Zilla Capital expects that the Central Bank of Egypt will keep the interest rate unchanged at its next meeting
For our top macro talks today, first, Zilla Capital expects that the Central Bank of Egypt (CBE) will keep the interest rate unchanged at its next meeting, which is scheduled to be held on Thursday, 16 September. The inflation rate in Egypt remains close to the minimum target of the CBE of 7% (+/- 2%) for the fourth quarter of 2022, and we expect it to average 5.6 % in the fourth quarter of 2021. We believe that the Federal Reserve’s recent announcement that it is not expected to raise interest rates in the near future has led to an increase in foreign investment flows into debt instruments in emerging markets, which led to easing pressure on interest rates in Egypt.
- Second, Egypt aims to achieve a positive annual economic growth rate of 7% over three years.
Egypt has been one of the few countries around the world to achieve a positive growth rate of 3.3% with a gross domestic product (GDP) exceeding 408 billion USD by the end of fiscal year 2020/2021. Also, the government is strongly keen to continue implementing structural reforms by disbursing 28 billion EGP in arrears to support exporters from March 2020 to June 2021. To lay the foundations for an environment that attracts investment, and expand incentive packages to maximize the role of the private sector in the development process, thus contributing to strengthening the structure of the national economy
- Equally important, Egypt's Ministry of Emigration and Expatriate Affairs launched an online platform to raise 1 million USD in donations from Egyptian expats in the US to support the presidential Decent Life Initiative.
The initiative aims to raise the living standards of over 50 million citizens. Noting that the Decent Life Initiative comprises a series of countryside-focused national infrastructure projects. Moreover, the Micro, Small, and Medium Enterprises Development Agency (MSMEDA) has injected a total of 10.4 million EGP into 350 projects in Luxor during the first seven months of 2021. The investment is part of the Decent Life initiative, and provided nearly 771 job opportunities.
- Moving to our companies and M&As talks, first, a consortium of UAE’s Aldar Ventures and sovereign wealth fund ADQ has submitted a mandatory tender offer for 90% of upmarket real estate developer SODIC.
The offer, deposited on Tuesday morning, aims to buy 320.5 million shares, representing 90% of SODIC’s shares as a maximum or 51% as a minimum. The execution was suspended at a cash price of 20 EGP per share. It’s worth mentioning that SODIC's ownership structure is divided among several companies, the most prominent of which is the Saudi Olayan Investment Company, the single largest shareholder with 14%. The issued capital of the company is 1.39 billion EGP, distributed over 349 million shares, with a nominal value of 4 EGP per share.
- Second, Elsewedy Electric (SWDY) has completed the acquisition transaction of a 99.25% stake in International Cables Co at a value of 410 million EGP.
Shares in International Cables have been transferred to the new owners through two transactions in the Egyptian Exchange’s (EGX) over-the-counter (OTC) trading market on Monday, the sources highlighted. One of the transactions has been implemented in the Egyptian pound, while the other has been executed in US dollar. It is worth noting that Elsewedy Electric reported a consolidated net profit before minority interest of 1.58 billion EGP in the first half (H1) of 2021, compared to profits of 914.24 million EGP in H1 2020.
- Furthermore, Suez Canal Bank (CANA) and Arab African International Bank (AAIB) have subscribed to valU’s first securitized bonds offering with around EGP 145 million for each.
On Monday, EFG Hermes announced it has closed the first securitized bonds issuance worth 322.55 million EGP in favor of its subsidiary ValU as part of a securitized bonds issue program valued at a total of 2 billion EGP.
- And for our investments talks, Siemens is expected to sign contracts worth 6 billion USD to implement the second and third lines of Egypt’s high-speed rail project within the coming two months.
Both phases will connect the Sixth of October to Aswan, and Luxor to Hurghada via Safaga. Adding that Siemens, along with Orascom Construction and Arab Contractors, signed a 4.5 billion USD contract with the government to design, install and maintain the first line, which will run 660 Km between Ain Sokhna, Alexandria and Marsa Matrouh.
- By the same token, United Company for Trading & Distribution (UCTD) signed an agreement with Bayer’s Consumer Health Division to import and distribute over-the-counter (OTC) products in the Egyptian market.
The new deal marks a new strategic alliance with promising prospects and high benefits for consumers. Both medical manufacturers will provide a multitude of benefits to the market and the Egyptian market simultaneously.
- Likewise, the United Bank joined an alliance to establish the Lighthouse platform for educational investments with a target capital of 1.75 billion EGP.
The vision of the Lighthouse platform is to provide a distinguished educational service within the reach of the middle-class family. We believe that the Lighthouse platform has promising opportunities for growth and is in line with the alliance’s strategy by investing in Egyptian cadres who are able to form influential projects in the education sector through establishing new schools and buying existing ones.
- Finally, Capitar, a Cairo-based B2B e-commerce startup, has successfully raised a 33 million USD Series A fund round.
Meanwhile, the company suffered a standalone net loss of 59.58 million EGP in H1-2021, compared to a net profit of 49.78 million EGP in the year-ago period. The round was co-led by Quona Capital and MSA Capital alongside additional investors Savola, Shorooq Partners, Foundation Ventures, Accion Venture Lab, and Derayah Ventures. The round comes as Capiter ramps up its efforts to expand its service across Egypt and the region within 2022.
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