Zilla Capital is expecting that the CBE will keep rates on hold unchanged

Newsletter

18 May 2023

The CBE has raised interest rates by 1000 bps over the past year after delivering a jumbo 200-bps rate hike in March. CBE Governor Hassan Abdalla last month expressed doubts on the effectiveness of monetary policy to curb inflation, and said that policymakers need to be “very careful” about tightening policy further. (Zilla Capital)

CBE updates licensing, regulatory framework for foreign exchange firms.
The bank’s new instructions involve the requirements and procedures related to licensing and registration, including the minimum limit of the issued and paid-up capital. However, the updated monitoring and supervision rules applied to exchange firms comprise the requirements of the automatic operation, governance, and outsourcing systems, along with the rules governing acquisitions and mergers. Accordingly, foreign exchange companies have been given a one-year period to fulfill the requirements as of the date of the instructions’ issuance. (Hapi Journal)
Moreover, the Supreme Investment Council approved 22 measures to help attract more foreign direct investment into the country.
What we can expect is to set new incentives for priority sectors, improved terms for special economic zones and faster tax refunds could now be on the table. The government will consider expanding golden licenses beyond national and strategic projects. Faster approvals and simpler rules for property ownership are on the list. Greater independence for regulators, better data collection on state-owned enterprises, and less preferential treatment for public-sector firms are being looked into. (Hapi Journal)
Egypt was the largest recipient of FDI in the MEA last year and the second largest recipient globally.
Egypt drew around 107 billion USD of FDI in 2022, which went towards 148 projects — more than double the number of projects that received foreign investment in 2021. The increase in FDI projects was “fuelled by several mega projects being announced in renewable hydrogen,” the report said, pointing at the 19 green hydrogen mega projects, most of which are expected to be established in the SCZone. These projects accounted for 97% of all of Egypt’s total inbound FDI, and made Egypt the “world’s top destination for mega projects in terms of capital investment in 2022.” (Economy Plus)
EBRD lowers Egypt’s GDP growth forecast for FY 2022/23.
The European Bank for Reconstruction and Development (EBRD) has downgraded its forecast for Egypt’s gross domestic product (GDP) growth to 4.0% for fiscal year 2022/2023, 0.7% down from its previous forecast in February. The international financial institution also trimmed Egypt’s real GDP growth for the upcoming fiscal year 2023/2024 to 4.8%, 0.2% down from its February projection. The downward revision is driven by higher fiscal and external vulnerabilities in the country, along with elevated commodity prices and soaring inflation. (Al Mal)
On the other hand, EBRD highlighted some upside risks including higher gas exports and Egypt’s role as an energy hub for the Eastern Mediterranean, in addition to the outcomes of business-environment reforms under the program backed by the International Monetary Fund (IMF),
which focus on empowering the private sector, boosting competition, and addressing fiscal and external vulnerabilities. The report also referred to the possible factors that could hinder growth, which involve further inflationary pressures, tighter monetary conditions, challenges in securing external financing, and slowdowns in implementing structural reforms. Furthermore, EBRD anticipates the cost of servicing public debt in Egypt to surpass 60% of government revenues in 2023 and 70% in 2024. (Al Mal)
The European Investment Bank (EIB) will invest EUR 50 mn every year into Egypt-focused private equity and venture capital firms.
EIB is doing due diligence on a possible investment in Sawari Ventures’ next fund. Earlier this month, the VC were in talks with investors to launch a 200 million USD tech fund. The EIB was one of the biggest investors in Sawari’s first fund that deployed 70 million USD into 20 Egyptian companies, including fintech startup MoneyFellows, which attended a meeting alongside Sawari with Vigliotti last week. (Ahram Online)
The well-known businessman Mohamed Mansour will become the owner of a 500 million USD Major League Soccer (MLS) team expansion franchise this week in San Diego.
The move is part of Mansour’s plan to invest in global football and expand on the success of acquiring Danish football club Nordsjaelland (FCN). He has also expressed interest in purchasing an English football club in the future, the newspaper reports. Besides football, Mansour previously invested in Facebook, Twitter, Spotify, and Uber. (Asharq Business)
Orascom Construction has sold its entire stake in a construction chemicals subsidiary for 1.8 billion EGP to Swiss chemicals firm Sika.
The transaction saw OC divest its entire 28.25% stake in the firm as it looks to reallocate funds to accretive investments. (Al Mal)
Finally for our investment talks, the Saudi Natural Gas Distribution Company will establish a company in Saudi Arabia with Qalaa Holdings’ Taqa Arabia.
The disclosure did not reveal any details. The two sides signed an MoU last year to explore ways to develop and operate gas distribution services in the country. Also, Dubai-based fintech Network International has launched a digital payments service in Egypt. The Networkpay service offers point of sale (POS) and other online payments channels to businesses, as well as payment plans with banks and tie-ins with fintechs offering loyalty programs, including EFG Hermes’ valU and Zeal. (Economy Plus)