuss interest rates on Thursday, 21 September.

Another visit to China: An Egyptian delegation will touch down in Beijing this November for a roadshow aimed at attracting investment into the engineering, electronic and agricultural sectors, writes A l Mal, citing Egyptian-Chinese Businessmen Foundation chair Majd Al Manzalawy.

GAFI + the SCZone have already been to Asia a number of times this year, including for a spring trip to China that resulted in a spate of MoUs with Chinese companies interested in setting up energy, manufacturing and industrial projects in the zone. Our friends at HSBC Egypt had GAFI on the road in Beijing and Singapore last month to drum-up inbound interest in Egypt.

THE BIG STORIES ABROAD-

Oil prices are the main focus of attention in the global business press this morning after a pledge by Saudi Arabia and Russia yesterday to maintain supply cuts until the end of the year sent prices to their highest levels since November. Brent and US crude futures both climbed 1.2% after the world’s second- and third-largest oil producers said they would prolong their combined 1.3 mn bpd cut through to December, a move that will trigger further tightening in the market.

The markets this morning: Prices are slightly higher this morning, with Brent up 0.1% at USD 90.2 per barrel and WTI 0.2% higher at USD 86.8. Rising oil prices are hitting Asian shares and US + European futures this morning, which are almost universally in the red. The news is getting the front-page treatment on Reuters, Bloomberg and the Financial Times.

Those US curbs on China tech aren’t working out so well: Washington’s attempts to stymie China’s domestic tech industry don’t appear to have gotten traction judging by Huawei’s largest smartphone, which shows off some advanced home-made tech that TechInsights is calling “a big milestone and breakthrough for the Chinese semiconductor industry.” Their teardown of the Mate 60 Pro reveals that China’s Semiconductor Manufacturing International Corp. has acquired the ability to produce 7 nanometer chips, despite US sanctions attempting to prevent the country from accessing the most advanced tech.

Yes, but… SMIC’s tech remains behind the world’s most advanced chip fabs at TSMC, which currently has the ability to manufacture 4-nm chips and is working towards 3-nm. There are also questions about how many of these chips the country is able to produce, and at what cost.

Expect even more Chinese strides on the semiconductor front: China will soon launch a state-backed USD 41 bn investment fund focused on the semiconductor industry, people familiar with the matter told Reuters. The fund will focus on ramping up investment into domestic chip manufacturing.

Read more: Reuters + Bloomberg.

That’s just the beginning of Techtember and Techtober, as the tech journalists refer to the first two months of this season. You can expect:

  • Apple to unveil a new iPhone, AirPods and Watch next week;
  • Microsoft to show off new hardware at an event on 21 September;
  • Google to take the wraps off its much-leaked Pixel on 4 October.

CIRCLE YOUR CALENDAR- .

Looking to do your master’s degree in the UK? Applications for the British government’s Chevening scholarship will open from Tuesday, 12 September and close on 7 November. The scholarship offers full financial support for students to pursue an eligible master’s degree at over 150 UK universities. Applications will be open here.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Telecoms and financial infrastructure companies had a solid 2Q despite inflation and a weakening currency.

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2

Economy

Egypt’s non-oil private sector activity contracts at same pace in August

Contraction in business activity stabilizes: Activity in Egypt’s non-oil private sector shrank at the same rate in August as the month before, according to S&P Global’s purchasing managers’ index (pdf). The headline PMI reading came in at 49.2 for a second consecutive month — its highest level since August 2021 —- suggesting conditions have “somewhat stabilized in recent months after a prolonged period of contraction,” said David Owen, senior economist at S&P Global Market Intelligence. The reading is still below the 50.0 threshold that separates growth from contraction, making August the 33rd consecutive month that business activity has been in decline.

TL;DR- “The 49.2 reading was the joint-highest in two years alongside July's figure, as output and new orders fell at modest rates while employment and inventories moved into expansion territory,” said Owen. “However, a pick-up in inflationary pressures was also indicated by the August survey findings, with some firms noting that a faster increase in input costs had reduced overall activity.”

Inflation continues to stymie growth: The weaker USD-EGP exchange rate, raw materials shortages, and wage pressures led to continued price pressures in August. Businesses raised selling prices at a faster rate last month than they did in July as input costs and expenses rose. Persistently high inflation meant that output and new orders continued to decline albeit modestly as some respondents pointed to a recovery in market demand.

Something’s gotta give: “Comments from surveyed companies suggest that exchange rate problems and cost of living pressures will need to be fully addressed before the country can escape the detrimental effects of inflation which currently runs at a record high,” Owen said.

Remember: Inflation hit another all-time high of 36.5% y-o-y in July thanks to surging food costs and the impact of a series of devaluations. Data for August will be released on 10 September.

Looking into the crystal ball: Only 9% of respondents shared a positive outlook for the coming year — up just marginally from the near-record lows seen in recent months, as businesses continued to fret over a potential recession.

The release received attention internationally: Reuters.

FROM THE REGION-

Growth in business activity in Saudi Arabia slowed to an 11-month low: The country’s PMI (pdf) fell to 56.6 from 57.7 in July — still well above the 50.0 threshold for growth — as output growth eased and demand fell.

Business confidence reached a post-pandemic high in the UAE as rising new orders, higher tourism figures, and more investment spurred optimism. The country’s PMI (pdf) stood at 55.0, down from 56.0 the month before but still marking rapid expansion.

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3

M&A WATCH

Sanlam-Allianz Africa merger gets the greenlight from regulators

Sanlam and Allianz move forward with their pan-African merger: South African non-banking financial services firm Sanlam and global insurer Allianz have received regulatory approvals to merge the bulk of their African operations, creating the largest pan-African non-banking financial services business on the continent, according to a joint press release (pdf). The companies first revealed the merger plans in May 2022.

No change for Allianz Egypt: The group’s subsidiaries — Allianz Ins. and Allianz Life — will continue their normal operations under the same board of directors, Allianz Egypt CEO Ayman Hegazy told us last year.

A frican NBFS juggern a ut: The combined business, dubbed SanlamAllianz, will operate in 27 African countries and is expected to have an equity value of some ZAR 35 bn (USD 1.8 bn). Namibia will be added at a later stage, while Sanlam will retain a standalone presence on its home turf in South Africa. “SanlamAllianz’s ambition is to be among the top three players, in both market share and profitability, in the markets where the company will operate,” the statement reads.

CEO named: Heinie Werth (LinkedIn), the current CEO of Sanlam Emerging Markets, will head up SanlamAllianz.

A 40-60 split: Allianz will hold a 40% stake in the new JV, a company official told us last year, with the option to increase that to 49% and obtain management rights.

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4

Capital markets

EFG Hermes tops EGX brokerage league table in August

EFG Hermes once again topped the EGX’s brokerage league table in August, with a market share of 16.0%, according to bourse figures (pdf). Rounding out the top five were CI Capital (5.6%), Mubasher Securities (4.9%), Thndr Securities (4.3%) and Ostoul Securities (4.0%). EFG has held the top spot every month bar one so far this year.

Newcomer Thndr is climbing the league table: The app landed on the brokerage table for the first time in July, appearing in the top five with 3.8% of the market share before rising to the fourth spot this month.

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5

Moves

Mashreq names Norman Tambach as group CFO

Mashreq has appointed Norman Tambach (LinkedIn) as its group chief financial o fficer, it said (pdf) yesterday. Tambach joins the UAE-based lender after nearly 10 years at ING Germany, where he was appointed CFO in 2019. Prior to his time at ING, he spent over 20 years at KPMG. He has extensive experience in strategic financial engineering, M&A, financial operations, regulatory governance, risk management, capital management, and corporate tax planning.

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6

LAST NIGHT’S TALK SHOWS

Sisi’s population speech dominates Egypt’s talk shows

President Abdel Fattah El Sisi’s comments yesterday on Egypt’s soaring population growth dominated the conversation on the airwaves last night. All of the nation’s talking heads went over the president’s speech on the opening day of the Global Congress on Population, Health and Development(watch runtime 14:51), and invited on health ministry officials to discuss the issue.

THE MAIN MESSAGES-

Poor education, employment and health options are the result of population growth: “If this high population wasn't present [from 2011 to the present], people wouldn't have felt that there is no good healthcare, no decent education, no decent employment,” the president told the gathering. El Sisi’s comments were echoed by Health Minister Khaled Abdel Ghaffar, who described the rising population as the “biggest obstacle” to economic growth.

A hint at more drastic measures: The president suggested that Egypt faces “catastrophe” if steps aren’t taken to “regulate this freedom [to reproduce],” referencing China’s one-child policy. “They succeeded in their population control policy,” he said, stopping short of recommending specific measures.

He wants annual birth rates reduced by 80%: El Sisi said that the country needs to reduce the number of annual births to just 400k from 2.2 mn in 2022. He didn’t specify the period of time in which he sess this happening.

The Health Ministry isn’t advocating for regulation: In an interview on Al Hayah Al Youm last night,Deputy Health Minister Tarek Tawfeek said that the the government will be able to bring birth rates down by educating people, rather than resorting to legislation to control the population (watch runtime 6:13). On Masaa DMC, ministry advisor Amr Hassan said that existing initiatives have managed to bring down the annual birth count from 2.7mn in 2019 to 2.2 mn last year (watch runtime 7:29).

ALSO ON THE AIRWAVES-

The National Dialogue: Al Hayah Al Youm (watch runtime 4:50) and Masaa DMC (watch runtime 2:24) covered the events at the Dialogue yesterday, where participants discussed economic issues including the public debt, inflation and the budget deficit.

FACT CHECK- You can’t pay someone to perform the Umrah on your behalf: Fatwa trustee at Egypt’s Dar Al Ifta Khaled Omran appeared on Masaa DMC (watch runtime 6:45) to settle a recent controversy on social media stirred by scammers offering to charge less money to perform the Umrah on pilgrims’ behalf. Omran said that it is not possible to pay someone else to perform the rite, and told people to remain vigilant against scammers.

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7

EGYPT IN THE NEWS

El Sisi’s comments on rapid population growth leads lead international coverage of Egypt this morning

Dominating the headlines on Egypt in the foreign press this morning: Yesterday’s comments by President El Sisi on the country’s surging population growth. We have the full story in Last Night’s Talk Shows, above. AFP, Bloomberg, the National and Xinhua all gave the president’s speech some ink.

ALSO- EgyptAir resumed commercial flights to Sudan for the first time since the country’s civil war erupted, operating two flights to and from the Sudanese coastal city of Port Sudan — a largely secure entry point. The Associated Press has the story.

The news in Sudan comes as the UN’s refugee agency says it now thinks more than 1.8 mn refugees will have fled Sudan by the end of this year to neighboring countries, Reuters reports. Some 1 mn people have already left their homes since war broke out in April. Truce talks are going nowhere Right now, the news agency reports.

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8

Also on our Radar

Hassan Allam + Agility score EGP 1.5 bn CIB loan for Yanmu logistics park. PLUS: News from Volvo, MCV, Beltone, and NUCA

LOGISTICS-

Yanmu x CIB: Yanmu Logistics Park has lined up a EGP 1.5 bn, 10-year loan from CIB to help fund its first logistics park east of Cairo, according to a joint statement (pdf) out yesterday. Yanmu is a joint venture between HAU Logistics and Kuwait-based global supply chain and infrastructure player Agility. Yanmu will build logistics parks and warehouses across Egypt.

FYI- HAU Logistics is a newly-formed partnership between Hassan Allam Utilities and AP Moller Capital.

Advisors: Matouk, Bassiouny & Hennawy were legal counsel.

Background: The companies announced the USD 100 mn park earlier this year alongside the unveiling of their new Yanmu joint venture. Hassan Allam Utilities is expanding its investments in logistics as it builds an “integrated logistics platform covering the entire value chain for storage and handling services in Egypt,” it said. Agility said last fall that it is investing c. USD 60 mn “to develop and operate two customs and logistics centers in the Suez Canal Economic Zone.”

AUTOMOTIVE-

Volvo will make electric buses in Egypt: Swedish automotive giant Volvo will partner with local private-sector firm MCV to locally assemble electric buses for export to Europe, the Trade Ministry s ai d yesterday. Under the agreement, the two companies will use at least 50% local components, according to the statement. Volvo had earlier expressed its interest in upping its local investments during the Egyptian-Swedish Business Forum in Stockholm in May.

Remember: MCV entered into an agreement with the Military Production Ministry in 2021 to locally assemble the first all-Egyptian electric buses in cooperation with a ministry factory.

NBFS-

Beltone Leasing gets a factoring arm: Beltone Financial’s leasing subsidiary has received a license from the Financial Regulatory Authority (FRA) to add factoring to its lines of business, according to a statement (pdf). The company has rebranded as Beltone Leasing and Factoring.

The strategy: “The company plans to capitalize on this new license in light of the growing demand for immediate access to cash flows and alternate sources of finance by medium- and large-sized corporations, while reducing the associated credit risk,” Beltone said in the statement.

Beltone has lots of dry powder after in July closing a landmark EGP 10 bn capital increase, placing some 5 bn new shares on the EGX. Its leasing arm recently raised its capital to EGP 1 bn, becoming what Beltone says is the biggest player in the local market in terms of paid-in capital.

The leasing business is going strong: Beltone’s leasing arm has so far this year “signed multiple transactions worth approximately EGP 4 bn,” according to the statement. Last week it acquired the Laguna Vista Beach Resort in Sharm El Sheikh from Pickalbatros Hotels & Resorts Group to lease it back to the company in an EG P 750 mn agreement.

REAL ESTATE-

NUCA offers eight plots of land for USD: The New Urban Communities Authority (NUCA) is selling eight plots of land for industrial projects — six in Badr City and two in Borg El Arab — under the government’s land-for-FX initiative aimed at drumming up foreign currency, A l Mal reports, citing data by the authority it says it has seen.

Remember: The land-for-FX scheme allows foreign investors to circumvent the lengthy auction process by bidding directly for state-owned land, provided they pay in hard currency.

ENERGY-

Swedish consultancy to study integrating renewables into the national grid: The Egyptian Electricity Transmission Company (EETC) has contracted Swedish consultancy AFRY to conduct a feasibility study on connecting renewable energy sources to the national energy grid, according to Al M al, citing Sweden’s ambassador to Cairo, Hakan Emsgard. Funding for the study will come from the Swedish government’s development finance institution Swedfund, he said. Cabinet published a statement following a meeting between Sweden’s international cooperation minister and Egyptian Electricity Minister Mohamed Shaker on Monday, without mentioning AFRY.

MANUFACTURING-

Applicants get the green light to operate their Damietta Furniture City workshops: GAFI boss Hossam Heiba handed over permits to several applicants to operate workshops in the Damietta Furniture City, the investment authority said yesterday.

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9

PLANET FINANCE

SoftBank’s Arm scales back IPO

The Arm IPO just got significantly smaller: Arm is looking to fetch almost USD 5 bn in its upcoming IPO, a share sale which would value the UK-based chip designer at as much as USD 52 bn. The company plans to price its shares at USD 47-51, it said in an SEC filing yesterday on the same day it kicked off its roadshow. This is significantly lower than the USD 8-10 bn initially targeted by the company.

Having said that: Pricing at the lower end of the range would still make it the largest globally IPO this year, exceeding the USD 4.37 bn listing of Johnson & Johnson’s Kenvue.

Cornerstone investors are a who’s who of Western tech giants: Google, Apple, Nvidia, Samsung, Intel and TSMC are among the cornerstone investors for the offering, and have shown interest in purchasing USD 735 mn of shares. Bloomberg, the Financial Times and Reuters all have the story.

MEANWHILE- It’s IPO time in Muscat: The pipelines unit of Oman’s state energy company OQ Gas Networks announced (pdf) yesterday its intention to float nearly half of its shares on the Muscat Stock Exchange in October with subscription set to begin this month for retail and institutional investors. The transaction is expected to raise up to USD 800 mn, Reuters reports, citing an unnamed source it says has knowledge of the matter. This would make it the Sultanate's biggest IPO in almost two decades, according to the newswire.

Advisors: Our friends at EFG UAE are acting as joint global coordinators along with Bank Muscat and BofA Securities. Bank Muscat is the issue manager.

Round 2 for OQ: OQ took nearly half of its oil drilling business to market in a transaction that raised USD 244 mn in March as part of a plan by the Oman wealth fund to exit some of its assets.

ALSO WORTH NOTING-

  • Country Garden avoids default: China’s largest real estate developer has paid its interest payments in USD bonds, avoiding default for the second time in a few days and easing the crisis in the country’s embattled property sector. (Reuters)
  • World Bank considers doubling investment in Turkey: The World Bank is in advanced talks to increase its investment in Turkey to USD 35 bn. (Bloomberg)

EGX30

19,044

+0.7% (YTD: +30.5%)

USD ( CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

19.25% deposit

20.25% lending

Tadawul

11,411

-0.2% (YTD: +8.9%)

ADX

9,656

-0.9% (YTD: -5.4%)

DFM

4,053

-0.4% (YTD: +21.5%)

S&P 500

4,497

-0.4% (YTD: +17.1%)

FTSE 100

7,438

-0.2% (YTD: -0.2%)

Euro Stoxx 50

4,269

-0.3% (YTD: +12.5%)

Brent crude

USD 89.99

+1.1%

Natural gas (Nymex)

USD 2.59

-6.5%

Gold

USD 1,951.10

-0.8%

BTC

USD 25,695

-0.4% (YTD: +55.5%)

THE CLOSING BELL-

The EGX30 rose 0.7% at yesterday’s close on turnover of EGP 2.23 bn (5.7% above the 90-day average). Local investors were net buyers. The index is up 30.5% YTD.

In the green: Eastern Company (+7.3%), Qalaa Holdings (+3.1%) and Mopco (+2.3%).

In the red: Alexandria Containers and Cargo Handling (-4.4%), Orascom Development Egypt (-2.2%) and Beltone Financial Holding (-2.2 %).

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10

Diplomacy

Egypt, Japan + Jordan top diplomats hold talks in Cairo

Egypt x Japan x Jordan: Foreign Minister Sameh Shoukry met his Japanese and Jordanian counterparts Yoshimasa Hayashi and Ayman Safadi for a three-way meeting on the sidelines of the Arab-Japanese talks at the Arab League’s HQ in Cairo yesterday, the Egyptian Foreign Ministry said in statements (here and here).

On the agenda: Collaboration prospects on electrical interconnections between Jordan and Iraq, boosting Palestinian exports, and introducing an Egyptian-Japanese schools-like model in Lebanon. The statements provided no further details.

Egypt + Japan are strengthening ties: This comes four months after the Japanese prime minister visited Egypt, during which the countries upgraded bilateral ties to a strategic partnership. The meeting came just two days after Hayashi held talks with Safadi in Jordan, where he announced that Tokyo will extend a USD 100 mn loan to support the country’s electricity reforms.

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Our weekly deep-dive into infrastructure in Egypt.

Published every Wednesday in EnterpriseAM.

Read Hardhat
11

HARDHAT

Telecoms + tech firms players are doing well despite macro headwinds — but have a challenging road ahead

Telecoms + financial infrastructure companies had a solid 2Q despite inflation and a weakening currency: EGX-listed telecom and financial infrastructure companies recorded solid revenues and bottom lines in 2Q 2023 despite the effects of rising inflation, the EGP devaluation, and an ongoing FX shortage. Their strong performance is expected to hold steady over the medium and long terms, analysts Enterprise spoke with indicated, although challenges — including maintaining a positive net cashflow and diversified revenue streams amid regional expansion — prevail, our sources say.

A quick look at telecom players’ financials: Telecom Egypt reported a 19% y-o-y increase in its 2Q 2023 bottom line, hitting EGP 2.9 bn on revenues of EGP 14.2 bn, up 29% y-o-y, which the company attributed to its wholesale and retail divisions. Meanwhile, Raya Holdings subsidiary Raya CX’s bottom line soared nearly sixfold to EGP 81.8 mn in 1H 2023, according to the company’s earnings release (pdf). Raya CX’s strong performance came on the back of operational expansions, particularly in foreign markets such as Saudi Arabia, which helped offset the impact of the EGP devaluation.

The name of the game: Diversifying revenues + securing FX-denoninated revenues. For Telecom Egypt, the company’s USD-denominated revenues from international carriers, customers, and networks helped drive up revenues in EGP terms, with both of these segments showing y-o-y and q-o-q growth, according to the company’s earnings. These revenues helped offset cost pressures from domestic inflation, Al Ahly Pharos Senior Associate Mariam Wael told Enterprise. Meanwhile, Raya CX has been pushing forward with regional expansion plans, helping it diversify its revenue streams amid “an increasingly inflationary environment exacerbated by the volatility of the EGP,” CEO Ahmed Aboulezz is quoted as saying in its earnings release.

It’s much of the same for those in digital payments: State-owned, EGX-listed payments company E-Finance saw its revenues rise 38% y-o-y to EGP 967.5 mn in 2Q 2023, with net income after non-controlling interest rising 56% y-o-y to EGP 436.4 mn. EGX-listed payments giant Fawry’s adjusted net income rose to EGP 181.1 mn in 2Q 2023, up 342% y-o-y. Revenues grew 45% y-o-y to EGP 768.5 mn during the quarter.

Geographical expansion is a key ingredient in the recipe for consistently strong performance: Fawry and E-Finance intend to expand to Saudi Arabia, and are looking at receiving digital banking licenses in Egypt this year. The last quarter of the year may witness e-Finance group finalize its financial and digital investments while establishing its headquarters in the kingdom and officially beginning their operations, according to Ibrahim Sarhan.

Buoying revenue growth across the board: Getting the most value from customer bases + growing service offerings: Telecoms and payments companies have focused on maximizing value from their fixed customer base and expanding their service offerings, which contributed to bolstering revenues from different segments, Zilla Capital research head Aya Zoheir told us. These companies have also been cutting direct and indirect costs amid accelerating inflation, allowing them to maintain positive EBITDA levels, according to Zoheir, who expects the sector’s revenues to continue rising as companies continue to tap into a broader customer base.

What does the future hold? Challenges lie ahead, but there’s plenty of room for growth: The National Telecom Regulatory Authority is expected to sign off on mobile phone service price increases, which would help telecoms players secure better financials throughout the rest of the year, analysts told us. Market watchers are expecting prices to rise by 10-15%, Wael said. Meanwhile, Telecom Egypt is expected to see its mobile phone services improve in the back half of the year, partially on the back of a five-year national roaming agreement the company signed with Orange that will allow TE to use Orange’s mobile service infrastructure. This agreement is expected to slash in half Telecom Egypt’s interconnection costs, which account for some 25-29% of its total operating expenses, Wael said.

The government’s digital transformation push — and the work left to be done on financial inclusion — will also help drive growth for payments players: The government’s digitization and financial inclusion strategies mean there’s plenty of upside for companies in the digital payment space, analysts say. “Cashless transactions are extremely underpenetrated in Egypt, so this massive growth potential can likely overcome any expected hits to consumption activity due to inflation,” Noha Baraka, head of the fintech sector at CI Capital, previously told us. This potential is evident in banking services being front and center in digital payment companies’ revenues, such as Fawry, where its banking services segment was the single largest driver of the rise in revenues, accounting for 52% of overall topline growth, Zoheir said.

Your top infrastructure stories for the week:

  • The future Sohag wind hub is growing: Orascom Construction, Engie and Toyota Tsusho have land in Sohag for their planned 3-GW wind farm.
  • Financial close for Acwa’s Kom Ombo solar plant: Acwa Power has achieved financial close for its 200 MW solar project in Kom Ombo, the largest privately-owned solar plant in the country.
  • Fourth Dabaa reactor approved: The Egyptian Nuclear and Radiological Regulatory Authority gave the all-clear to Rosatom and co. to proceed with the construction of the fourth 1.2-GW reactor at the Dabaa nuclear plant.
  • Local construction companies eyeing business in Iraq: The Housing Ministry is putting together a list of local construction companies that it recommends for taking on infrastructure projects in Iraq.
  • Madinet Masr x ASEC Automation: Madinet Masr signed an MoU with Qalaa Holdings subsidiary ASEC Automation for the construction of an EGP 100 mn infrastructure and road network for the Cavana project at its New Cairo Sarai development.
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CALENDAR

SEPTEMBER

September: Hassan Allam Utilities + Agility to open Yanmu East logistics park.

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.

End of September: ADQ to acquire stakes in Elab, Ethydco and EDC.

4-6 September (Monday-Wednesday): Africa Climate Summit, Nairobi, Kenya.

5-8 September (Tuesday-Thursday): Global Congress on Population, Health and Development, Cairo.

7-8 (Thursday-Friday): Regional Forum for Sustainability & Development, Cairo.

7 September (Wednesday): National Dialogue.

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.

13 September (Wednesday): Deadline for settling outstanding military service in FX.

15 September (Friday): Ultraibex Wadi Degla Protectorate clean-up event.

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

15 September (Friday): Deadline for applications to EGYAID scholarship 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 (insurance conference), 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.

20-23 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo.

21 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

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).

26 September (Tuesday): Taqa Arabia’s ordinary general assembly meeting.

27 September (Wednesday): Deadline for bidding in the fifth phase of the investment map offered by the Industrial Development Authority (IDA).

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

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

30 September (Saturday): The start of the new academic year for Egyptian universities.

30 September (Saturday): The start of the new academic year for Egyptian schools.

OCTOBER

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

October: Egyptian-Jordanian Business Council, Amman, Jordan.

October: Gov’t expects to finalize sale of Gabal El Zeit wind plant.

October - November: Gov’t expects to finalize sale of military-owned fuel retailer Wataniya.

1-3 October (Sunday-Tuesday) International Expotec for water economics management, Egypt International Exhibition Center, Fifth Settlement, Cairo.

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.

2 October (Monday): Government meeting with investors to look into liberalizing electricity grid.

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.

10-12 October ( Tuesday-Thursday) Ceramica Expo, Cairo International Convention Center.

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.

22 November (Wednesday): Deadline to apply to FRA for credit rating license.

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

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

DECEMBER

December: Gov’t expects to finalize sale of military-owned bottled drinks company Safi.

December: Gov’t expects to finalize sale of Zafarana wind farm.

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.

June 2024: Gov’t expects to finalize sale of Beni Suef combined-cycle power plant.

1H 2024: Gov’t expects to finalize sale of four water desalination plants.

End of 2024: The launch of the high-speed train line linking Ain Sokhna with Al Alamein City.

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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