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See you in 2024

Good morning, wonderful people. We close 2023 grateful for our families, health, and friends — and thankful that so many of you have opted to start your workday with us for another year. Writing to you every day is the highlight of our professional careers.

** This is the last issue of EnterpriseAM for the year. Along with our sister publications, we’re taking a publication break this Thursday through Monday to recharge and gear up for 2024. All of our publications will be back in your inboxes at their usual times on Tuesday, 2 January 2024.

PSA #1- Banks will be closed on Monday, 1 January, to mark the end of their fiscal year, and will return to work the following Tuesday, the Central Bank of Egypt said in a statement yesterday.

Take Sunday off — bridge. You’ve earned a long weekend, folks.

PSA #2- Keep your umbrellas close. We’re in for a rainy couple of days paired with some sandy winds today and tomorrow, according to the Egyptian Meteorological Authority. Expect daytime highs ranging from 20-22°C from today through Monday.and lows of 14-16°C.

RED SEA WATCH-

Another sign we’re inching closer to normalcy in the Red Sea: Shipping giant CMA CGM has resumed Red Sea transit and is “currently devising plans for the gradual increase in the number of vessels transiting through the Suez Canal,” it said in a statement. Meanwhile, Hapag-Lloyd will decide today whether to resume Red Sea transit or not, a company spokesperson told Reuters.

Following in Maersk’s footsteps: This comes shortly after AP Moller-Maersk, the world’s second-largest shipping line, said that it will resume operations in the Red Sea after the US-led naval coalition promised to patrol the Red Sea. AP Moller-Maersk, Hapag-Lloyd, CMA CGM, and many other international shipping companies have paused transit through the Red Sea following repeated attacks from Yemen’s armed Houthi group on vessels bound for Israeli ports, passing through the waterway.

Don’t get too excited: The Iran-backed group yesterday launched a missile attack on a contained ship passing through the Red Sea, Reuters reported. A move which will likely cause shipping firms to stop and reconsider before allowing their vessels to sail through the waterway once again.

AND- Egypt, Jordan talk Red Sea navigation: Jordan’s Foreign Minister Ayman Safadi met with Foreign Minister Sameh Shoukry in Cairo yesterday to discuss the importance of Red Sea navigation freedom, according to a Foreign Ministry readout.

ICYMI- Jordan activated the Arab Line — a sea-land route that links Aqaba in south Jordan with Nuweiba in Sinai — earlier this week, in a bid to ensure smooth shipping movement.

WAR WATCH-

Israel warns of a wider regional conflict: Israeli Defense Minister Yoav Gallant warned that the war on Gaza could escalate into a wider regional conflict, as tensions with Iran continue to increase, FT reports. Gallant told a parliamentary committee that Israel is now involved in a “multi-arena war” spanning seven different areas — Gaza, the West Bank, Lebanon, Syria, Iraq, Yemen, and Iran.

Close to home: Egyptian forces shot down a drone of unknown origins near Sinai’s Dahab yesterday, Reuters reported. This marks the second such incident in a month after Egyptian forces intercepted a flying object that crashed near the coast of Dahab two weeks ago.

WATCH THIS SPACE-

#1- Brace up for tight food supplies: Global staple foods are expected to continue to run short well into 2024 as supplies get strained by El Nino (drier and warmer than average weather), export restrictions, and strict biofuel mandates, reports Reuters. Wheat, corn, and soybean prices are pegged for losses in 2023.

Meanwhile, in our neck of the woods: Strategic reserves of wheat currently stand at 4.3 months, Supply Minister Ali Moselhy reportedly said yesterday. The ministry wants to buy 3.5 mn tons of wheat from next local harvest season.

#2- Iran ups production of highly-enriched uranium: Iran is increasing its production of highly enriched uranium, reversing a months-long slowdown in output that began in June, Reuters reports, citing a statement from the International Atomic Energy Agency. Iran is enriching its uranium to up to 60% at a rate of about 9 kg a month — up from 3 kg during the slowdown, believed to be the result of secret talks between Iran and the US.

MORNING MUST-READ-

Two wars, and a handful of “civil disturbances,” 50 elections, and rich-world bias: Here’s how some of the smarter people in the Western press think you should be thinking about 2024:

#1- Volatility will be the theme of the year, the New York Times writes, noting that economic uncertainty and armed conflict are set to run headlong into a list of elections spanning from Taiwan and India to the US of A.

Huge things that matter to business — in Egypt, the region, and beyond — are at stake: Who gets elected and how much power they have will affect decisions ranging from how artificial intelligence will be regulated to “factory subsidies, tax breaks, technology transfers, the development of artificial intelligence, regulatory controls, trade barriers, investments, debt relief, and the energy transition.”

#2- Greenwashing by corporations is a sideshow in emerging markets. What really matters is that “Rich countries are using the green transition as an excuse to boost their own economies at the expense of developing ones.”

It’s not an activist speaking — but the head of the UN’s top trade body. “Many trade rules forbid policies that can be used by developing countries. And the developed countries have more fiscal space to subsidize in the areas that are good for ‘quote, unquote’, the environment,” UN Conference on Trade and Development Secretary-General Rebeca Grynspan tells the Financial Times in a year-end interview.

Competition is going to be particularly fierce when it comes to job-creating (and economically important) investment in industry, where Grynspan notes that advanced economies are now trying to muscle-out the developing world to bring jobs and technology back home.

#3- It’s a year in which every business will have to come to grips with what artificial intelligence means to their business. Our friends at McKinsey think that 75% the total business “use case” for AI will fall into just four buckets: customer service and operations, marketing and sales, software engineering, and research and development.

And adoption has so far been slow: Younger people are playing with it, sorting out its strengths (cutting through deep stores of data) and weaknesses (so. much. hallucination). But only a third of managers around the world tell McKinsey they’re using generative AI for work. Nearly 70% have either tried it and decided not to use it — or have never touched it at all.

Your best starting points for AI: There are far more questions than answers. Folks with more exposure will want to look at Benedict Evans’ annual look ahead, which this year focuses almost entirely on gen AI. Newbies can start with the Economist.

THE BIG STORY HERE AT HOME-

Gold prices soar to a fresh record high: The price of 24 karat gold rose to an unprecedented EGP 3,771 per gram yesterday — a 5.6% increase from Monday’s prices. Gold prices have more than doubled over the past year as more Egyptians flock to the precious metal, which has been acting as a haven asset for people looking to protect savings from the weakening EGP.

No specific trigger: Economic experts and government officials joined Kelma Akhira (watch, runtime: 6:03) and Ala Mas’ouleety (watch, runtime: 37:05) to weigh in on the matter and try to figure out the reason for the spike. Most of them failed to pinpoint a specific trigger and simply attributed it to rising demand. Supply Minister official Nagy Farag told Kelma Akhira’s Lamees El Hadidi that he expects prices to stabilize soon and warned people against making purchases at the current inflated prices.

THE BIG STORY ABROAD-

The news flow has slightly picked up this morning with more news coming in, mostly from the US.

#1- US strikes Iraq: The US military has launched strikes on three Iraqi facilities that the US says were being used by Hezbollah and affiliated groups. The strikes came in response to a series of attacks against US personnel in Iraq and Syria which it said were carried out by Iranian-backed militias. (Bloomberg | Reuters | BBC | CNN)

#2- US extends tariff exemptions on Chinese products: The US has extended tariff exemptions for hundreds of Chinese products — including pumps, electric motors, car parts, bicycles, and vacuum cleaners — and 77 Covid-related products — like face masks and hand sanitizing wipes — due to expire on 31 December to 31 May. The tariffs were originally imposed by former US President Donald Trump’s administration in 2018 after an investigation found China guilty of unfair trade practices. (Reuters)

ALSO- FROM THE DEPARTMENT OF A*A- There has never been a better time to buy a Mac than today, after Intel decided to accept a USD 25 bn grant from Israel to build a chip plant in the country’s south. It’s the “largest ever investment by a company in Israel,” Reuters reports.

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1

FINANCIAL SERVICES

How did Egypt’s non-banking financial services perform during 3Q 2023?

NBFS: A quarter in review. The Financial Regulatory Authority (FRA) is out with its quarterly report (pdf) detailing the latest on non-banking financial services (NBFS). Sums taken out rose across the board — leasing, factoring, consumer finance, and MSMEs — except for mortgage financing, which suffered from the side effects of the central bank tightening monetary policy and raising interest rates.

IN THE GREEN-

#1- The value of leasing contracts jumped about 17% y-o-y to almost EGP 27 bn in 3Q. However, the number of contracts signed during the quarter shrank by around 32% y-o-y to 427.

#2- Factoring receivables grew 39% y-o-y in 3Q to almost EGP 10 bn.

#3-Consumer finance companies lent out some EGP 12.1 bn during the quarter — up 60% y-o-y — to 811k clients — up 18% y-o-y. Over 40% of the sums granted went towards vehicle purchases, while 24% went towards purchases of appliances and electronics.

#4- Funding for MSMEs: Financing granted to MSMEs jumped almost 35% y-o-y to EGP 49.7 bn with micro enterprises taking the lion’s share of the funding (c. EGP 45.2 bn). The funds were distributed among 3.8 mn enterprises.

IN THE RED-

The value of mortgage loans taken out during the quarter fell about 42% y-o-y to EGP 2.4 bn, with the number of beneficiaries falling 58% y-o-y to 1.2k.

2

FINANCIAL SERVICES

Egypt’s Kandil Glass signs EGP 250-mn sale-leaseback agreement with Beltone

Kandil Glass x Beltone: Beltone Financial subsidiary Beltone Leasing and Factoring has inked an EGP 250 mn sale and leaseback agreement with Kandil Glass for its real estate assets and production lines, Beltone said in a statement (pdf) yesterday.

Where’s the money going? Kandil Glass said it will use the funds from the five-year agreement to finance working capital and investments needed to support its growth plans.

A busy year for Beltone, full of leaseback agreements: Beltone’s leasing arm has inked transactions worth over EGP 5 bn this year, that includes a EGP 1.2 bn sale and lease back agreement with Al Ahly Sabbour, a EGP 750-mn agreement with Pickalbatros, and a EGP 500-mn agreement with Hassan Allam Properties.

EXPLAINERThe sale-leaseback agreement: It’s a transaction in which a company sells an asset, such as real estate, to a buyer (generally a financial institution), and then immediately leases it back from the buyer. This allows the company to free up capital tied to the asset while still retaining use and operational control over it. This type of financial arrangement is often used by businesses to generate cashflow, reduce debt, or finance other business activities while maintaining the use of essential assets.

3

Enterprise explains

Don’t let ChatGPT do your investing research

Don’t fire your most junior analyst yet: ChatGPT and its AI competitors suck at pulling data out of investor relations material, according to a study by Patronus AI, an outfit founded by two former Meta employees.

The trial: Patronus fed gobs of Securities and Exchange Commission filings into LLMs from OpenAI, Meta, and Anthropic and then asked each of them 150 basic questions. The bots brought back the wrong answer 68-81% of the time — they either failed to understand the question or hallucinated fake answers.

Even if using “long context windows” the bots still screwed up 21-24% of the time, and failed to respond in c. 4% of all cases.

SOUND SMART- Think of a context window as the bot’s memory — the amount of stuff it needs to keep straight in its “head” to answer a question. A “long” window can span multiple large documents, videos, or conversations. The longer the window, the richer the potential understanding of context the bot will have — and the better it will be able to reason and summarize data. The catch: Long windows are expensive, they’re hard to train bots on, and they still have high error rates — more data = more chance of hallucination unless you manage the LLM really tightly.

Part of the problem: General AI models are trained to be jacks of all trades — not Grand Wizzards of High Finance, says Anand Kannappan, Patronus’ CEO.

What’s Patronus’ pitch? The company bills itself as helping businesses learn to “use generative AI with confidence” by helping teams “detect LLM mistakes at scale.” It rolled out a product earlier this month called FinanceBench that bills itself as “the industry’s first benchmark for testing how LLMs perform on financial questions.”

And not all financial documents are created equal: A bot that learns, in late 2023, to understand publicly available SEC data will still face challenges if asked questions about transaction memos, pitch decks, and equity research, Kannappan says.

GO DEEPER- Check out Patronus AI’s website, read its press release on the study or read more on Fortune | CNBC.

4

Startup watch

Bosta co-founder launches TradeHub, an export-focused B2B marketplace connecting Egyptian manufacturers with buyers across the globe

Export-focused B2B marketplace TradeHub is a newcomer to Planet Startup: Digital B2B platform connecting manufacturers and buyers, TradeHub has launched operations, according to a company statement (pdf). The platform seeks to facilitate trade and promote exports by helping local manufacturers access international markets.

The founders have pedigrees: TradeHub was founded by Ahmed Gaber (LinkedIn), the co-founder of courier startup Bosta, and former Meta software engineer and co-founder of tourism business automation service Triplancer Ahmed Atef (LinkedIn).

How it works: The company provides local manufacturers with a platform to showcase their factories and products, helping them connect to buyers across the world. Buyers can either directly send requests for quotation (RFQs) to a specific seller or appeal to a bigger pool by launching a tender for a certain product, Gaber told us.

More to come: TradeHub will introduce payment processing and escrow services after 1Q 2024, Gaber said.

Big aspirations: TradeHub plans to connect 10k local manufacturers with traders by the end of 2024. The company is initially targeting buyers in the UK, with future plans to tap more European markets, Gaber said.

Funds incoming: The two founders started bootstrapping the company three months ago, Gaber told us. They are currently in talks with investors in the UK and Europe, angel investors in Saudi Arabia, and local venture capitals for a pre-seed funding round that they expect to close by the end of January.

Interested? The company’s waitlist is here.

This publication is proudly sponsored by

5

ALSO ON OUR RADAR

Central bank shuts 7 FX bureaus. PLUS: News on East Qantara Dry Port, EasyPay cards, capital gains tax, PE firms

The news slowdown continues, with not much happening on the home front.

NBFS-

CBE shuts down seven FX bureaus: The Central Bank of Egypt (CBE) has revoked the licenses of seven foreign exchange bureaus for not meeting the EGP 25-mn minimum capital requirement. The bureaus include Golden Marriott, Roxy International, Al Esraa, El Noor, Misr Cambio, Cairo Switzerland, and British Exchange, sources told Asharq business.

Remember: Under the new regulations introduced by the CBE in May, FX bureaus are required to have at least EGP 25 mn in issued and paid-in capital — up fivefold from the previous EGP 5-mn requirement — as part of its efforts to regulate the currency market.

FOREIGN EXCHANGE-

No more FX transactions for Egypt Post’s EasyPay cards: Egypt Post’s prepaid card EasyPay can no longer be used for international transactions, whether purchases or withdrawals, after the postal services provider suspended all foreign transactions following government directives, according to a text message sent to clients and seen by Asharq Business reports.

This is the latest in a long list of measures the government has introduced in response to the country’s FX shortage. The Central Bank of Egypt in October restricted foreign-currency (FCY) transactions on local-currency credit cards to EGP 7,750 per month (about USD 250 at the official rate) and stopped the use of local-currency (LCY) debit cards abroad.

TAX-

More capital gains tax discussions: Officials from the Finance Ministry and the Misr Clearing and Depository Company (MCDR) agreed to hold another meeting in two weeks to review the executive regulations for the long-awaited capital gains tax, during a tax-centered meeting yesterday, Al Borsa reports, citing informed sources. The Finance Ministry wants to publish the tax’s executive regulations next month for the tax to be collected on gains made during 2023.

REGULATIONS-

Private equity firms must allocate some of their investments for Egyptian companies — EGX listed or not — under recent regulatory amendments put forward by Prime Minister Moustafa Madbouly, the Financial Regulatory Authority said in a statement yesterday.

LOGISTICS-

East Qantara Dry Port to go online in four months: Trial operations at the EastQantaraDry Port in Ismailia governorate are set to kick off in late April, Mohamed El Banna, vice chairman of the port’s operator New Suez Canal for Dry Ports and Logistics Services, told Al Mal.

6

PLANET FINANCE

S&P 500 approaches all-time high

It’s another quiet morning on Planet Finance with a number of markets (LSE, for example) off for Boxing Day and plenty of traders staying home in the last, quiet week of the year.

S&P 500 nears all-time high: S&P 500 rose 0.4% during yesterday’s trading, closing about 0.5% away from its all-time high as expectations of the US Federal Reserve moving forward with rate cuts in 2024 keep market sentiment high, Bloomberg wrote.

The Nikkei and shares in Australia are up in early trading this morning, Shanghai is flat, and Hong Kong is shaking off a two-day holiday. Aussie shares are at a two-year high, CNBC. Shares in Europe look set to open in the green later this morning, while Wall Street could dip into the red at the opening bell.

ALSO WORTH MENTIONING-

Banking sector slashed over 60k+ jobs this year: Twenty of the world’s biggest banks cut at least 61.9k jobs in 2023, making it one of the worst years for layoffs since the 2008 financial crisis, when the same lenders eliminated 140k jobs. (Financial Times)

EGX30

23,995

-1.0% (YTD: +64.4%)

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

11,873

+0.5% (YTD: +13.3%)

ADX

9,517

+0.3% (YTD: -6.8%)

DFM

4,029

+0.3% (YTD: +20.8%)

S&P 500

4,775

+0.4% (YTD: +24.4%)

FTSE 100

7,698

0.0% (YTD: +3.3%)

Euro Stoxx 50

4,521

-0.1% (YTD: +19.2%)

Brent crude

USD 81.07

+2.5%

Natural gas (Nymex)

USD 2.55

-2.3%

Gold

USD 2,079

0.0%

BTC

USD 42,482

-2.7% (YTD: +156.9%)

THE CLOSING BELL-

The EGX30 fell 1.0% at yesterday’s close on turnover of EGP 3.2 bn (2.3% below the 90-day average). Local investors were net sellers. The index is up 64.4% YTD.

In the green: Beltone Financial Holding (+5.1%), Abu Qir Fertilizers (+3.4%) and Ezz Steel (+3.3%).

In the red: ADIB (-5.0%), Palm Hills Development (-3.6%) and GB Corp (-3.5%).

CORPORATE ACTIONS-

Mopco back to trading tomorrow: Mopco’s shares will resume trading on the EGX tomorrow after a three-day voluntary halt, following its merger with subsidiary, the Egyptian Nitrogen Products Company (ENPC), according to an EGX disclosure (pdf). Mopco’s eligible shareholders tomorrow will receive new shares resulting from the merger at a ratio of 8.07 new shares for each share held before the combination of the two businesses.


2024

JANUARY

1 January (Monday): Egypt to join the Brics.

1 January (Monday): Private-sector minimum wage to rise to EGP 3.5k and minimum pension rate to rise to EGP 1.3k.

7 January (Sunday): Coptic Christmas (national holiday).

9 January (Tuesday): B Investments’ general assembly (pdf) to look into capital increase ahead of Orascom Financial Holding (OFH) acquisition.

17 January (Wednesday): A delegation of Egyptian companies to visit Istanbul.

25 January (Thursday): Revolution Day / Police Day (national holiday).

FEBRUARY

11 February (Sunday): Deadline to apply for the Chicago Booth Executive Programin El Gouna.

25 February 2024 (Sunday): Deadline to bid for 23 blocks in an international oil and gas tender.

MARCH

20 March (Wednesday): End of sugar export ban.

APRIL

9 April (Tuesday): Eid El Fitr (TBC) (national holiday).

25 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC) (national holiday).

MAY

1 May (Wednesday): National holiday in observance of Labor Day (TBC) (national holiday).

5 May (Sunday): Coptic Easter.

6 May (Monday): Sham El Nessim (national holiday).

29 May (Wednesday): Virtual launch of Chicago Booth Executive Program.

JUNE

15-19 June (Saturday-Wednesday): Eid El Adha (TBC) (national holiday).

30 June (Sunday): June 30 Revolution Day (national holiday).

JULY

7 July (Sunday): National holiday in observance of Islamic New Year (TBC).

23 July (Tuesday): Revolution Day (national holiday).

SEPTEMBER

2-5 September (Monday-Thursday): Egypt International Airshow, El Alamein International Airport.

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

OCTOBER

6 October (Sunday): Armed Forces Day.

EVENTS WITH NO SET DATE

Q1 2024: Opening of the newly developed Pyramids Plateau in Giza.

February-May: The Grand Egyptian Museum could officially open to visitors.

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.

2H 2024: Gov’t to launch the Cairo Ring Road BRT buses.

November 2024: Egypt to host the World Urban Forum (WUF12).

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

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

2025

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

EVENTS WITH NO SET DATE

End of 2027: Trial operations at the Dabaa nuclear power plant expected to take place.

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