{"id":617183,"date":"2024-03-18T00:00:00","date_gmt":"2024-03-18T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2024\/03\/18\/eu-package-secured\/"},"modified":"2024-03-18T00:00:00","modified_gmt":"2024-03-18T00:00:00","slug":"eu-package-secured","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2024\/03\/18\/eu-package-secured\/","title":{"rendered":"EU package secured"},"content":{"rendered":"

Good morning, everyone. <\/strong>The big story here at home is the announcement yesterday of an unexpectedly large EUR 7.4 bn assistance and investment package from the European Union that officials say will take Egypt\u2019s relations with the EU \u201cto the level of a strategic and comprehensive partnership.\u201d That\u2019s eurospeak for \u201cWe\u2019re now besties.\u201d<\/strong><\/p>\n

The funding includes concessional finance, grants, and new investment. <\/strong>It remains unclear how soon the first tranche of the concessional funding might be unlocked and how much of the package includes money already announced or committed. We\u2019re looking forward to more details in the weeks to come as the measures wend their way through Brussels\u2019 approval process.<\/p>\n

^^ We have the full story in the news well, below. <\/p>\n

Also this morning: Our friends at EFG Finance are venturing into SME finance<\/strong>, and we\u2019ll be watching closely \u2014 and not because they\u2019re our pals. EFG Holding\u2019s launch of what was then known as EFG Hermes Leasing back in 2015 triggered a rush into non-bank financial services by banks and financial services players, who lined up for leasing and factoring licenses while also diversifying into consumer finance (a market pioneered by the folks at Contact).<\/p>\n

Most activity in leasing and factoring and other non-bank extensions of corporate credit <\/strong>have <\/strong>focused primarily on big business.<\/strong> We talk constantly about the \u201cmissing middle\u201d and worry about where the next generation of big businesses will come from. The answer is simple: They\u2019ll come when the banks and the finance community get serious about providing capital to small and medium-sized businesses that are generally seen by big players as \u201ctoo risky\u201d or \u201ctoo expensive\u201d to do business with. <\/p>\n

(And, uh, interest rates. Want to see SMEs grow? Offer them affordable finance. Few can afford to take on significant debt when they\u2019re paying credit card interest rates. In this respect, we bluntly disagree with the IMF\u2019s requirement that we take subsidized interest rate programs \u2014 for small businesses, climate, women \u2014 out of the capable hands of the central bank.)<\/p>\n

How is an SME too expensive? <\/strong>Apply the same big-company due diligence screens and procedures (and all of the attendant staff overheads and reviews) to a small business facility, bankers say, and you\u2019ll find that loaning to a tiny company costs too much relative to the NIM the lender will generate. <\/p>\n

EFG Finance moving into the market is a signal to other players <\/strong>that banking SMEs could well prove to be a good business. We hope others follow suit. The market may be growing at a torrid pace, as we note in our story this morning (below), but that\u2019s easy to do when the denominator is really, really small.<\/p>\n

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So, when do we eat?<\/strong> Maghrib prayers are at 6:05pm in the capital city, and you\u2019ll have until 4:33am tomorrow to hydrate and caffeinate ahead of fajr.<\/p>\n

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The morning\u2019s must read: EnterpriseAM UAE had coffee with Steve Lutes<\/strong>, the US Chamber of Commerce\u2019s vice president for the Middle East, during his recent swing through the Emirates. He talked about where US companies see opportunity (climate, pharma, space), data sovereignty, and why American companies are waking up to the region as a good place to do business. Read the full story here.<\/a><\/strong><\/p>\n

WATCH THIS SPACE-<\/p>\n

<\/a> #1- EGAS is expanding to Saudi Arabia. <\/strong>State gas firm EGAS is setting up a new venture in the KSA, dubbed Modern Gas Saudi Arabia, which will be 80% held by units of the state-owned natural gas player, Oil Ministry said in a statement<\/a>. The Saudi Basira Company will hold a 20% stake in the venture, which looks set<\/a> to focus on contracting as well as natural gas distribution to industrial, commercial, and residential clients.<\/p>\n

<\/a> #2- <\/strong>Gov\u2019t to give up majority stakes in three real estate players?<\/strong> The Madbouly government reportedly wants to keep no more than 20% of Heliopolis Housing and <\/strong>Development<\/strong> (HHD), Zahraa Maadi<\/strong> Investment & Development (ZMID), and Al Shams Housing<\/strong> and Urbanization by the start of next year, Asharq Business<\/a> reports, citing an unnamed government official. The government owns a majority stake of the three EGX-listed real estate companies through Holding Company for Construction and Development (HCCD) and other state-owned outfits.<\/p>\n

This could potentially bring a whole lot of money into state coffers: <\/strong>HCCD alone owns 72.25% of HHD \u2014 which has a total market cap of EGP 14.1 bn currently \u2014 in addition to 47.6% of ZMID (current market cap EGP 3.9 bn), and 44.54% of Al Shams (current market cap EGP 1.59 bn).<\/p>\n

The caveat: <\/strong>HCCD will not offload another stake in HHD \u2014 be it on the EGX to a strategic investor \u2014 prior to developing the real estate developer and upping its market cap, the holding company\u2019s Executive Managing Director Hani Soliman told Al Borsa<\/a> last week.<\/p>\n

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<\/a> ICYMI- <\/strong>Missed this week\u2019s Inside Industry? <\/strong>In our weekly vertical exploring all things industry and manufacturing, we looked at why foreign investors \u2014 particularly from Turkey \u2014 are eyeing fresh investments in Egypt\u2019s spinning, weaving, and readymade garments industry, particularly after the EGP float earlier this month made investments more attractive.You can check out the story here<\/a>.<\/p>\n

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THE BIG STORY ABROAD- <\/p>\n

It\u2019s another sleepy Monday in the global business press, with geopolitics<\/strong> (Putin just won<\/a>reelection<\/a>, getting six more years in power \u2014 he\u2019s now the longest-serving leader since Josef Stalin) and tech<\/strong> (the White House is pushing the Senate to take up without delay a bill that would ban TikTok<\/a>) taking center stage<\/strong>. <\/p>\n

<\/a> Sign of the Times #1- The US Federal Reserve will have to keep rates high for longer than <\/strong>markets anticipate<\/strong>, according to economists surveyed in the latest Financial Times-Chicago Booth poll<\/a>. Most respondents think we\u2019ll see a maximum of two cuts this year. When? July or September, they say. <\/p>\n

<\/a> Sign of the TImes #2- So. Much. AI. Anxiety. <\/strong>This time, physical robots take center stage:<\/p>\n