Egypt exempts consumer financing services from VAT

Newsletter

08 Jul 2021

For our top news today, Egypt exempts consumer financing services from VAT. The FRA has been working on removing all obstacles facing the sector. During the first five months of 2021, the value of consumer funding reached EGP 5.5 bn provided to about 515,000 customers. So, this law aims to increase the local purchasing power by regulating the establishment of consumer credit firms offering financing to consumers in order to purchase goods and services in installments proportionate to their income. On the macro economical level, we believe it will help increase domestic demand and consequently, increase investments, employment and spur economic growth.

Second, the Agency for the Protection of Competition and the Prevention of Monopolistic Practices agreed to reduce production capacities in 23 cement companies operating in the Egyptian market. We believe that this is a good decision since the market is facing a continued increase in supply over demand results in two things.
The first is the accumulation of stocks in companies in a way that exceeds their capabilities, which makes them resort to stop production, according to the ability of each company to survive, and the other thing is that new investors do not enter the cement market. This causes a future deficit in supply after several years, and consequently an increase in inflation. It is worth noting that the selling price of cement in Egypt is still less than the cost of its production, and that companies still cannot bear its burdens, which will force them to exit the market amid the difficulty of exporting cement.
Third, for our macro talks, Egypt's net international reserves increased by USD 116 mn during June amounted to USD 40.58 bn at the end of June, compared to USD 40.46 bn a month earlier.
Noting that reserves are still about USD 5 bn short of where they were prior to COVID. The country’s stock fell by almost USD 10 bn from the USD 45.5 bn peak in February 2020 due to the COVID-induced sell-off of emerging-market assets, and the lockdown of the economy in the second quarter.
Adding to our macro, Minister of Trade and Industry Nevin Gamea revealed that Egyptian exports to the Kenyan market will continue to be exempted from customs duties for a year,
starting from the beginning of this July, within the framework of the exception granted by the East African Union of Kenya, Rwanda, Burundi, and Uganda. On one side, we believe that the Egyptian government is trying to maintain its strong economic-political ties with the African countries in order to back her up in its Ethiopia GERD dispute. And on the other side, the Kenyan market in specific is one of the most important receiving markets for Egyptian exports in the COMESA countries and the East African region.
Moving to Egypt’s green economy, Egypt has successfully manufactured the first locally built electric bus. The move is part of the country’s strategy to keep pace with the global trend of switching to electric vehicles (EVs).
It is worth mentioning that Egypt started plans to highlight the EV segment, and has begun activating agreements concluded between the El Nasr Automotive and China’s Dongfeng Motor Corporation, to manufacture the E70 electric car.
In the same token, Vortex Energy IV, a global renewable energy platform managed by the private equity arm of EFG Hermes, has raised USD 200 mn in the first close for its fourth fund.
Vortex Energy plans to grow its business to reach a target size of USD 750 mn for the fund in the next two years. Also, regards EFG last updates, EFG Hermes gets EGX's approval for listing capital raise shares. It will increase its capital to EGP 4.611 bn from EGP 3.843 bn by issuing 153.72 bonus shares worth EGP 768.61 mn.
Finally, TAQA Arabia unit to build two photovoltaic (PV) power stations for USD 4 mn with a total capacity of 5 megawatts (MW) in Somabay in the Red Sea.
Noting that Taqa Power will be entitled to a 30-year concession management agreement of this station.